Private and Confidential
Trading Business Plan
Page 1 of 24
Private and Confidential
Trading Business Plan................................................................................................................1
Business Plan Area 1 – Decision Making..............................................................................3
Statement of aspirations.....................................................................................................3
SWOT Analysis .................................................................................................................4
Goals ..................................................................................................................................5
Long Term Objectives .......................................................................................................6
My ability to make decisions .............................................................................................6
Business Plan Area 2 - Technical systems, trading methods, financial management ...........7
Trading beliefs regarding the market.................................................................................7
My Trading Style ...............................................................................................................9
Financial Management.......................................................................................................9
My Trading Records ........................................................................................................11
Personal Disciple .................................................................................................................12
Business Plan Area 3 - General rules...............................................................................12
Trading rules ....................................................................................................................12
Review program...............................................................................................................15
Operations and Infrastructure ..............................................................................................16
Sources of Data & Charts ................................................................................................16
Trading Accounts.............................................................................................................16
Appendices...........................................................................................................................17
Appendix 1 – Action Plan................................................................................................17
Appendix 2 – Results of Back Testing ............................................................................21
Appendix 3 – Results of Forward Testing .......................................................................22
Appendix 4 - Trading Daily regime.................................................................................23
Page 2 of 24
Private and Confidential
Business Plan Area 1 – Decision Making
Statement of aspirations
•
The source of contentment in my life is my family.
•
I am committed to trading as a profession that will enable me to achieve my personal and
professional goals.
•
I have the potential to make money in the markets.
•
The achievement of trading excellence is a priority to me.
•
Self employment and the freedom to work in my own style is important to me and I have
a strong desire to make a success of this venture.
•
Financial independence is important to me and trading will enable me to attain this.
My mission
To become a professional trader and live in a style that allows me to find contentment as a
husband, father and member of the community.
Page 3 of 24
Private and Confidential
SWOT Analysis
Strengths
•
•
•
•
I have the will and the motivation to succeed as a trader.
I am open to developing myself in order to succeed as a trader.
I am able to acquire skills and knowledge to help me succeed.
I have the support of my family.
Weaknesses
•
•
I am sometimes impatient and lack discipline in making my trades.
I may have psychological barriers to my success that I will need to identify and
overcome. Some that I am aware of are;
o Losing trading discipline when bored.
o Failing to follow my own rules.
Opportunities
•
•
I am in a financially stable position that provides the opportunity to move into a new
career.
Success as a trader offers the chance to earn significant sums of money that will
contribute to;
o Maintaining my family’s standard of living;
o Establishing financial independence.
Threats
•
I will need to demonstrate the ability to trade consistently well within a period of 18
months.
•
Absence of support structures may impede my ability to succeed.
•
Developmental support, i.e. training access to specialists.
•
People, processes and structures that support me in my current role, i.e. Finance,
payroll, tax, medical insurance, travel arrangements.
•
Social Support from work colleagues and associates.
Page 4 of 24
Private and Confidential
Goals
Personal
•
To live a long, healthy and fulfilled life that is based on;
o A lifelong intimate relationship with Jane that enables us both to enjoy all
aspects of our lives.
o A strong and supportive relationship with Jimmy that helps him to grow and
develop as an individual.
o Maintain our standard of living at or above the current level.
o Establish financial independence for our family at or above our current
standard of living.
o Find a way of giving something back to society through charitable work or
giving.
Trading
•
•
To develop the discipline, skills and capabilities of an excellent trader.
Generate income from trading that;
o Maintains our current standard of living;
o Contributes towards the establishment of unearned streams of income.
Start-up
•
•
To contribute towards establishing financial independence for our family by
delivering significant sums of money.
o To be achieved as a result of owning shares in the organisation.
o To be realized as a result of a trade sale or flotation.
o The results of which will be invested to contribute towards the production of
unearned income.
Maintain a broader range of involvements to counter the isolation of trading from
home.
o By executive involvement to an extent that is compatible with my trading
plans.
o Or by non-executive involvement.
