Thursday, July 10, 2014

Establishing a Trading Plan - Part 2 - Setting Goals

(This is a continuation of my previous post:  Establishing a Trading Plan - Part 1)

Having clear and specific goals helps keep me focused (sadly, I probably learned this the hard way).

I originally assumed that there was only one goal for all trading plans - to make money.  While this may be true at a very high level, I now find setting goals directed towards my approach to trading much more useful.

Examples of goals that focus on my trading approach:
  • Learn and try new trading styles and approaches
  • Test the boundaries of my risk tolerance
  • Consistently be disciplined in all my trades (for example, obeying all my stops and rules)
Having goals that are not purely profit related helps me focus on improving my approach to trading.  This seems to align with most of my research and reading about other traders who consistently caution against setting profit targets as goals.  The advice generally seems to be that if I follow a sound approach, positive results will follow.

The key thing to remember is goals can change.  I plan on reviewing and adjusting my goals periodically to bring focus to the areas of the trading I want to work on.

Wednesday, July 9, 2014

Establishing a Trading Plan - Part 1 - Outline

One of the most important things I've come to realize through my own experience as well as reading the insights of other experienced traders is the importance of establishing a trading plan.  (duh, having a plan is probably a good idea for any venture!)

What is a Trading Plan?  

To me, a Trading Plan is simply a document that outlines:
  1. What are my goals?
  2. What is my approach to trading?  What set-ups will I look for to trade?  What stocks or indices am I going to trade?  What are my rules for entering and exiting a trade?
  3. What is my risk management approach?
Why have a plan?

Many of you are probably thinking "I already know my goals, strategies; writing them down is a waste of time!"

Trust me, taking a plan that is was "in my head" and formalizing it into a documented Trading Plan made a world of difference.  Having a formal, documented plan helps keep me focused, disciplined and mitigates the "random gut feel trades".

In future posts, I'll describe in more detail what I include in my Trading Plan...

See my next post on Setting Goals

Getting started again...

After a long hiatus I thought it would be a good idea to resurrect this web site.  Unlike the previous incarnation, this time I will focus on documenting my thoughts about trading and investing.  

Why am I doing this?  Mainly it's to formalize my thoughts and track my own progress.  By writing things down I believe it will make everything more accountable and allow me to reflect on me trading and investing performance.  Hopefully, readers who stumble across this site can share in my experience and gain something.  Who knows!

What are my goals?  Simply put, it is to consistently generate income through trading and investing.  Eventually I hope to build enough capital and skills to retire!!!

In future posts, I will cover topics such as:
  • Trading (which I define as short-term, speculative type trades based on specific set-ups and anticipation of short-term price movements)
  • Investment (which I define as long-term accumulation of growing passive income streams; mostly through individual stocks and ETFs)

I encourage you to check back often and provide comments...

Thank you!