CREATING A TRADING PLAN PART 3

CREATING A TRADING PLAN PART 3

Trading Goals

Setting goals is an essential part of your trading plan as they provide you with a beacon to work towards, the ability to track your progress and the motivation required to get the job done. Try to define your goals in terms of your development as a trader, as opposed to purely financial goals. If you focus on becoming a proficient trader, the financial rewards are sure to follow just as night follows day. Then decide how you will achieve these goals and how you will reward yourself once you do. The rewards should reflect the scale of the achievement as well as being specific and meaningful to you. For example, the reward of a night out should name both the venue and the people you intend to take with you.

Annual trading goals:

This looks at the big picture, think of the knowledge and the skills you want to have in a years time.

An example will be: My annual trading goal is to . . . (develop my trading ‘edge’ in order to tip the balance of probabilities in my favour. At the moment, this comprises three separate elements, namely:
1. I receive coaching from _____ ________, who is one of the best practitioners of the strategies that I employ.
2. I model the best trading practices, including having a written, clearly laid out trading plan.
3. My strategies are well developed, tested and monitored comprehensively to ensure that they remain tradable, market sensitive and profitable). I expect to achieve these goals because . . . (in addition to the coaching, I read xyz magazine and study the words of wisdom from the more experienced members of Forex Factory. When I achieve my goal, my reward will be . . . (a two week family holiday in Japan).

Monthly trading goals:

An example will be: My monthly trading goal is to . . . (achieve consistent profitability every month, with a Success ratio of 2:1 or more. I expect to achieve these goals because . . . (I review my performance on a daily / weekly / monthly basis and quickly spot any problems, should they occur). When I achieve this, my rewards will be . . . (a celebratory meal out with my partner / family in a porch restaurant).

Weekly trading goals:

We need to zoom in closer on the details now.

An example will be: My weekly trading goal is to . . . (trade every day of the week in accordance with my trading plan. This will entail taking my stops instantly; sticking to my risk and money management strategies; following my exit criteria and devoting most of my time to searching for new trades and choosing only the very best setups). When I achieve this goal I will pat myself on the back by . . . (having my favorite wine and cigar at Wine Connection in town).

Daily trading goals:

We are zooming even closer into the details. Every day what do you what to achieve?

An example will be: My daily trading goal is to . . . (trade according to my plan. Today I will stick to my plan because it is detailed, specific, tested and profitable. I am confident that I have the self discipline to adhere to it which, in turn, will ensure that my weekly, monthly and annual goals are met). Assuming that I stick to my plan, I will pat myself on the back by . . . (Watching my favorite drama for an hour)



What markets are you going to trade

You have a choice on which market to trade, it could be currencies, stocks, index, oil....the list goes on. Every trader has a reason on why he wants to trade that particular instrument. You will need to list down the reasons why you want to trade this currency pair or this stock. Also list down the number of instruments you are looking at.

An example will be: The instruments that I will trade are . . . (U.S. stocks in the evening after work because good opportunities exist in the 7-9pm session. They also provide excellent liquidity, volatility, tight spreads, fast fills and low commissions). The currency pairs I am looking at is ….... because........

What time frame will you be trading in?

By now you would have decided what kind of trader are you or would like to become (swing, intraday or position trader). After deciding on what kind of trader you are, you have to focus on the time frame you will be trading in. You must be clear in how many time frames you will be trading in any why you will be using them.

An example will be: As a swing trader, I will use . . . (daily charts to determine the trend; 10 minute charts to enter and exit positions and 60 minute charts to monitor my open positions).