Page 5 of 24
Private and Confidential
Long Term Objectives
Personal Objectives
•
•
•
•
•
Keep the weekends for family and friends.
Spend an evening a week with Sharon.
Do something with Jimmy each week as father and son.
Improve my health by reducing my weight and improving my aerobic fitness.
o Lose 1 stone and to run 5 miles.
Establish unearned income that generates between £7,000 and £10,000 net of taxes
per month.
Trading Objectives
•
•
•
•
•
Generate an income of £7,000 per month to maintain my family’s standard of living.
Define a method of trading that suits my personality and objectives.
Establish an environment that will support my development as a trader and my ability
to trade.
o Suitable office environment.
o Infrastructure – desk, chair, pc’s, telecommunications, and data feeds.
o Account(s) – appropriate accounts to execute my trades.
o Personal Development & Support – Coach / Mentor, training, seminars.
o Social – people that I can discuss my trading with.
Establish the support systems that will help me to develop and operate as a trader.
Develop the discipline, skills and approach that will enable me to become a
consistently successful trader.
Start-up Objectives
•
•
•
Become a share holder of Ecumen. 1
Work on Ecumen to help establish it as a successful business.
Identify one or more incremental opportunities that I can become involved in.
My ability to make decisions
•
I will make decisions based on probability thinking rather than possibility thinking.
•
I will utilize tools and techniques that support this form of decision making such as
analysis and refutation and the Comprehensive Model of Trading Competence.
1
Ecumen is a company that is being formed to provide mobile content.
Page 6 of 24
Private and Confidential
Business Plan Area 2 - Technical systems, trading methods,
financial management
Trading beliefs regarding the market
General
•
There are inefficiencies in the markets that allow well disciplined traders to make money.
•
I am the most important variable in my trading method. Developing myself is the single
most effective way to improve my ability to produce consistent results.
•
I can produce the results that I want by focusing on a small number of trading instruments
that have the right balance of price and volatility.
•
I need a small number of techniques for identifying opportunities and executing trades.
These must be understood and internalised to the point at which I can own them. In fact I
may only need to trade one good trading plan to be successful.
•
No matter how I define my trading set-ups, once the order is filled anything can happen.
This is because every moment in the market is unique.
•
I do not need to know what will happen next in order to make money, provided that I
define my trading plan objectively and that I think and act in terms of probable outcomes.
•
There is a random distribution between wins and losses for any given set of variables that
define a trading plan.
•
A trading plan is nothing more than an indication of a higher probability of one thing
happening over another.
•
In-order to become a consistent winner I must;
•
Objectively define my trading plan;
•
Predefine my risk on every trade;
•
Completely accept all possible outcomes;
•
Act on my trading plans without hesitation;
•
Pay myself as the market makes money available to me;
•
Continually monitor my susceptibility for making errors.
Trends
•
The trend is my friend. Trading with the prevailing trend significantly enhances the
probability of success. Trade in the line of least resistance.
•
Different trends exist in different time frames. The trend in the higher time frame exerts
greater influence than those in lower time frames.
•
Trends do not move in straight lines but form a series of highs and lows.
•
Once a trend has started it will tend continue.
•
Trying to pick the top or bottom of a trend to enter a trade has a low probability of
success. Entering a trade in to an existing trend has a much higher probability of success.
Page 7 of 24
Private and Confidential
•
Between periods of trend prices move in ranges. These ranges may form patterns that
indicate probable outcomes.
•
Patterns fall into 2 categories, those that indicate the probable continuation of the existing
trend and those that indicate the probable reversal of a trend.
Support and Resistance
•
Price support and resistance is formed as a result of the memories of traders. What
happened when price reached a given level in the past is likely to happen again. The
probability of these occurring increases each time the event occurs.
•
Broken support will become resistance and broken resistance will become support.
