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Writing A Trading Plan
All professional traders have a trading plan. Trading futures
is a zero sum game and those with a plan (and the discipline to
apply it) will succeed over those that have no plan. A plan
details the particular market anomaly that you intend to exploit
- your edge. Human emotion creates anomalies - essentially, the
fear and the greed of those that have no trading plan.
Creating a trading plan and rigidly applying that plan allows
the professional trader to eliminate emotional responses from his
trading.
Let's look at what your written trading plan should cover:
Trading concept - What anomaly is your trading strategy
intending to exploit?
Timeframe - The shorter the timeframe the more trades that can
be made. However short term trading leads to lower reward:risk
ratio's and higher commission costs.
Instrument - There are many different ways to trade
essentially the same idea - options, futures, exchange traded
funds etc. Which offers the most reward for your trading
concept?
Entry - How will you open your trade?
Exit - How will you close your trade - A stop loss should be
placed at a point where the trading concept become invalid, this
could be a specific price or a certain length of time. A profit
exit must also be established - again either a certain target
price or a timed exit.
Money Management - How much capital is required to trade the
strategy and how much should be risked on each trade to maximise
returns whilst minimizing the risk of blowing the account?
End of Day Routine - At the end of each day every trade should
be compared to the trading plan and any variances should be
addressed. Remember the plan is their for a reason and you must
trade it exactly. If a change is required then it should be
properly tested before being added to the plan. No decisions
should be made whilst a trade is live.
Brokers - Which broker will you use and how will you trade?
Automating a trading plan through the broker's API will help to
eliminate any emotional responses.
Your plan will require constant revision as the market
dynamics change. If you have noticed a market anomaly then it's
very like that many of your competitors have as well.
"If you don't know where you are going, any road will take you
there." Lewis Carroll
 MORE RESOURCES updated Sat. March / 06 / 2021
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Disgruntled
The following situation happens quite often to many
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