A Trading Plan - You MUST Have One!

[roguetrader]

I'd agree Tuffty, when it comes down to it paper trading is a long way from "live trading" and I'd even go as far to say that you could quite successfully paper trade and fail completely trading for real, but it does have its uses, providing you are honest with yourself. Even though I trade for real now, I still paper trade any new setup before taking it live.
I would certainly never risk my capital before successfully paper trading for a while. Though when it came to live trading I approach very cautiously regardless of the results on paper. The market seems to have a way of knowing when you have real money at risk

 

[Jyde]

Thanks, both Rogue and Tuffty.

I can only agree with all your sentiments, as they are of course very sensible and the only way to approach this from any sensible angle (albeit, not all do consequently, including myself in past times).

I have been trading for almost a year (I am breaking even, lately catching up with initial losses), so I am actually past the initial stages of trading. Also, I use very small amounts until I can show a consistant trend of gains.
I just happen to be caught in a strange position of being between 'ideas'. I think I would post more details and ask for advice in seperate thread, though, rather than destract from this splendid thread we have here.

What I was more enticed about regarding the subject of writing up a good trading plan was that noone seems to include testing in their suggestions here, which puzzled me a bit, and I was wondering whether this was down to individualism, purposefully done, or simple forgetfulness (not that I believe that for a second, of course).
I would have thought something along the lines of:
For new systems/strategies, I shall paper trade for a minimum of 20 units of the time frame of relevance, and backtest shall show an average risk/reward ration of 1:3 for at least... etc, and so on...

Is it simply because, as we say in my native country, to keep beard and snot seperate, ie. is a trading plan only really considere once a strategy has proven succesful?

Jyde

 

[sulong]

sulong, I guess it depends on your motivation for defining a trading plan. It should be OK to change it for the right reasons (i.e. new information changing the parameters of a trade) but wrong if you want to change the plan based on hope, greed or dispair.

It looks like I did misunderstand your use of the word "constrain".

I agree that a trader needs to "update" his plan from time to time.

But, once it's updated, the plan needs to be followed exactly, until the next update

Otherwise, it's not a plan, but an idea..

 

[roguetrader]

Hi Jyde,
Now that I know where you are in trading there is probably very little advice I can give you, more just a case of sharing ideas and experiences. I can only truly say I have been trading for about a year also, during that time I have learnt that what I was doing before bore little resemblance to trading but proved quite costly so it will be a while before I recover the money lost in those 18 mnths or so.

For me personally a plan is simply a road map for a particular trade ie an entry point, a management phase and an exit so testing wouldn't come into it. For me trading is a bit like a war, (an analagy I picked up in a trading book somewhere and adopted) So on that trainof thought testing, in my case paper trading a theory is a bit removed from the front lines of the battle as it were so it doesn't get a mention in either my strategy or plan. It comes before both of them and if it passes the test will be incorporated into my strategy. If that makes any sense.

 

[timsk]

Update


In an earlier post I foolishly offered to collate the views expressed on this thread and try to cobble together a basic trading plan template. It's proving to be a tad more complicated than I imagined it would be, but I suspect you lot all realised that didn't you! :cheesy:
Anyway, I am doing it and I will post it for everyones amusement in due course. However, (insert an excuse of your choice here - Christmas etc.) it's not going to happen until the New Year I'm afraid. Nonetheless, I'm sure that won't be a problem because, as disciplined traders, you all share the same middle name, Patience!
Seasons Greetings to you all.
Tim.

 

[davidgrice]

Hello All,

Better late than never to join the discussion I guess!

I wrote this trading plan with the intention of my Dad (a stock market illiterate) being able to pick it up and broadly understand what I do. I like the fact that it took as much time and effort to produce though, as it gave me a sense of professionalism that previous plans hadn't - after all, I want this to soon become my sole profession.

I hope this can help some of you out there.

Regards, Dave.

P.S. I am NOT trading this at the moment because:
1) It didn't gel with my trading style (To many pullbacks after entry - I want quicker results)
2) LSE may not be best market (will need to try on US stocks)

 

[timsk]

David,
Thank you for resurrecting this thread and for the attached trading plan.

I have just about completed the 'Trading Plan Template' that I offered to compile based on the various contributions made on the thread as well as ideas gleaned from other sites etc. Sorry for taking sooooo long to write it! I will be posting it sometime over the coming weekend having made a few final corrections.
Cheers,
Tim.

 

[timsk]

t2w Trading Plan Template

Hi All,
As promised, attached is the trading plan template. If you download a copy of it, please send a check for £49.99 made payable to 'timsk', c/o Sharky at t2w. Only joking - unfortunately! On a slightly more serious note, I hope you find the template useful and that it helps you to create trading plans that make you truck loads of wonga. However, this is only on the express condition that I'm not on the other side of your trades! Lastly, on a genuinely grave point, if it all goes horribly wrong, don't come knocking on my door when you're looking for someone to blame. Please read the disclaimer on the cover!
Enjoy,
Tim.

