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Vince, I think there are also constructive trading plan examples, if you
look in the right places. Van Tharp's Peak Performance course comes to mind.
Our local San Diego trading group is doing a goals setting / planning
presentation to start off the new year, as it has in the past. Certainly
many of us find review and planning a valuable, on-going component of
successful trading.
As you point out, a trading plan is like a business plan. The general
knowledge on planning, objectives and follow-through is usually applicable.
Of course, I've seen business plans vary from back of napkins to polished
venture capitalist dog-and-pony shows. Interesting to note how both can
work, or fail.
Several people have mentioned the private/personal nature of trading
journals. I believe some aspects of the trading plan are personal. For
instance, why am I trading? The more I know my personal goals the better I
can choose and tailor the type of trading to pursue, and ensure trading
objectives support this. From the objectives I can craft a strategies that
make sense within that context. And so on.
In setting up trading objectives, I use the SMART acronym: Specific,
Measurable, Acceptable, Realistic and within a given Time Frame. Do a
Google search on SMART goals for more info.
Here are a few question triggers for objectives: What are my objectives for
level of involvement? That is, how much time and effort do I plan on
exerting on a regular basis? What is the frequency or interval I would like
to trade? Several times a day, a week, a month, or a year? What
capitalization are am I comfortable with? What is required? What are my
account loss risk levels and actions?
If you are trading for a living, I would recommend a full-blown cost
analysis. Sunny Harris has a concept called Potential Hourly Wage (PHW),
which she charts for a given market. Van Tharp recommends calculating your
hourly wage for trading. In either case, the planning involves an
assessment of all costs and activities like done for any business.
Good business planning involves contingency analysis. For day trading, what
immediately comes to mind are feeds and electronic order processing.
Computer power backup is easy; what about Internet? Data feed? Can I use an
alternate order routing? Order desk? Tech support? This last year the
friggen GLOBEX went down for 5 hours in the middle of the trading day ...
how do I handle open positions? Do I have alternate markets or covering
strategies? For futures trading, how do I handle lock-limit markets? Can I
execute an EFP (exchange for physical)? I use elements of the trading plan
to create templates and guideline sheets I can quickly pull and execute in
case of emergencies.
Speaking of guides, I create operational guides for trading. Yes, I have a
lot of things automated, but so do commercial pilots, and they still use
checklists. I find it helps. Operations guides are laid out as a part of my
trading plan. It helps keep my head on straight.
For automated systems, I want a way to asses they are trading like they are
supposed to. I've traded plenty of automated systems that back-test well in
different periods, start off well and get awesome returns, then for some
reason go South (BTW: this tendency seems to increase with shorter time
frames). Part of my plan includes how I will regularly assess system
performance, and when I will consider switching systems.
Last, but not least, the trading plan also includes "the rules":
Rules for selecting a market
Rules for entry and exit
Rules for managing risk
Rules for sizing a position
Rules for scaling a position
...
Well, there's just a few thoughts on trading plans to toss into the hopper.
Kevin
From: "Vince Heiker" <tachyonv@xxxxxxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Subject: Trading Journals and Trading Plans?
2. Trading plans.
Can't win without a good trading plan...according to many trading experts -
none of whom (see trading journal comments above) can show even one good
example.
What constitutes a good trading plan?
Anyone here ever seen one, other than brief outlines in books about what one
should contain?
Is it a portion of a full-blown business plan? Is a full business plan an
important critical success factor? If so, what is a full business plan for a
trader?
There are plenty of books at Amazon and elsewhere about business plans, and
many good examples...but is one really necessary? Is creating and
maintaining a good business plan, worth the considerable effort that it
takes for a trader? If so, why?
Back to just the trading plan portion itself. What is it? Just a list of
trading rules, of do's and don't's?
Inquiring trading minds want to know...so why can no trading experts provide
good designs and good examples?
If anyone herein knows of a book, seminar, tape, web site, etc., where there
is a good trading plan, design, please share it with us. If you have a good
one of your own, can you at least share the design of it with us, if not
much of the plan itself?
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