Trading Plan - Building a Trading Plan

Trading Discussion Risk Management Practices
#1

Hello,

I tried to look through the pages of this specific thread, but I didn’t see much related to what I was curious about. The question of this post pertains more to the creation of organization/format/categories and the depth of those categories in your trading plan.

Could anyone discuss how they’ve built their trading plan? (yes, of course, experience). You don’t have to post specifics of your plan if you’re uncomfortable with not doing so, either. I have developing my own and it just seems bare, but I also know simplistic is great too. I am just wanting to see the different things people are concerned about and how far in depth the detail is in their plan.

Attached is a screenshot of my own that I have been demo-trading with:

trading plan.jpg700×633 58.4 KB

I guess I’m not clearly sure how to ask this question without asking specific for your plan. I’ve tried following the format provided in the schooling, but just wanted to see some examples of formats that others used to help refine ideas.

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#2

Your risk is not fully defined. See I notice a lot of traders say that they risk 2% of their account per trade or 1% per trade. But how many open positions will you have at the same time and how will this decide your risk factor? I’ll give you an example. Say you open 5 trades at 2% each of what your account is worth. Say you lost all 5 of these trades the same day you opened them. You just lost 10% of your account. So how much of your account total are you willing to risk by the number of open trades. This needs to be better defined than anything because this will make you or break you.

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#3

Thanks BardBardy, this is a really good point that I am well aware of with my options trading, but completely forgot to address here. I appreciate that.

#4

Anytime pard. Keep it simple like you have so far and you’ll be alright.

#5

I’d also make a point of the risk/reward. I’d personally make sure that my risk reward is 2:1. If I take a hit I lose 1%, if I make a profit I make 2%. If I can get 70% of my trades in the green, I’m much better off.

#6

Hi. I really like your plan. I echo what BardBardy said.

While I’ve found it important to keep it simple, I’d take this one stage further and say it is important to account for correlations across pairs.

Both positive and negative correlations can ‘scew’ your risk and expose you to excessive risk on a single outcome.

#7

I trade ES and my trade ends up in three ways:
First: Win (3 points) 60% of times
Second: Scratch (0 points) 20% of times
Third: Loss (5 points) 20% of times

So my Reward to Risk Ratio is 3/5=0.6

I usually get 100 trades average per month. With ES one point equal to $50, here is my calculations for Profit/Loss:

60 wins x 3 points each win = 180 points
20 scratches x 0 points = 0 points
20 losses x 5 points each loss = 100 points

Net result = 80 points x $50 = $4,000

#8

Thanks for asking that. It has to be straight to the point

#9

I read a lot about it once, but I think you can do it randomly, the main thing is for you to understand what you have in mind for the near future, and to constantly analyze what you have already done and what you can do even better.

#10

This is a very important aspect that needs to be studied qualitatively and in detail, because you really can’t act on the market without some kind of planning, but a lot of people don’t really understand how to do it and where you should start, so yes, it’s worth reading more about that.

#11

Completely agreed. Do not enter the market without a solid list of actions and scenarios to deal with. Obviously time will sharp those aspects necessary to be successful. And don’t forget to deal with emotions. That is by far the toughest part.

#12

Making a trading plan is an essential part of trading. Just be simple with your approach and plan well.

#13

A proper plan is required for every trader. It is never possible to make a consistent profit without a plan. I have interviewed many traders who have given me a lot of information about the plan. If you want to succeed in trading, you must follow the plan. How to trade, where to set stop loss, how to maintain money management and risk management, all these things have to be complied with.