Here is another master piece I found from Linda Raschke‘s article.
I would only list out the key points which I have found to be useful for me to write my trading business plan.
Here is a list of some of the types of things you can include in your annual
business plan. This will give you something to work on. Start thinking about
putting together a professional program, comprised of bite size pieces.
- What methodology or patterns are you going to trade? It is OK to have a “library” of setups, but most people do best concentrating on a niche or particular technique.
Learn to do one thing consistently well instead of trying to master too
- Which markets are you going to trade? If you trade equities, think about keeping a “stable” of stocks to follow. Don’t get caught up in scanning a database of too
many issues that you are not familiar with. It invites unfortunate
situations where there may be pending issues or reports in the company
that you are unaware of. If you have not had much success trading soybeans
or silver in the past, why try to continue to trade them in the future?
- How much capital are you going to put into your trading accounts? Something I have to add here, stay away from looking at percentage returns when evaluating performance statistics, such as percent return or drawdowns, on your personal account. Concentrate instead on dollar amounts. What is your dollar amount
tolerance? My stomach turns at a specific dollar amount drawdown.
Percentages vary too much according to how much money you keep in your
account. You might have a net worth of 1 mil and keep 100,000 in your
trading account and your situation will be entirely different than a
person who has 5 mil and keeps 100,000 in trading account. The person with
the higher net worth will feel freer to use a different type of leverage.
So think in terms of dollar amounts…how much are you willing to draw
- How do you plan to enter, exit, and manage trades? I like dividing my contract size into two units. Sometimes I go all in and then scale out in halves. Other times I put half on and look to add the other half. Some positions I keep half on as a core
and use the other unit as a scalping unit. Whatever style you choose, it
should be written down into your plan.
- What is your plan to manage drawdowns? How will you evaluate when you need to take time off?
- What are your monthly goals?
Are you going to strive to make a certain number of trades each week or
perhaps a certain number of SP points? Remember, these are guidelines by
which to measure your progress. Some months will be better than other
months. The end of the month is a good time to do a periodic review. Most
businesses do this on a monthly or quarterly basis.
- Include a daily routine in your overall business plan. How are you going to evaluate your performance each day? Keep a notebook of the things you do RIGHT. Pat yourself on the back for small moral victories, such as exiting a losing position in a
quick fashion. Note the small incremental improvements you make.
- Create an office environment designed to facilitate performance. Eliminate distractions and outside influences. Reduce glare and get a comfortable chair. Invest in good equipment. Invest in an excellent data feed.
- Include a provision that will keep you from trading if outside circumstances create an unusual stress, such as health, divorce, or a major move. You might as well just write a check out of your trading account and kiss it goodbye. This is a hard
thing to recognize before it is too late. People LOSE money during times
of 10 major stresses: death, taxes, divorce, moving, health…you get the
point. Trading is a performance-oriented discipline. If you can’t perform
well, cancel the show… If a tennis player severely sprains his ankle, he
cancels the match. Why do damage to your ratings? Why mar your statistical
record with sub-optimal performance?
- Record Keeping – Rate yourself on your routine and structure and nightly homework. Do you do research or have way of logging results? What type of research is included in your program or plan? My problem is I stack too many projects up on back burner. I need to streamline this area for myself. Or, I get diverted doing research, go off on a tangent late at night and stay up way too
late. Then I am not in optimal condition the next day. My business plan
includes a bedtime. I promise myself to adhere to it.
- Rewards! All work, no play makes Jack a dull boy. You must have outside interests or hobbies to get your mind off the markets at the end of the day. You must treat yourself to something you really want. If you spend money on your self you will
eliminate subconscious poverty thoughts. I am serious. Treat yourself like
a million bucks and you will be worth it soon. Maybe after a good week you
treat yourself to a massage, or buy something you really want. I already
have something in mind that I will do for myself if I meet my goals next
year. It is something that does not cost too much but that I could never
justify spending money on because it might seem frivolous. But the money
comes from my trading account so nothing is frivolous!
- LASTLY,What plans do you have to continually improve yourself? See yourself as a top-notch person, health-wise, performance wise, and attitude wise. How do you keep advancing in life? You know the old saying, if you are not going forward, you are going backward. Educational pursuit such as books and study courses are
important, but don’t neglect spiritual pursuit, or outside projects…perhaps building your own website, starting your own trading network, writing your own book on all the trails and tribulations of the business, or working with a charity.