Writing Your Trading Plan

In my latest series of posts, I've talked about a number of topics which can be loosely labeled: "realistic expectations." For instance, I talked about $400 a Day, and The Rule of 72. The purpose of those posts was to provide a realistic metric with which to measure yourself, and to gauge your progress. These realistic measures, or expectations, can then be incorporated into your trading plan, which formed the basis for another series of posts, beginning with Self-Esteem, A Difficult Task, Shifting Focus, and Questions to Ask While Writing a Trading Plan.

These are important questions to ask and, more importantly, to answer honestly. So now let me first start off by eliminating "making a fortune and retiring early" as an option. Larry Williams is famous in the trading world for starting with $10,000 and turning it into $1,147,000 in 12 months during a trading contest. There is a reason why Larry is famous. No one has come close to repeating that kind of performance! There are over 60 million active traders in the marketplace, and only one trader, in 1987 - a remarkable year, by the way - was able to accomplish that feat. So, in answering our series of questions, let's start off by choosing achievable goals.

Next, like our Obsessive-Compulsive patients who "cured" themselves (So How Do Traders Break Their (Bad) Habits?) we need to have an out-of-body experience. We need to step outside of ourselves and see ourselves in the cold, harsh light of reality. We must refuse to allow Dopamine and Cognitive Dissonance to distort our image of ourselves. Only the brutal truth will suffice. And we must answer our series of questions with that kind of brutal honesty. And that is the process of writing a good trading plan.

Then, all we have to do is to adhere to it. Simple, right?

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