Trading Plan

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Anthony24_7

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I'm very new to the world of trading, I've a couple of books and number of threads on this site. I'm currently trying to work out what my next step should, as they a say "a little bit of knowledge can be dangrous". There's been numerous mentions on this site of a "Trading Plan"

Can anyone give me pointers as to how a Trading Plan should be constructed and what's contained within a Trading Plan.

Thanks in advance

Anthony
 
im sure there is no set plan, but mine goes something like this.
in word i have a document i call routine for shares.
my first heading is periodically. - in this i have instructions on how i create my various databases of shgares to view. i do this about once a month. it gives detailed instructions ie delete all non index shares, delete eps growth <0 etc...
then i have my daily routine.
in it i have 5 various setups ie breakouts, isabuys etc..,
for each setup i have instructions on how to determine position size, what database to look at to find setup, what type of pattern to look for, work out buy price which i put into excell, work out stop porice which i put into excell, what time period i am going to trade.
i then have instructions on how to keep my trading journal.
 
A Trading Plan is vital to your success or failure as a trader. Mine goes something like this:

Monthly:
Look at all FTSE100 1 year charts.
Re-assess and filter down to top ~85 for volume and movement.

Weekly:
Look at these ~85 charts.
Mark on all Trends, Support & Resistance, Double Tops & Bottoms and Triangles.
Re-assess and filter down to top ~10 approaching these important levels.

Daily:
Look at these ~10 charts - get to know and love them!
Hopefully, somewhere in this set you have stocks that are capable of moving, have decent volume and are about to become tradable.

Money Management (for me) is even more important - if you don't know about it then I suggest you do some reading on the following:

How can I reduce my risk?
Amount to trade (% of capital)
Stop loss
Risk/Reward Ratio

Hope it helps a little,
 
First things first, imho.
You need a Learning Plan
From your description you are a beginner, so look through First Steps, see whether you want to learn more about trading UK or European or US stocks or options or futures. After you've chosen what you think you're interested in, then consider time frame - intra day, several day moves etc. How does that fit in with your current life/job?
Then buy a good book on the subject, read it carefully and if you still think that particular field of trading is right for you, take it further.
One step at a time, don't rush into anything and above all be realistic about this business. It is not as easy as it might appear, but needs determination, hard work, self-control, application and humility.
HTH
Richard
 
mr c - you are correct its not as easy as it may appear, having had two longs which profit warned in 2 days, im going greyer and balder. the key is as shariss says have a good money management plan, which makes the inevitible losses not as important.
i also plot my equity curve, and prefer a slightly increasing one rather than a volatile one
 
Thanks for your help guys
I intend to trade on US as I work 9 to 5 and I don't have a boss that hovers over my shoulder (though I'm not complacent). I've just completed the book "Win As Stock Market Speculator by Alexander Davidson" and I'm awaiting delivery of the book "Technical Analysis of the Financial Markets by John J. Murphy" (I would appreciate suggestions of any other books to read). I've considered “several day moves” as a timeframe but I’m too sure how much research time that involves. Once I've amassed a little more knowledge I attempt paper trading. BTW what's the general view of paper trading, does it just lull you into a false sense of security, can you learn anything about your behaviour, can it help your technical skills.

I’m trying to try treat trading like a business which will one day replace my salaried income, having goals but being realistic is pretty hard at the moment but my short term goal (first 6mths to a year) is to better the return I’m receiving from my savings bank 5% and I’ll build from that.

You guys though have given me food for thought

Thanks again
 
Hi A 24/7,
Glad to hear you have a good job in the Civil Service ;-)
As for TA, Murphy is all you need.
Personally I trade US intraday only. Trading over several days, imho, exposes you to overnight risk from news events. If you decide to anyway, make sure you are broadly Delta neutral to reduce risk in this type of market.
Richard
 
Hi,
The spread bet firms are tax free. Finspreads.com is as far as I know the cheapest at 50p a point.
 
Murphy is certainly a good book to have ordered. I'd also like to recommend Dr. Alexander Elder's "Trading For A Living" and Van K Tharp's "Trade Your Way To Financial Freedom". In my opinion, both clearly worth reading (and both rather easier going than Murphy, too) before you do any real trading!
 
A24/7,
You pay UK tax.
If you have unfettered access during the day, you ought to consider intra day trading US stocks. You then have no overnight risk and your money, risk and position management are under your own control to an extremely high degree. That provides maximum safety as long as your positions have some balance and you minimise exposure time. If you are entirely long and we are in a bull market, though, consider buying some cheap deep otm puts, just in case.
If you position trade over a period of days you need to be well diversified long and short and be broadly delta neutral. If you choose to be predominantly long or short, consider a simple options strategy such as the above to insure against a worst case economic or geo-political event.
I know I have implied the above in the previous post, but it needs emphasis because you don't want to be wiped out by events beyond your control.
I shan't wish you luck, this business is about other things, but I hope you succeed.
Richard
 
Mr. Charts said:
If you position trade over a period of days you need to be well diversified long and short and be broadly delta neutral. If you choose to be predominantly long or short, consider a simple options strategy such as the above to insure against a worst case economic or geo-political event.
Click to expand...
While I agree with Mr. Charts point on having a low-cost insurance policy via deep OTM puts, I think Richard may have forgot to mention the Delta Neutral strategy is only sensible in a non-trending market.

In a trending market you will obviously want to be trading the trend.

Being 'well diversified' does reduce risk, but also substantial profit. Again, the diversification should be in a broadly non-trending market and preferably matching stocks within the same sector.
 
you must trade with trend.dont fight it.the most you will get if you fight it is the recoil.see hindsight astra zeneca trade on these boards.learn from someone else mistakes,as we have all done.
 
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