 

[dbphoenix]

Nice job. You may well become one of the 5%.

For convenience' sake, I've taken the liberty of converting this to a pdf for those who prefer pdfs for whatever reason.

 

[Orion]

An excellent contribution. Well done.

 

[barjon]

timsk

That's really far too good to get lost buried in a thread. Why don't you submit it as a Knowledge Lab article, I'm sure it would be well received.

good trading

jon

 

[Mr. Charts]

timsk,
That is a superb contribution - in fact, it is the best thing I have ever seen on any BB.
That looks like weeks of hard work.
Richard

 

[frugi]

A brave and complex undertaking, with a top drawer result. Thank you very much timsk. The Knowledge Lab is certainly salivating at the prospect of its inclusion, if you are happy to allow your tour-de-force to be featured there.

 

[SOCRATES]

Timsk, a commendable effort, well done !

 

[SvenFoster]

By far one of the best collaborative efforts seen that couldn't have been collated better. A fantastic read worthy of another one tomorrow, and the day after...

I wouldn't be surprised if sections of this ended up in a $49 e-books and sum how missed the point but you can't stop that i guess.



Timsk, I can tell you've been busy but someone putting this into a "knowledge lab-ette" would ensure its rightful place in e-history.

Sven
ps: it couldn't have came on at a better time for me

 

[dbphoenix]

It's not an e-book, but Vad Graifer sent me a copy of his new book The Master Profit Plan: Your 5-Step Trading Plan Workbook a couple of weeks ago and it shares the general thrust. At least traders now have at least two resources for creating and developing trading plans.

 

[timsk]

Thanks folks for your kind words. Do you ever remember seeing a child over inflate a balloon and thinking 'just one more little puff and the balloon will burst and there will be tears?' Well, my fragile male ego is at that precise point.
:cheesy:
While I'm delighted with the positive response (so far!), my take on it is that the template is a tad dull and lifeless by itself, a bit like non alcoholic beer or a new home with no furniture, carpets or curtains. It would be far more potent and, indeed, poignant if there were a few real trading plans created using the template. So, I urge anyone who uses the template to submit their plan. Everyone will benefit: the wider trading community will be enriched by your offering and doubtless you will receive free advice about any weak areas of your plan that could be improved. A 'win win' situation all round.

db,
Thanks for creating the pdf file - that would never have occurred to me! Is the Vad Graifer workbook that you mention available off the net for free? If so, would you post the link please.

Cheers,
Tim.

 

[dbphoenix]

db,
Thanks for creating the pdf file - that would never have occurred to me! Is the Vad Graifer workbook that you mention available off the net for free? If so, would you post the link please.

Cheers,
Tim.

Not exactly. It's $45. Info is available at realitytrader.com (it's not listed on Amazon yet).

If I were you, I'd place copyright notices on your work. They don't offer all that much protection, but at least you might make those who steal it feel a bit guilty. Or make it pretty and post it, as suggested, in the Knowledge Lab. People would have something to link to other than a message board post (more cachet as an article) and you'd stand a fair chance of receiving due credit. And the plans you're asking people to submit can be posted to the forum set aside for the "article".

 

[frugi]

There is a strong chance it will become part of the KLAB, but for the moment we lack a Content Editor, so it will be a short while before anything happens - sorry!. Meanwhile I agree that taking steps to guard your intellectual property is a good idea, timsk. Rogues abound in this field, as you know.

 

[SOCRATES]

There is a strong chance it will become part of the KLAB, but for the moment we lack a Content Editor, so it will be a short while before anything happens - sorry!. Meanwhile I agree that taking steps to guard your intellectual property is a good idea, timsk. Rogues abound in this field, as you know.

I absolutely agree with your advice with regard to guarding intellectual property and your real and very valid warning about marauding rogues, some of whom incidentally successfully masquerade as helpless and / or curious and / or in need of help, or otherwise but in reality are covert persistent information beggars and pirates. Some of these actually transform the original information to make it unrecognisable and useless.

On the other side of the coin, I frequently spot sporadic information and advice which is truly priceless, but only to those able to recognise these and to use them properly. In this regard, I have come to the conclusion that no matter how clearly or persistently these may be put in front of an audience there are very few able to recognise these gems for what they truly are, the great majority are apt to dismiss them as mere pebbles.

This leads me to the conclusion that the great majority are apt to ignore what ought not to be ignored in preference for what ought to be. In the stampede for what in mainstream terms are viewed as solutions, the real answers remain unasked and unaswered. The latter part of this paragraph involves work, real work, which the great majority are either unwilling or unable to carry out for themselves.

Because the great majority are either unable or unwilling to do the work for themselves, therefore exposure of a plan that requires personal effort is not viewed with the value that it should have attached to it. This is not what people want, they want quick fix solutions, signals, indicators, formulas, systems, black boxes, and all sorts of gimmicks that will exonerate them, according to their perception, from the tedium of what is truly required.

Therefore, anything that requires graft must be safe. Long may this continue.

Kind Regards As Usual.