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Thread: The Trader Business-Plan

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    Default The Trader Business-Plan

    Many people, excited by the opportunities presented in the markets, leap before they look. Some people find temporary success “winging it” or learning as they go. However, more often than not, that approach results in massive drawdowns, despondency and closed trading accounts. Newcomers to the markets, and even those who have already started trading (even successfully), may find themselves reading this article and thinking “What does this chap mean by…?” or “I never thought of that”. If that’s the case, you may very well benefit from the time investment required to thoroughly learn your trade, study all the tools available, and design a business plan before expanding your activity in the markets. Here, Chris Terry offers an outline for designing a business plan with the elements required for a successful career trading.

    Just as a carpenter needs his hammer, saw, and blueprints, it is important for the trader to be well equipped with the
    proper tools. The trader must have a good charting platform, data feed, books, and proper education.
    However, the most important tool required for trading success is a good, solid business plan.
    There is a saying: “Without a plan to win, you automatically plan to fail.” Compare trying to trade without a “goal” to a soccer team playing without a goal or a net to put the ball in for a score. They would run the field in circles aimlessly until they tired out. Below we examine the basic concepts for how to develop a business plan. This is an outline to inspire ideas. Traders should use the ideas only to inspire and design their personal, custom plan.

    Business Plan, Part I: Personal growth
    Maintaining a great attitude is vital for success, and negativity is one of the greatest challenges a trader must overcome. Self doubt and lack of confidence are poisons – not just for traders, but for anyone striving for success. One cannot expect to succeed long-term if their brain has recorded years of negativity with relatively little positive input to defend against the negative influences. A negative thinker will lack the confidence to take the required steps to achieve success. The first goal is to decrease negative influences and build a positive attitude.
    As a trader, it is vital to start diluting the negative influences in life with positive input. Since the subconscious portion of the brain is more powerful than any computer invented, it cannot erase any of the sights, sounds, and smells of life; they are imprinted forever. Making an effort to becoming deaf to negative influences, and choosing not to read or listen to negative inputs, while also adding positive input, will start to dilute the past negatives and create a mental state conducive to success.
    Achievers in any field strive for peak performance mentally, physically, emotionally, and spiritually. Combating negativity
    is the primary goal for achievers, and this is why the “Self Help” section of any bookstore is one of the largest, with rows and rows of books. The game plan for personal growth is:

    1. Read books on “Positive Mental Attitude” (PMA).

    2. Positive self talk : Start to think of yourself as a winner. Say to yourself: “I am a winner. I am a success. I am constantly learning, I surround myself with positive influences, and I am a great trader.” For many, this may seem to be pure nonsense, but believe it or not, it will help improve your trading results. It is a key element for creating positive results and preventing negativity from sneaking into your thoughts and trading results.

    3. Associate with like-minded people : Another important component of success is being part of an association or a group of people striving for the same goals in the same business. As a trader, one should do his best to find others who have a common interest in technical analysis and short-term trading. There may be groups in the local area that meet on a regular basis, but there are also many chat rooms where traders can trade insights and inspire one another.

    4. Physical : Exercise, not just to stay healthy physically, but also for a healthy mind can greatly support you in creating success as a trader. Doing 30-45 minutes of exercise at least three times a week will assist in keeping the juices flowing physically and mentally.


    Business Plan, Part II: Trading goals

    Plan summary
    1. Mission statement
    2. Goal setting
    3. Financial and time commitment
    4. Record keeping
    5. Trading plan methodologies
    6. Drawdown rules and contingency plan
    7. Compensation


    1. Mission statement :

    What is your business objective? Here are some examples: To become one of the top traders in the world, I will:
    1) invest time and money into books, seminars, and market research
    2) associate with top traders in my field
    3) always expand my mind with new ideas.

    To develop as a solid, steady trader with a well-defined
    trading program, I will:
    1) focus on the price action of the current market conditions for short-term trading;
    2) work to become a 70%+ win-ratio trader
    3) helping fellow traders improve their ratios.

