Creating a trading plan

CREATING A TRADING PLAN
Reference:
https://www.platinumtradingacademy.com/

INDEX
1. Creating A Trading Plan

CREATING A TRADING PLAN
 I will be honest; when I started trading I did not
have a TRADING PLAN.
 I really did not see the need for one. I was wrong.
 Trading Forex will be more successful for you as a
trader if you have a proper plan in place.

 The classic quote that is often used when referring
to not having a TRADING PLAN is “Failing to plan
is planning to fail”.

 Trading plans are really a lot like insurance.
 You don’t usually want it until you’ve faced a
catastrophe.
 But after that catastrophe, which may be was a
huge loss on a single trade, or worse, a margin call
from one really bad trade, as a trader you probably
recognize that something needs to be done.

 Regardless of how you get there, just the fact that
you actually arrive at the destination of realizing
that a TRADING PLAN is not just a “nice to have”,
but sometimes a necessity, is generally a positive
development in the journey / career of a Forex
trader.
 The bottom line is a TRADING PLAN is a must.

 Here is one very basic reason for having a plan:
New traders sometimes barely even have the
actual reasons for entering a trade.
 Imagine, that you were planning to loan money to a
new business as an investment.
 Could you picture yourself lending money to a
person without a business plan when they said that
they were going to start their business based on
“their gut?” Obviously no one should ever start a
business by relying on his or her gut alone.

 However, plenty of new traders start trading in
exactly that manner.
 So, what should you include in your TRADING
PLAN?

 A very simple approach is to look at it in four
sections: WHAT, HOW, WHEN and WHY.
 My first TRADING PLAN was along these lines and
was short and to the point.
 As time has elapsed since I started trading my own
plan has now reached a staggering 21 pages
including all inserts on profitability, plus how I trade
with my various brokers and then finally my
Marketing Plan.

WHAT(What type of trader are you?)
 I think that the initial question that you should ask
yourself is “What type of trader am I?’ If you are a
new trader, you may not know yet, bear in mind the
TRADING PLAN is a fluid document for many
things.
 As you develop as a trader your style will become
apparent and you can update your plan accordingly.

 The benefit from knowing what type of trader you
are is quite straightforward.
 Defining what you are gives you a comfort zone.
 If you take a trade that is outside your definition and
it loses money it serves as a reminder to you that
you were not trading within your comfort zone.

THE FOLLOWING IS A VERY SIMPLE CHART
OF TRADER TYPES
 Trader Type: Characteristics Of The Type / Style:
Scalper
1. Day-Trader: Holds trades for less than a day (A bit
longer than scalpers).
2. Swing-Trader: Holds trades from a few hours to a few
days. INTERMEDIATE.
3. Long-Term Traders: Holds trades for at least a day and,
possibly months / years.
4. Position Trader: Holds trades as long as needed to build
& work a position.

HOW:(How to manage positions / enter and exit
trades?)
 This is a very important part of your TRADING
PLAN.
 Without a definition of “how” the plan is really both
useless and pointless.
 In this section of your TRADING PLAN you should
specify how many lots you are going to trade on
whatever types of trade that you are going to enter.

 Additionally, you specify what your risk is per trade.
 This will obviously be in relation to your account
size.
 The rough rule of thumb in this area is not to risk
more than either 0.50%-0.75% of your overall
account balance on any one trade.

 By doing this it tells you basically whether you
should be trading Micro, Mini or Standard lots.
 This section should also contain whether or not you
will trade news events and what your risk will be
around such events.

 This area can be as complex or as straightforward
as you want it to be.
 You can use SMA or EMA, Bollinger Bands,
Fibonacci Levels or Pivot points, whatever you like,
whatever is comfortable with your trading style to
describe entry / exit parameters to your trading.
 The benefit of detail in this section, allows you the
opportunity to troubleshoot losing trades.

 More definition definitely means more discipline.
 A very important point here is that the strategy must
be your own, what you are comfortable with and not
lifted / copied from another source.
 There is little point me providing a PDF of my
TRADING PLAN because each of us is a different
type / style of trader.

