My Trading Plan
 

 I use this as a base template for my stock and options trading, in conjunction with my trading routine.  The Futures trading plan will be slightly different, and can be found here.  A little personality goes a long way, and this plan fits my personality.  Do not copy this!  Take the time to go through the exercise of working out a trading plan that fits your personality, you'll be much better off for it.


1. A maximum of 4 positions held overnight (updated Feb 2/07)


2. The maximum allowable loss for any given trade is the same as risk exposure.  A maximum of 1% of total
account equity will be at risk in any given trade.  Total amount at risk determines the position size
according to the following mathematical formulae:

(Pcurr - Pstop) * #shares = R,

Where:
Pcurr = current stock price
Pstop = stop loss price
#shares = Number of shares
R = total equity at risk == TotalAcctSize * 1%


3. Entry Criteria
Candidates for a trade are obtained from a pre-determined watchlist.  Work out and review the thesis for
entering the stock (ie. the reason, rationale, or idea behind why you want to enter this stock in the
first place).  Prior to entering the trade, always:

- confirm market/sector trend (more aggressive when market is moving in the same direction as candidate,
and more cautious when market is moving in opposite direction as candidate).
- confirm stock trend (using basic technical indicators, ie. RSI, MACD, 10/20/50d EMA)
- confirm persistency of trend
- confirm that the stock trades relatively "clean"
- double check where your initial stop will be placed
- calculate the price corresponding to 3R.
- confirm that your thesis is a high-probability scenario - what is the probability that the stock will
reach the 3R profit level?  How about the 2R level?


4.  Exit Criteria
Unconditionally sell when your stop loss is hit.
If the stop has not been hit, then sell if the price-action indicates a high probability of the stop being
hit.


5.  Nightly Review (added Jan 08/07)
Review the charts of any and all open positions after market close and before next day's market open.  Adjust stops as needed.