Trade The Journey

Trade The Journey

Trading Plan: A plan to Trade?

Trading is intuitive. Why on earth would you need a business plan to trade? The research is completed, and we’ve been watching this stock’s movement for the last two weeks.

The entry is determined.

In fact, with all the discouraging news coming out, the stock has taken a beating. The business has been making a come back, but the financial climate has changed the momentum of the stock’s upward trajectory. The company is a leader in its sector and maintains the positive sentiment of many analysts.

This is a “bullish” view of the stock. The bull is rushing forward instead of the bear using his paw to swipe the market downward.

 

I believe that Warren Buffet would say that this is the perfect time to buy. The stock is selling at a discount to its real value. To be accurate, Warren Buffet doubled down on his purchase of this stock.

 

It is my firm belief that disclosing the stock might encourage someone to buy the stock which shouldn’t be completed without research. That’s the purpose of this post to inspire you to create a plan.

Hearing that Warren Buffet investing in a stock would spur anyone to purchase the stock. Mr. Buffet is a billionaire as of a result of his investments which he seldom sells. “Stock bonds” is a term coined by Mr. Buffet due to the steady returns his stock investment strategy creates.

 

When I listen to Mr. Buffet, he makes things sound so simple but don’t be swayed by the ease at which he implements his strategy. I can guarantee you won’t be the same for you.

 

Reading Van Tharp’s book, Trade Your Way Towards Financial Freedom, inspired me to create a trading business plan. Creating a business plan for your trading is the first requirement in becoming a professional trader.

Forming a plan forces you to confront the reality of your DREAMS and trading. When you crunch the numbers, you get to see how much it takes to earn a livable return. Trading is a sport, and there are levels to reach.

 

 Letting the reality sink in, I now had to create realistic entry and exit points based on the risk capital I had set aside. This risk capital isn’t enough unless I hit the lottery in a sense and receive a return ten times my risk.

Listening to the post-fight UFC interviews last night, I listened to Nate Diaz speak of his journey in the UFC. He spoke of his ups and his downs and the staying power he has to be still relevant. He doesn’t respect the newcomers or the 15-minute champions that come and go.

To him, those aren’t warriors. Warriors have maintained their strength of character to proceed forward in the face of a loss or a win.

 

Forming the trading plan was a bit like the fighter entering training camp to prepare for a formidable foe. A foe who like him is dedicated and determined to reach the pinnacle of his profession.

The master traders aren’t attempting to hit a home run or achieve the unrealistic goal of never losing. Instead, the master traders have formed a realistic plan based on their strengths and weaknesses. Master Traders create a probable plan; therefore, it becomes an effective plan and ultimately, a profitable one.

At first, I thought forming a trading plan was a bit unnecessary. For the last two years, I’ve read many books, and I never heard about anything about developing a trading plan.

 

I read about the research and money management involved in trading but never anything about a plan.

But I am glad I did form a plan. It has helped me develop a better perspective on the steps I need to find the time frame and style that suits me.

 

What are my entries?

What are my exits?

Trading Rules?

Risk Capital?

Money Management Strategies? Position Sizing?

Growth vs. Value Stocks?  Commodities? Currencies?

In what sector will you specialize? What do you know about the industry? Personal Experience?

Maximum Amount your willing to let the stock travel against you?

Goals?

Time Frame?

How much time are you able to devote to research, testing, models, and trading?

What is your goal? A livable return? Retirement? Wealth?

What is your emotional temperament?

 

Before forfeiting your hard-earned capital to the professionals of the market, try asking yourself the questions above.

The goal for me, you and all other retail traders/investors are to stay in the game.


Video of the Week

Host: Better Systems Trader

Trader: Linda Raschke

[embedyt]https://www.youtube.com/watch?v=mszybq33TqI&t=5144s[/embedyt]

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