 The above TRADER TYPES (In the “What” section)
should help you in connection with outlining your
“HOW”.
 The bottom line is to be comfortable as a trader.
 There is enough stress around trading without you
trying to pigeon hole yourself into a type / style of
trader that you are not.

 In my own TRADING PLAN, I highlight definitions of
RADAR, FLASH and FUNDAMENTAL trades.
 I add to this when each style of trade is appropriate
and what my entry lot sizes are for each type of
trade.
 I also include when I will add to positions, how I will
use the ATR and Hedging on trades.

WHEN: (When will you trade?)
 This is the forgotten item in most TRADING
PLANS.
 There is so much flexibility as a Forex trader.
 The markets are open from 5.00pm Eastern (USA)
on a Sunday night and close the following Friday at
5.00pm Eastern (USA).
 The Forex market moves 24x7.

 Having said that, the one thing that the Forex
market thrives on is liquidity, without liquidity driving
the market there is either no movement or extreme
lack of liquidity movements, which personally drive
me crazy.

There are principally, three trading sessions
1. THE ASIAN SESSION:
 The Asian session is more often than not a lot
quieter than the London and US sessions.
 It tends to take its lead from what happened
previously in the US session.

2. THE LONDON (EUROPEAN) SESSION:
 Liquidity definitely improves as the European
markets open.
 The overlap from the Asian into European sessions
is sometimes the most volatile and there are often
very fast, very active, very volatile moves that can
define momentum moves with currency pairs.
 As the Asian markets close the European session
settles down.

3. THE U.S. (AMERICAS) SESSION:
 As the U.S. comes on stream the volatility
increases once more as the overlap between the
European and U.S. traders take hold.
 I think it is safe to say that from 8.00am to 11.30am
Eastern the Forex markets are at their most liquid
period of the 24-day.

 When you trade can have a huge influence on your
results.
 It should also define your trading strategy.
 High volume equals higher risk.

 WHY: (This is where you write out your goals and
objectives)
 This is the final segment and probably the most
important of all of them when you look at your TRADING
PLAN. Why do you want to be a Forex trader?
 More time with the family or Financial freedom
 Trading is NOT easy.
 It can be very difficult, and tough, and costly and most of
all totally 100% frustrating at times.

 Common sense does NOT always apply.
 The markets are what they are, not what you want
them to be, or think they should be.
 Set your financial objectives conservatively.
 I was told that a target of 1% - 2% of your account
balance per day is good (Personally, I target 1% per
day).

 Maximum trade size should not see you risk more than
0.50%-0.75% of your account balance.
 Break down your income objectives to daily targets and
build up to weekly and monthly goals.
 Create an excel spreadsheet that you can follow and
use to check performance.
 You must journal all your trades (Entry, Exit, was it a
Market order, or a Limit order, time of day trade placed
or triggered, position size etc.).

 I created a mini marketing document this year with
detailed goals and objectives.
 I set out at the beginning of 2014 certain thoughts
and views on how the markets would perform.
 This is part of my FUNDAMENTAL overview
contained in my TRADING PLAN.
 This year for me it is a substantial document.

 A TRADING PLAN is NOT something you do and
then file away, it should be referred to regularly to
check and test your strategies and objectives; in
essence a “fluid” working document.
 There are great opportunities in trading currencies.
 You just have to be realistic and set your financial
goals to be achievable bearing in mind how you
trade, when you trade and how much capital you
are risking.

 The “WHY” serves as a reminder as to why you are
prepared to go through the pain when times get
difficult? The WHY helps put things in perspective
relative to the bigger picture?
 If you find it totally frustrating trying to achieve the
goals that you set yourself personally and
financially you have to re-evaluate.
 Are you goals realistic?
 Are you following your plan?

 Looking at your results versus your plan allows a
complete diagnosis of your performance.
 Either you inject some self-discipline and move forward,
or, you quit trading.
 In my opinion and this is the hardest lesson that I have
had to learn, there are three things when trading that
you must use everyday: -
 1. DISCIPLINE
 2. DISCIPLINE
 3. DISCIPLINE

Creating a trading plan

More Related Content

What's hot (20)

Viewers also liked (7)

Similar to Creating a trading plan (20)

More from platinumtradingacademypta (16)

Recently uploaded (20)

Creating a trading plan