    In the long-term, I will manage money for clients, become one of the top teachers in trading and technical analysis, and
    write a book on the subject.

    2a. Trade goal setting
    How many trades will you average per day? What is your maximum? How many points do you want to strive for per
    trade?

    2b. Personal growth goal
    Your personal growth should be to maintain a solid mental and emotional foundation and constantly improve knowledge
    and skill. The goals could also include both trading and nontrading related books to read. Table 2 is a list of recommended
    titles on technical analysis and trading.

    3a. Financial commitment

    Determine the financial commitment you will make to your business which includes account start-up capital, data feeds,
    accounting and attorney fees, telephone/fax services, computer equipment, seminars, etc. For example:
    I will fund my short-term trading account with a minimum of $100,000 and will use a maximum 4-1 margin. My financial
    commitment to my swing trading account will also be $100,000. I commit up to $3,000 each to attend two training seminars per year, $50 per month for trading books, and $300 per month for my data and charting software.

    3b. Time commitment
    This is the amount of time you invest in your trading business each day, which for some traders might be just a few hours, five days per week, and for others it could be 14 hours per day, six days per week. For example:
    Trading Analysis will be done on a daily basis. If it is not done on any particular day, trade execution will not occur. Analysis on weekly, daily and intra-day time frames will be done 8-10:00 pm. If this is not permissible for any reason, it will be done the following morning at 6:45 am. An analysis of actual trades executed will be a part of my end-of-week analysis.
    This will help to duplicate positive outcomes and eliminate poorly executed trades. Analysis of a monthly chart will be done on a bi-weekly basis. Both the endof-week and monthly analysis will take place anytime between Friday and Sunday evenings.

    4. Record keeping
    It is important to keep a record of all business transactions. Keep a separate filing cabinet just for your trading business,
    and check daily trade summaries each night for possible errors. Stay on top of the paper work as it is created or this will get away from you quickly. Expense reports, bank deposits and withdrawals, and credit card expenses should all be maintained and up-to-date.
    For example: All trades will be logged and all statements reconciled every day, and any problems will be rectified immediately. I am currently keeping a sheet on each trade, noting trade rationale and time frame, profit objectives, and stop-loss parameters, plus a trade review noting adherence to the preceding and all other trading rules. I also keep a daily sheet noting daily P&L and open positions. Closed profit and loss will also be tracked on a weekly and monthly basis.
    5. Trading plan methodologies A trader must clearly define the entry method and be prepared to respond to all types of market conditions. How to exit the trade, both with a gain or a loss, must be predetermined and clearly defined. The following examples will give an idea for how detailed and specific the plan should be, and you should develop your own plan.

    Entry plan for trending environment:
    Markets to retrace 38-50% off its highs
    A support at its 20-period exponential moving average
    A bull-flag formation
    On a smaller timeframe, look for a ABC corrective wave to confirm bull flag pattern
    Test of the lower trend-line of the bull-flag pattern
    Stochastic to have reached oversold condition of 20 or lower
    Once the market confirms all this criteria, place a buy order at the market
    Exit at the pivot low below its 20 EMA as risk point, typically no more than x points of risk on any one trade. Exits will be as follows: when profitability is more than x points, seek to take off 50% of my position immediately and move the stop up to the break-even point. Short sells are simply a reverse of the above.
    Last edited by desta_wp; 04-27-2008 at 11:19 AM.

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    Default The Trader Business-Plan (2)

    Entry plan for breakout trades:
    Use the first few hours’ range for a breakout trade
    Pre-publications and criteria will be for a narrow range market that has been consolidating for at least five trading days
    Let the market breakout of its first hour’s range and look to buy a bull flag on a one-minute chart
    Should the market trade back and test support of a high of first hour range this would be a good time to buy
    The exit will be just under the support of the first hour range. Shorts are reversed. Profits will be taken for more than x points on 50% of position, and move stops up to breakeven. Look for continuation patterns for pivots to adjust stops and seek to exit into recent resistances or higher timeframes’ EMAs.

