A trading plan template for the unplannable

 

I know some people like to plan ahead more than others. I hate to be late or leave things to the last minute … while Mrs R tells me that she can’t be motivated unless there’s a deadline looming right in front of her. This difference between us means that most days out start with me tapping the car keys by the back door, while she shouts ‘just a minute’, and proceeds to take ten.

To a plan-aheader like me, it appears that those who leave things to the last minute have no plan at all. But the reality is that those who appear chaotic may just have a different timing mechanism. There’s often a logic to the piles of clutter on a desk … and a method behind just-in-time management.

So, whether you’re a plan-aheader, or a last-minuter … there’s no excuse to being without a solid trading plan.

Why we need a trading plan

You can always find someone who’ll tell you that they’ve traded without a plan, and made money. Of course, it’s perfectly possible to get lucky once … twice … even a few times.

But if you continue to trade without a plan, you are categorically setting yourself up for failure.

With no plan, you have no way of evaluating what works and what doesn’t. You’re at the whims of your emotions and how you felt last time trades worked out (or didn’t).

If we want to avoid repeating failures, we need to be able to identify them. Likewise, to duplicate our successes, we need to recognize them.

Problem is, that creating a trading plan is about as exciting a prospect as planning for your pension … or arranging the car insurance. It doesn’t get the heart racing.

So, it tends to be something cobbled together in a rush, without enough thought.

But trading plans don’t need to be complex – they need to be easy to follow. So, especially if you’re not naturally a plan-aheader, you will always know what to do next.

A few weeks back, I compared trading with driving a car – where we instinctively act and react, without having to think about. This is the kind of ease and simplicity that a good trading plan can bring to your trades.

Where to start

Before you get to the nitty gritty of your practical trading plan, it’s worth considering what you want to achieve from your trading.

I expect this will be about the level of income you want.

Your trading goals should be ambitious enough to keep you motivated … but realistic enough that you become dishearted.

It’s fine to have ambitions of great holidays … paying off the mortgage … a comfortable retirement … security for your family …

But look at the investment you have to start with and be realistic about the timescale it could take you to achieve those things. Yes, you can start small, but it’ll take a little longer to achieve those goals. Yes, you could make 100% profit in the first year … but with high returns like that, you should be prepared for some steep downs as well.

Keeping these long-term goals in mind is one of the most powerful ways to stay on the straight and narrow when you’re plodding through the ‘boring’ stuff, and feeling like your profits are standing still. This is a long game.

What is a trading plan?

Whether you sit at your screens for hours each day following the markets … or you just log in once a month to check your long-term positions … every trader needs a plan.

This tells you when you will be looking the markets … what markets you’ll look at … what you’re looking for … and how you’ll react to what you find.

Without this plan, trading can easily slip into a process of listlessly looking through charts, chasing signals, and generally wasting time and getting ourselves into trouble!

Building a plan

The trading plan template below shows the bare bones of a trading plan. I recommend printing this off and filling it in (just click on the images to download a pdf version). If you can’t answer some of the questions here, then maybe your plan is ready to take to market.

But don’t let that worry you, because any extra information you might need to complete your trading plan can be found here:

• Ready-made trading plans which you can work from
• Stacks of trade entry methods
• Smart exit strategies
• Ways to deal with drawdowns
• Spread Betting School to guide you step-by-step through these processes
• And last but definitely not least, the trading journal – the lynchpin that holds a trading plan together. This simple spreadsheet has everything you need to keep track of your results.

 

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