STOCK INDICES TRADING PLAN - EXAMPLE OF TRADING PLAN
Below is an example of a stock index trading plan that a trader can use as a template to come up with one of their own.
JUSTIFICATION FOR A TRADING PLAN
1. TRADING IS A BUSINESS, SUCCESSFUL BUSINESSES ALWAYS HAVE PLANS
- Businesses that are successful always begin with a plan.
- Successful business plan will guide you to success, think of your trading plan as a map: it is a constant reminder of how you will consistently pull profits from the trading stock index.
- Difference between a successful Indices trader and a losing trader is the plan.
2. TO KEEP ME IN THE RIGHT DIRECTION
Consistency is important in your trading routine to measure how successful you are as a trader.
Keep you on target, read it every day & stick to it.
IF YOU HAVE A GOOD TRADING PLAN AND YOU ARE DISCPLINED ENOUGH TO STICK TO IT YOU WILL BE SUCCESSFUL.
INDICES TRADING STRATEGY
Our Stock Indices trading strategy will only open bullish trades, this is because index moves are based on the principle that stock prices always move upward over time, therefore the index that track these stock prices movement will over time move in a general upwards direction. To open a buy trade we shall wait for a price pullback & buy these dips.
TREND DIRECTION
BULLISH BUY TRADES ONLY
WAIT FOR PULLBACKS - BUY THE DIPS
TRADING SYSTEM
GOALS OF THE SYSTEM
- Ability to IDENTIFY A TREND AS EARLY AS POSSIBLE.
- Ability to AVOID WHIPSAWS.
A Trade System should find a compromise between the two Goals,
Find a way to identify a trend as early as possible but also find ways to help you distinguish the fake signals from the real ones.
FUNCTIONS OF EACH INDICATOR
MA - Identify a new trend as early as possible.
RSI - Confirm the begin of a new trend.
TIMEFRAMES
- Main timeframe is the 1H.
- Signals are generated on the 1H timeframe.
1H
- 5 & 7 L MA
- RSI (14)
RULES
LONG ENTRY
1H Chart
- Both MAs are moving UP
- RSI greater than 50
LONG EXIT
- Moving Average gives opposite signal
TRADE ROUTINE
- Signals are generated using 1H timeframe.
- Signals to be executed immediately rules are met ( Not Before ).
- Entry signals should be executed during daytime.
- Close all trades at the end of the day.
TIME OF DAY TO WATCH MARKET
Watch market during daytime
MONEY MANAGEMENT
Day trading - Low risk High return method
Trade when I have a high risk to reward ratio 3:1 or more
Never trade more than 10 % of account total account balance
Never risk more than 2 % on a single trade
MINDSET/PSYCHOLOGY
- Trade without Emotions (greed, fear, anticipation, impulse, bias, overexcitement)
- I trade what my eyes see not what I feel.
- I will be patient.
My job is not to be the trading system!
It is not to decide which trades looks promising.
That is the job of my Forex trading system. My system has a set of rules which tells me this is what I follow. Do not get caught up in price action & make rules as you go along.
MY JOB DESCRIPTION IS
To sit patiently & wait for my system to indicate that it's time to enter or it's time to exit. And then with great focus I execute trade as planned.
Taking trades not indicated by the system, second guessing the system & not taking trades given, hesitating and getting in late, anticipating and getting in early are all common place & boil down to lack of faith in the system & not having a burning focus on accurate execution.
GOAL: To have 100% undivided focus on mastering my ability to execute my Stock Indexes trading system accurately.
The more you develop the ability to step back from market movements & watch the market dispassionately, waiting for a signal to trade, easier it'll be to witness the fluctuations of your emotions without getting sucked into them allowing them to throw you off your game.
WEAKNESS
- I am greedy.
- I overtrade
- Make a list of all your weaknesses that are interfering with your trading. This is the first step to help you overcome these weaknesses. Use trading psychology to help you overcome them.
NB: by writing down your weaknesses you will begin recognizing them as you trade, once you do this you will begin to avoid this mistakes & your trading will improve.
GOALS
- To focus on exit just as much as I do on entry.
- Always protect my account using stop loss, money management methods, trading with the trend & always following the rules of my trading system & trading plan.
- Never second guess or go against my trading system.To always keep up my discipline.
- Follow all the rules of my system & never break them.
- Trade fewer times & execute all my trades correctly.Trade what I see, what the system + charts are telling me.
- Sit patiently & wait for trading signals from my trading system.
- Achieve consistent profitable trading results.
Write down goals & focus on achieving these goals in your trading
FOLLOW THIS SYSTEM
This is the most important part of creating the system.
Always follow the rules
Stick with the trading rules
Be disciplined & patient enough
JOURNAL
Log all my trades in a trading journal so that as to track my progress.
