“You want to know another amazing thing? All successful operators that have met or with whom I have spoken, were reflected in writing (in one form or another) their perception of the markets and its exact methodology of operation. They had put in writing rules which depended his life. ”
John Hayden –
“The 21 irrefutable truths to invest in stock”
Those who have heard the call of financial markets attracted by the magic of his promises, have paid for the experience of initiation rituals and wander the roads of pilgrimage to find the Holy Grail.
Those who survive the initial mirage, with more will than know-how, have acquired the knowledge, tools, information, methods … that provide a plot basis on which to make investment decisions or speculation. However are a minority who get recurring income that allows them to live on.
One element to consider that generally distinguishes a successful trader from another that has lacked he is to have developed its own Trading Plan or Strategy Operations. Sometimes too lazy to write and reflect on “what we have in the head”, or by the fear of facing a blank or concern that involves us reveal our limitations, most often postpone this task for better chance … maybe never arrive!
But why is it so important a trading plan?
- Directs the steps to take when it is an opportunity; defines the strategy, operations, tactics.
- Structure an inherently unstructured environment; clearly define the parameters of action: opening price – closing fork supply / demand position size depending on the capital available, schedules markets …
- It provides motivation; achieve brand objectives, challenges to take on, areas for improvement …
- Outlined a contingency plan; establishes procedures for action in case of an unforeseen incident (eg interruption of service or communication with our broker if we have open positions)
- It provides a practical framework for operations adapted to the personal characteristics; formalizes our tactics and details clearly and concisely.
So how do we begin?
Before tackling mechanically to a list of questions to which we try to respond should we think of the approach we give our document so that the approach is valid and effective.
It can help us to think that we will present to an investor who wants to we manage your portfolio or what we like to listen to us if we were the investor.
It should be noted that this is an exercise in analysis result of a reflection on how we see and understand the market, understand our capabilities and limitations, and adapting to all our operations. He performed in a professional manner, dedication and effort will involve several weeks or even months and we should not forget that this will be a “living” document, which periodically we will review.
We must treat our plan from the slopes Business and Personal, aspects of the following table:
| DEAL | PERSONAL |
|
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From the business point of view, as if it were a company can not be subject to improvisation and although many operators to perform this activity as a “hobby” you are playing their heritage. An example can illustrate us the importance of this approach:
What if a company is devoted to produce what one worker has heard at the hairdresser because it is fashionable or to open an empty commerce, and think to fill the shelves of products that asked the first to come in to ask? even that seems comical, relatively speaking, this is what many traders make markets.
From the point of view, being an activity that depends largely on the performance of the operator and subject to psychological aspects, knowledge, experience, skills, personal character, we can not ignore the personal knowledge of the technical aspects and emotional.
Anyways what are the essentials?
- Trading philosophy ; is key to develop a model that reflects our way of operating, we will continue faithfully and impregnate all the operations we undertake. In which we describe the ways in which we rely to achieve our ultimate goal.
As an example our philosophy might be as follows:
- Analysis of price, volume and indicators.
- Assessment of conditions provided in other time scales.
- Preservation of capital.
- Tactic ( setups ) predefined high probability and consistently executed.
- Careful management operations jacks predetermined and benefits good risk / reward ratio.
- Careful selection of the operations and their proper management, to carry achieve good results
- Guidelines to follow to maintain personal discipline; knowledge of technical and personal psychological condicionanentes involved in the operation will help us chart a course with objectives that should be paid special attention.
To do this we will make an analysis of personal introspection that trying to identify and understand what our strengths (virtues) and weaknesses (defects), it will combine supportive strategies and refuerzen on the strengths and establish mechanisms to limit the impact of weaknesses.
Both defects as virtues consider them from the technical, emotional and external aspects.
- Risk Management ; Most professionals agree that is the most important aspect to succeed. If suitable parameters are not set, the odds of losing capital are very high.
Some points to consider and generally accepted values:
- How will we protect the positions? ¿Stop lost mental or released?
- Diversification of assets, markets and strategies.
- Maximum risk per trade (1..3% of capital)
- Maximum operational risk on open positions (10..15% of capital)
- Operational tactics ( setups ); the realization of all analyzed and considered aspects will be established with very detailed criteria for implementation, monitoring and closure of the operation.
The following criteria are specified:
- Market and time scale.
- Market context (background conditions)
- Entry.
- Position.
- Protection.
- Profit target.
- Gestió operation.
The idea of this post to a seminar by Dr. Gary Dayton, Trader & Trading Psycologist Educator, knowledge of the vicissitudes of many arises from assisting traders and their own experiences.
“Why risk everything in a single operation? Why not make life in a pursuit of happiness rather than a search for the pain? I decided I had to learn discipline and money management. ”
Paul Tudor Jones