    Every plan must include the exit parameters for all market conditions, and how to respond when the market moves for or
    against the positions. Table 3 shows a list of several exit strategies and parameters.

    6. Drawdown rules
    If you are experiencing a serious string of losses, called a drawdown, there is something wrong. Continuing to trade in
    the same manner without any preset rules for to respond to a drawdown can result in a zero-balance account. However, having predefined rules will allow you to respond to a drawdown in a calm manner, and will give you the opportunity to return to effective trading. Below are examples of drawdown rules:
    If three trades in a row are losers, trading for that day will come to a halt and no further trades will be made. The rest of the day will be occupied by either taking a break from trading and resolving any issues that may be hindering my thought process, or by analysing the market and why those trades lost.
    Stop trading immediately if the account balance exceeds a 50% drawdown of base capital.Traders should have a contingency plan. What is your plan in the event you take a severe loss or drawdown? What could go wrong with your
    business plan that would put you in this situation? For example:
    Not executing trades when signals occur
    Executing trades when there is no entry signal
    Not having an exit plan for a win or loss scenario
    Allowing losses to exceed predetermined amounts

    My contingency plan should any of those possibilities occur is: take one week off from the markets to reevaluate my trading, current market conditions, my risk management, and my mental and emotional stability. If a vacation is necessary, take one.

    7. Compensation
    Finally, what will your business need to pay you per month to cover your personal expenses? This is a business and, with
    time, should be able to afford to pay you an income just as you would receive working for any company. The possibilities for trading plan designs are limitless and extremely flexible – having a plan is the only strict requirement. The material presented here is an example only and can be used as a foundation to start building upon. Finally, attempt to find one method that works on any timeframe and that fits your character and risk tolerance. Then commence your work and strive for excellence with these methods in one market environment. After you have achieved that, then you can take your success and stretch it across all market environments and conditions.
    Last edited by desta_wp; 04-27-2008 at 11:23 AM.

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    Default

    thank you for the plane but i canot contorle my feelings

    greed and fear

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    Default Need a Business Plan!

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    Quote Originally Posted by forexdude View Post
    thank you for the plane but i canot contorle my feelings

    greed and fear
    Same here, many a times I do wish I had waited three seconds before closing the transaction

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    in doing any business, especially business forex course requires good planning to do business forex trader who has a clear goal that is easy to reach the stages that will accomplish that.

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    I see most traders don't have trading plan, even when they have, they don't implement it. Trading plan should be created and implemented

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    Quote Originally Posted by janknoah View Post
    I see most traders don't have trading plan, even when they have, they don't implement it. Trading plan should be created and implemented
    Making a good Trading Plan is very much important to get to the level of the success in the Forex which we want.

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    yes,without a perfect plan,its not possible to get success in trading ..traders should have a full proof plan from the starting itself.

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    Quote Originally Posted by nsawork View Post
    Making a good Trading Plan is very much important to get to the level of the success in the Forex which we want.
    Proper planning one of the main factors that lead to success in the Forex is no doubt that planning is an important element in terms of determining the proportion of the expected loss and the expected profit for any project

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    We all talk about proper planning as the best factor for success. Most traders still find it difficult to get their planning done

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    because much has not used the business plan properly so it is only natural that many traders will often get a loss than a profit and success.

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    Quote Originally Posted by janknoah View Post
    We all talk about proper planning as the best factor for success. Most traders still find it difficult to get their planning done
    to have a plan need to have experince to consider all market events in that plan. and i think the best plan is to trade with small lots and profite step by step

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    A trader should always have a good trading plan before he trades in these markets and that should be back tested in demo account for desired results before trading with the same in real account .

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    I believe that traders who are following their Forex trading plan can expect to achieve their financial goals. This need a strict control of each and every aspect of the trade.

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