A Forex Trading Plan Example Pt. I

14 янв. 2015 г.

REASONS TO TRADE
I write in detail why I trade, what I find appealing about it, what motivates me and why I believe I can be a good trader, based on my characteristics as a person and my skillset / competency profile. Tip: its important to be honest in the assessment of yourself and its wise to include input from others to objectify your profile.

MY APPROACH
I describe my general approach to trading. I believe trading should be seen as a business and I treat every element of it as such. I describe how I do this. For me this means having a fixed schedule, starting on time, preparing and reviewing my trades, being disciplined, managing my costs and risk, etc. I describe what kind of trader I am (scalper and day trader) and why this fits my trading personality. I describe how I see technical analysis and fundamental analysis in general and where I put the emphasis in my approach to placing trades. In this website, Tradingview, most traders will go for technical analysis only. I use both and I describe how I do that.

GOALS & OBJECTIVES
I specify my trading goals and objectives (both financial and non-financial) as concrete as I can, on a daily, weekly, monthly and yearly basis. I make everything measurable so I can track my progress. I specify the one off and running costs of trading. I have targets for the expectancy per trade, per day, per week, per month and per year (based on my actual win rate, my average winner and my average loser). Do I trade to supplement my income, to fully live of it, to improve my pension or for wealth creation? I specify this concretely (to the last €) in this section. I state how many trades a day I strive to make, and what my target win rate is. I also describe how I keep track of my best month, my best week, my best day and my best trade P&L wise. Non financial goals can be educational goals (I read 2 books on trading per month) or aimed at gaining experience as a trader.

MARKETS / CURRENCIES / TIMEFRAMES / SCHEDULES
I describe what markets I trade (Forex only), what sessions (New York and London exclusively), which days I trade and which not (for instance last week of the year is for study only and I plan my holidays), what my schedule is for trading (what time I start and finish), which currency pairs are in my trading portfolio and why (I trade only 8 pairs), what timeframes and why. I use multi timeframe analysis and I explain here how to do that.

BROKER
Here I list all requirements a broker must fulfill. When I change broker (I am actually in the process of doing that), I use this list to chose the best one. To give an idea (not my complete list): I want the broker to be regulated, to have been in business for several years, to be Non Dealing Desk, to have a user-friendly interface and a stable execution environment. It must be scalper friendly and have competitive spreads / commissions. Withdrawal of profits must be hassle free and timely. I don’t care about newsfeeds and charting via my broker, I have organized that differently so these are not requirements. Nor do I care about free bonuses and high leverage.

RISK MANAGEMENT
Here I describe everything I do on a day-to-day basis to manage the risk of trading, both financially and non financially, to ensure I live to trade another day. What is my trading capital (this should always be excess capital you can afford to lose), what is my max trade risk (I use a fixed fractional method), how do I ensure I never exceed this risk (I do position sizing: I scale the amount of units until the stop loss matches the traderisk), how many trades can I have open simultaneously (hence the max % of trading capital that can be at risk at any given moment), what is my minimal reward risk requirement, what leverage do I use, how do I control my emotions and in which situations do I not trade but stand on the sidelines? Its all described in detail under this section.

To be continued in "A Forex Trading Plan Example Pt. II". See the link under Related Ideas.