A Key Ingredient for Trading Success
08/23/2013 6:00 am EST
I often talk to my student traders about the importance of having a business plan as a trading business and not just viewing yourself as a trader with a trading plan, says Kam Dhadwar of Learn2StockTrade.
Whilst the trader and the trading plan are important parts of the overall trading business, they are not complete. Yet many traders approach this business armed with themselves and some sort of trading plan alone. This is no way to approach ANY business let alone the trading business. Actually as a trader, it’s much more than just any business, its a COMPLETE LIFESTYLE! So in effect your business plan is actually a plan for your lifestyle as a trader!
I believe it is imperative to include all of the following in your trading business plan at its most basic level:
Business Vision—What is your ultimate vision for your trading business, where do you see yourself in five-10 years?
Mission Statement—Your purpose for entering and being in the trading business? The real motivation behind why you want to trade needs to be more powerful and meaningful than just to make money, because there will be times when you are not and that means you can lose your motivation!.
Clearly Defined Goals & Objectives—Goals are long-term aims that you want to accomplish Whilst objectives are concrete attainments that can be achieved by following a certain number of steps. As traders you need outcome goals\objectives, performance goals\objectives, and process goals\objectives. Then focus on the performance\process goals and objectives as ultimately focusing on these helps you achieve the outcome.
Financial Plan—Capital requirements, start-up costs, planned expenses, planned income structure, and at least a three-five-year projected cash flow forecast. (These are working documents that should be reviewed every three-six months and yearly for a major review and update).
Trading Framework—Markets to trade, beliefs about the market, daily preparation plan, understanding plan, execution plan, risk and position-sizing models, trade management options etc.
Self Development & Growth Plan—How will you forecast and plan for your growth in a never-ending learning process? How will you structure your learning in such as way that the understanding of the concepts can be understood in such as way that you can execute them with belief and confidence?
Contingency Plans—What-if scenarios, risk analysis, trading plan contingency, hardware\software contingency.
The above is just some of the things that I suggest traders consider so that they have CLARITY in what they heading towards, but most importantly so that they can also establish a true feeling of being in line with the life’s values rather than going against them. Many traders struggle because their unconscious beliefs and values are not aligned with their goals\objectives. The inner conflict stops them and forces them to do things that they don’t want to do consciously, which is another subject in itself!
Developing a complete plan is not just for new traders, it’s for those that have not got where they want to go and also for those on the journey. Above all it’s about gaining CLARITY, and that is something everyone can do with no matter what your level.
By Kam Dhadwar of Learn2StockTrade