Here I am presenting the template of my trading plan (it is more on the execution plan per se). I don’t see a point to reveal my trading plan here. It does not help any reader, since it is designed ONLY to suit my personality, risk appetite etc. I guess a template of my trading plan makes more sense. Shoot me comments or question if you feel something has been left out.
This is the point that you pay to buy something or sell short something with expectation to collect profit later.
This is the only place your holy grail system works. At this level, your holy grail trading system tells you where to enter the trade. Some people like to call it proprietary system, since they never wanna share their magic method. Whatever it is, it just an entry point. Read more, you will realize it is just one of the component of your overall plan.(So, why do people spend thousands to buy entry signal? Anyway, none of my business).
R , R , R, R, R. How much you can afford to risk? Go to do some research of position sizing. There are different theories and methods on this topic. Some self-claimed risk-taker utilizes high leverage to trade big number of contracts. Some conservative folks only trade 1 contract per 10K account. Whatever it is. No right or wrong. As long as it fits YOU (I mean your pocket size, stomach etc), then go for it.
Minimum profit target
This is designed after reviewing my own experience. Do not trade without a profit target. It doesn’t make sense to me to have a profitable position and end up with a loss. I trade for money. So when money is in my pocket, I will try to protect it. I use minimum profit target as a decision point that I will at least get a break even result. Any profit beyond this point is a bonus. But a loss after achieving minimum target is absolutely nonsense.
Trailing stop condition
I know a number of traders do not trail stops. No problem with that. Again, there is no right or wrong in this business. You do whatever you feel it is right according to your plan. There are so many ways to catch a fish in the river. The purpose of trailing stop is to protect profit. After achieving my minimum profit target, I will start trailing stop.
Something to note when trailing stop: At initial stage of a new position, it is better to give some breathing space to your position (i.e Do not move your stop too early). For example, maybe I will just let my position to gain 2-R then I move my stop to break even point instead of locking profit at 1-R now. However, I will turn aggressive in moving trailing stop when position is moving fast and with bigger gain. For example, when I am gaining 4-R on paper, I will trail my stop to 3-R or even 3.5R. (These R numbers are just for illustration).
Key point here is, start slow, and be aggresive when having bigger profit on paper.
Hard exit condition
This the point that you MUST exit your position (even though your wife or your mum say NO).
I will have my stop loss order keyed in immediately after establishing a position. (Some people prefer a mental stop, it is fine). Stop loss is the last protection when market is not moving in your favor.
Secondly, It is important to have a plan to exit the position when it is “going nowhere”. For example, in day trading ,when a contract is stalled at certain price level for 5 to 6 bars, I would exit the position. Why hold on the position when it is not moving?
Ok, that’s all. This is the template of my trading plan. Of course, I am refining it along the way. So far, it is working for me.
From the desk of Trader Gav