Trading Approaches
•
There is an inherent rhythm to the market, as a result of the activities of major players
who buy, sell and sell short to generate volume and profit. I should be aware of this
rhythm and understand its potential to influence my trading.
•
Different market conditions require different trading approaches.
• Trending – buy strength and sell weakness.
• Range – Sell strength and buy weakness.
• I need to trade in a manner that is appropriate to market conditions or stand aside.
Money Management
•
Money management is critical to surviving in the market and making consistent profits.
In order to protect my capital I must;
• Always use a stop loss order, ideally placed in the market.
• Never risk more than 2% of total account equity on a single trade.
• Never risk more than 6% of total account equity on open positions.
• Allow profits to run, but cut losses quickly.
• Try to achieve a risk: reward ration of 1:2 or greater.
Volume, Volatility and Momentum
•
Volume affects price and the relationship between the two can give an indication of the
likely market direction. High volume indicates the interest of professional traders and
market makers.
•
Price volatility moves in cycles from high to low and back again.
•
Momentum changes before prices. Oscillators can help traders to time their entry into a
market to follow trends.
Page 8 of 24
Private and Confidential
My Trading Style
•
I am a short term trader employing the general and technical rules of behaviour that are
written in this business plan.
Financial Management
•
My first objective is to preserve my capital.
•
My second objective is to earn a consistent rate of return.
•
Professional traders consider an annual return of 25% to be excellent. As a small trader I
will aim for 12.5%. The more I succeed the higher I will set my targets.
•
I will always include slippage, commission and spread when assessing profit targets.
Risk
•
I trade objectively with the goal of developing a low risk plan with a probable outcome.
•
A maximum risk of 2% on any single position.
•
Maximum exposure will be set at 6% of capital on positions that have not yet been
protected by a stop loss order at break even or better.
•
Trading size will be adjusted each week based on the total amount of my trading capital.
•
Maximum Position Risk = (Total Equity in £ * 2%).
Draw Down
•
If I lose 4% of equity in a given month I will reduce my maximum trading size to 1% of
equity until my account is back to the start of month level.
•
If I lose 8% of equity in a month I continue to monitor the markets, but I will not trade
until I have conducted a review of my losses and understood the development needs that
they highlight.
Stops
•
Stop losses are used to limit my risk on a position. However, if I do not believe that a
trade is working I will not hesitate to take a loss before the stop loss is hit.
•
Stop loss levels will be set for all positions.
• Whenever possible the stop loss order will be placed in the market.
• If this is not possible then I will monitor the position and exit at the market when the
level is reached.
•
I will move my stops in the direction of the trade to;
• Establish a break-even position accounting for slippage, spread and commission.
• Protect profits with a trailing stop.
Page 9 of 24
Private and Confidential
Bet Size / Contracts per Trade
•
I will strive to optimize my exposure by learning to balance the risk of the trade against
the potential for profit.
•
Whilst I am learning to trade my most important measure of success will be the number
of points risked against the number of points of profit or loss.
•
Assume a contract size of 1000 currency units (1K) and leverage at 50:1 for the initial
learning period.
Currency
Pair
AUD/USD
EUR/JPY
EUR/USD
GBP/USD
USD/CAD
USD/CHF
Base
Currency
to $
0.7487
1.2038
1.2038
1.7506
1.0000
1.0000
Size of
contract
1000
1000
1000
1000
1000
1000
Cost of
Contract
in $
748.70
1203.80
1203.80
1750.60
1000.00
1000.00
Profit /
Loss per
pip
0.075
0.120
0.120
0.175
0.100
0.100
Margin
Ratio
50
50
50
50
50
50
Margin
Required
14.97
24.08
24.08
35.01
20.00
20.00
Assume account equity is $1000 and risk on trade is 30 pips.
Assume trade is USD/CHF.
Risk equity = Total Equity * 2% = $20
Risk per pip = $20 / 30 pips = $0.67.
Profit / Loss per pip for USD/CHF is $0.10
Number of contracts = Risk per pip / Profit / Loss per pip rounded down = 6 contracts.
