Consistent Profits with the best Trading plan
If you want to succeed in trading you need to tread it as a business and have a trading plan. It is important for every one. We also decided to make a plan for selling options and designed it in such a way that we can consistent profits.
There is one thing all Professional traders have in common and that is that they all have a trading plan. It is so important, it gives you direction what to do, when to do and how to do it, how to adjust, when to take profits. And when the market moves the wrong way it can cause a lot of stress. It would be nice that you look at your plan and it will tell you exactly what to do.
There is an old saying in business: “Fail to plan and you plan to fail.” It may sound glib, but those who are serious about being successful, including traders, should follow their trading plan.
A trading plan is just like a rule book that includes all the information on how a trader trades. Having a solid trading plan will ensure a trader is consistent in their trading and follow their rules. The plan outlines how your business runs and operates. Below is an excerpt of my trading plan
My Trading Plan:
Below is a summary of a trading plan for a beginning trader. Start small, learn the strategies, grow your account and become a professional trader.
|Why do I trade?||To become a professional trader|
|How much capital?||At least $2.500 for novice traders or more|
|What options do I trade?||Only liquid options that trade on the S&P500|
|What is my Approach?||Selling options with High Implied Volatility Rank so that we receive much premiums. Buy the options back when volatility drops.|
|What are my Profit Goals?||Close option when you can make 20-50% of maximum profit per trade|
|What is the Position Size?||Take small risk sell only 2 contracts per underlying.
When account size is bigger I can sell more contracts
|What is the Risk per Trade?||Novice traders should only risk 1-2% (2%x2.500=$50)
Intermediate traders risk maximum 5% of account size
|What are my Objectives?||Concentrate more on winning options trades than on profit.
To become a full time trader. Increase working capital to 40.000 Realize $2000 profit per month within 12 months time.
|What Markets will I trade?||Stock Options listed in the S&P500, ETFs, Commodities|
|Strategies||Selling puts, Spreads, covered call, spreads,
Iron Condor, Strangles, Iron Fly, Straddles
|Entry rules:||Choose liquid Options at a price extreme
Select Options with High IV Rank
|Duration:||Optimal duration is 25- 50 days to expiration|
Manage Winners early 20%
around 50% of the maximum profit
|Risk Management rules:||Move the untested side when tested Trades which goes against you roll out to the next month|
|What Tools will I use?||Dough and Think or Swim to determine Delta and IV rank|
|Review process:||What strategy did I use, How did the option change, what did I do|
|Continuing Education:||Watch Market Measures with Tasty Trade|
|Discipline & Mindset notes:||Enter Trades with high Probability.
Don’t Trade too large.
Take profits @ 50%
|My Golden Rules||Choose High IV Options, with enough number of occurrences, Trade small and trade often, Trade with enough occurrences and with the right kind of strategy given the market conditions.|
|Options Watch List||AMZN BIDU C CMG COST EBAY EEM EWJ FB FXI GLD GOOG GRPN GS HPQ IBM IWM MSFT XLF XLU XRT YHOO ZNGA NFLX PCLN RIMM SBUX SLV SPY TLT UNG USO VXX WFM X XLE AAPL GPRO HLF GDX|
The above table only shows a part of my trading plan. In other pages I describe the different strategies, how to set up the trade, what is your possible profit, the risk you take, how to adjust the trade, when to close it, etc..
It is reasonable to use 30-50% of your capital for a portfolio. Defined risk should not exceed the amount a trader is willing to lose at one time. If 10% of capital is allocated to defined risk trades, a 10% loss should not be a surprise.
Profitable traders and investors understand the necessity to keep trading their system. They understand the probability of experiencing a string of losses; it’s part of the game. Successful traders do not lose sight of their goals; they remain focused on the next trade. We like to set up high probability trades, which are likely to generate profits 60% percent off the time or more. It is important to know when-to-take-profits because you don´t want a winner turn into a looser.