Page 10 of 24
Private and Confidential
My Trading Records
•
Good records will provide me with the information that will allow me to assess my
development as a trader and progress towards my goals.
•
Maintenance of good records is a sign of a good trader.
Daily Diary
•
I will use my daily diary to record;
•
Tasks towards the achievement of my goals for each day.
•
My preparation for the trading day.
•
My thoughts, feelings and actions throughout the trading day.
•
My closure of the trading day.
Trade Records
•
A record of the parameters on which the decision to enter the trade was based.
•
Details of the trade itself.
•
Copies of the charts on which the trade was based.
•
A record of my review of each trade.
Financial Ledgers
•
Sales Ledger – details of each trade made during the course of the month and the profit or
loss made.
•
Purchase Ledger – details of all one-off and recurring expenses incurred during the
month.
•
General Ledger – Summary of the above and their impact on my trading equity.
Page 11 of 24
Private and Confidential
Personal Disciple
Business Plan Area 3 - General rules
•
My family comes first, trading second and start-ups third. If a conflict arises I will use
this rule to guide my decision making.
•
I will trade in a disciplined manner. If I become aware that I am not I will stop and
examine the reasons why.
•
I must develop a written plan prior to trading and then I trade that plan.
•
I must keep accurate records of all my trades and related activities.
•
I must strive to remain positive even in the face of losing trades, which I know are the
cost of participating in this business.
•
I will continually set higher trading goals as I meet my current goals.
•
I must study the markets each day and read something relevant every day.
•
I must rely on my own opinion and ignore the opinions of others.
Trading rules
•
I must objectively monitor the market and act without hesitation when it offers
opportunities consistent with my trading plan.
•
I will follow my trading regime each and every time that I intend to trade the market.
•
If I do not have the time or focus to follow my regime I will not trade.
•
My regime will include the following activities;
Self-awareness
•
Are there any issues for me that would undermine my technical trading today? Am I
confident and focussed? Should I commence trading or are there other issues that I
should deal with first?
Page 12 of 24
Private and Confidential
Developing Tactics
Markets
•
I will trade the following currencies;
EUR/JPY
EUR/USD
GBP/USD
USD/CAN
USD/CHF
AUD/USD
Time Windows
•
I will trade the following time windows;
Time Windows
Pacific Day Time
GMT
Start
End
Start
End
06:00:00 08:00:00 14:00:00 16:00:00
11:00:00 13:00:00 19:00:00 21:00:00
14:00:00 16:00:00 22:00:00 00:00:00
19:00:00 21:00:00 03:00:00 05:00:00
Charts
•
I will use the following candle stick charts;
•
Weekly
•
Daily
•
•
To identify key levels of support and resistance.
30 Minute and 5 minute charts with 20 sma and ADX(14).
•
30 minute chart to identify the overall price action for the day.
•
5 minute chart for identifying entries and exits.
Rules for Entry
•
I will not act on signals or enter a position in the first 30 minutes or last 60 minutes of a
session.
•
A long set –up requires a test of the 20 sma from above, short from below.
•
If multiple entry signals are given in any session only the first 2 will be taken. More
signals would indicate that the trend is losing momentum.
Page 13 of 24
Private and Confidential
•
Entries are executed using stop orders where possible. If this is not possible enter using
market orders.
Long Entry
•
Price tests the 20 sma.
•
ADX(14) > 29.9.
•
+DI > -DI
•
Place a buy stop 5 points above the high of the signal candle, good for the day.
•
If a subsequent bar provides a signal with a lower high move the buy stop to 5 points
above the lower high.
•
When the position is opened place a stop loss order 30 points below the entry price.
Short Entry
•
Price tests the 20 sma.
•
ADX(14) > 29.9.
•
-DI > +DI.
•
Place a sell stop 5 points below the low of the signal bar, good for the day.
•
If a subsequent bar provides a signal with a higher low move the buy stop to 5 points
below the higher low.
•
When the position is opened place a stop loss order 30 points above the entry price.
Rules for Exit
•
Testing shows an average of 70 points and a maximum of 210 points after the entry.
•
Use a trailing stop to exit the position on the first significant reaction.
•
Exit immediately if a reversal is indicated at a key support or resistance level.
•
If a position returns to 20 points below the entry price review original analysis and in the
absence of strong contrary evidence close the position.
Long
•
As soon as the position reaches 40 points above the entry trail a stop 20 points below the
high of the last completed candle.
Short
•
As soon as the position reaches 40 points below the entry trail a stop 20 points above the
low of the last completed candle.
Margin Exposure & Points Target
•
Calculated in accordance with the Financial Management section of this plan.
Mental Rehearsal
•
I will mentally rehearse the following whilst sitting at my desk prior to trading;
Page 14 of 24
Private and Confidential
•
Execution of my trading plan through identifying opportunities to profitable exit.
•
Emergency drills.
•
What will I do if my trading infrastructure goes down?
•
What will I do if the market starts to fall out of control?
Ambush
•
I will wait patiently for an opportunity to arise spending no more than 2 hours in any flat
market.
Monitoring
•
I will maintain my trailing stops in accordance with my rules for exit.
Profit Target
•
My initial profit target is 60 points.
Abort
•
If price reverses and clearly invalidates my analysis I will exit the position prior to the
stop being hit.
Daily Appraisal
See review program.
•
I will review all the documentation produced during the trading day to ensure it is
complete and accurate.
•
I will review each trade made during the day.
Review program
•
•
I will perform an initial review of trades closed the previous day as part of my daily
regime.
•
Did I follow my rules?
•
Was the result achieved as a result of my analysis and execution?
•
Was the result achieved as a result of the market acting as the market will?
•
If I identify a mistake I will note it on the trading records and make a note to consider
it before my next trading session.
I will take the morning of the first Monday of each month and use this day to review my
previous month.
• How does my equity curve look?
• Are there any positive patterns in my trading?
• Are there any negative patterns in my trading?
• What lessons do I need to learn?
• Should I be adjusting my trading method?
• Should I be looking for new trading instruments?
Page 15 of 24
Private and Confidential
Operations and Infrastructure
Sources of Data & Charts
Esignal – Real Time
•
Forex data.
Metastock - EoD
•
•
•
•
US & UK Equities
Currencies
Futures
Daily + charting
Trading Accounts
Short Term
•
FX Solutions
Coaching / Mentoring
Mike Elvin
•
To be agreed.
Page 16 of 24
Private and Confidential
Appendices
Appendix 1 – Action Plan
Phase 1 – Preparation
Objective
•
Demonstrate a clear understanding of what I want to achieve and how I propose to
achieve it.
•
Prepare my trading environment.
•
Office.
•
Operating Infrastructure.
•
Establish plans to address threats and weaknesses identified in the business plan.
•
Prepare a plan of action for the back testing phase.
Success Criteria
•
Completed business plan.
•
Completed personal development plan.
•
Infrastructure in place and tested.
•
Phase 2 plan completed.
Actions
Ref
Task
1
1.1
Complete Business Plan
Amend based on proposed
trading plan.
1.2
Update based on
assessment by ME
How
Understand the proposed
plan for trading spot
Forex.
Incorporate the rules
required into area 3.
Examine areas 1 & 2 to
determine if any
amendments are required
based on the plan.
Review results of the
initial assessment.
Incorporate any changes
required to the business
plan as a result of the
assessment.
Page 17 of 24
Target
Date
29/7
22/7
24/7
Completed
Private and Confidential
1.3
Update based on trading
FX contracts rather than
spread betting.
2
Complete personal
development plan.
Update draft based on
proposed trading plan.
2.1
2.2
Update draft based on
assessment by ME.
3.
Infrastructure in place and
tested.
Agree approach to
coaching / mentoring.
3.1
3.2
Review infrastructure
requirements based on
proposed trading plan.
4
Prepare plan for back
testing the trading plan
Check my understanding
of contracts, margin and
order types with FX Sol.
Amend Business Plan if
required.
20/7
29/7
Understand the proposed
trading plan.
Understand the
competences required to
trade it successfully.
Prioritize areas for
development based on this
understanding.
Understand the
recommendations made in
the initial assessment.
Incorporate actions based
on these recommendations
into the development plan.
24/7
24/7
29/7
Agree as part of the
follow-up discussions to
the initial assessment.
Understand the
infrastructure required to
trade the proposed
business plan.
Put in place the any
missing elements.
Try it out by paper trading
some signals to ensure it
all works.
Write a method for back
testing the trading plan.
Ensure that all the services
and information required
are available.
Write an action plan for
completing the test.
29/7
26/7
29/7
Phase 2 – Back Testing
•
Back testing will be performed on one instrument initially, GBP/USD.
Objective
Page 18 of 24
20/7
Private and Confidential
•
To prove to myself that the trading plan represents the edge that I require to trade the
market.
•
To expose me to the chart patterns that I will be working with, starting my learning in
recognizing and acting on the patterns.
•
To start to build my confidence in the trading plan.
Success Criteria
•
To have identified and tested between 75 and 100 examples of the trading plan set-up.
•
To have demonstrated a win / loss ratio of 60% or greater.
•
To have demonstrated a net average gain of 20 pips or more across the trades tested.
Actions
Ref
Task
1
1.1
Preparation
Prepare Data
1.2
Prepare a spread sheet or a
database that flags the
entry set-up.
2
2.1
Analysis
Idnetify set-ups that meet
the rules and identify
entry, risk and outcome.
2.2
Calculate results vs
Success criteria
Success
How
Target
Date
Download 6 months worth
of GBP/USD data
including indicators from
eSignal.
Look at the combination of
price and indicators that
identify the set-up.
Determine best method of
identifying.
Build the tool.
5/8
Starting with the latest
flagged set-up and
working backwards, find
entry on chart, validate as
an entry, establish Entry
Price, Stop Price, Exit as
per rules. Record on chart
and spread sheet.
Summarize the entry and
outcome for each set-up.
Compare results against
success criteria.
If the results match or
exceed the success criteria
move to Forward testing.
Otherwise return to
defining the plan and then
repeat back testing.
19/8
Page 19 of 24
5/8
19/8
19/8
Completed
Private and Confidential
3
Complete a plan for
forward testing.
Update my trading plan
based on lesions learned
from back testing and
prepare an action plan.
26/8
Phase 3 – Forward Testing
•
Forward testing will be performed on GBP/USD initially.
•
An FX Solutions demo account will be used to execute the test.
Objective
•
To build my discipline, skills and experience trading the plan without risking actual
capital.
•
To prove that I can trade the trading plan using the infrastructture that I have put in place.
•
Demonstrate that the trading plan can perform in actual trading.
Success Criteria
•
A win loss ratio of 60%.
•
Average net gain of 10 points per trade.
Actions
Phase 4 – Live Trading
•
Initially I will trade GBP/USD with an initial account balance of [$xxxxxxx].
•
I will add other instruments from the currency crosses that I intend to trade only after
completing the back testing phase for them.
Objective
•
To demonstrate my continuing development as a trader by trading my plan with discipline
and adherence to the tactical MoT.
•
To consistently make a profit in terms of pips.
Success Criteria
•
Achieve an average net profit of 10 pips or more per trade.
•
Achieve a win / loss ration of 60% or more.
Actions
Page 20 of 24
Private and Confidential
Appendix 2 – Results of Back Testing
Page 21 of 24
Private and Confidential
Appendix 3 – Results of Forward Testing
Page 22 of 24
Private and Confidential
Appendix 4 - Trading Daily regime
Page 23 of 24
Private and Confidential
Page 24 of 24