SAMPLE TRADERS BUSINESS PLAN Sample Trading Business Plan Page 1
TRADING BUSINESS PLAN Introduction. A traders trading plan is very similar in nature to a business plan for most entrepreneurs. In order to treat your trading as a business, it is critical to ensure that you create a trading plan which suits your own circumstances. This document is a sample trading plan I made several years ago for myself and you can use it as a basis for creating your own trading plan. Objectives. The Key Objective of my trading is to generate a monthly income of 7 12 K from trading options. At the higher end of 12K, this implies that I will need to make an average of $3000 weekly. Trading Futures this breaks down to about 300 points a week at 10 dollars a point. Alternatively I could use weekly options credit spreads to achieve a similar goal. Why Trading. In order to obtain personal financial freedom for myself and immediate family. In addition, to be able to help those around me who might be less fortunate than myself. Initial Capital Allocation $175,000. Trading will cease On a 40% drawdown of the Entire account ALL TRADING ACTIVITIES WILL CEASE. Until I am able to 1. Understand the causes of my losses. 2. Climb my Equity Curve on paper back above its 50 Day Moving Average. Markets of Focus Sample Trading Business Plan Page 2
Predominantly the account will be used to trade credit spreads on Indices and Shares. On an opportunist basis, momentum shares will be traded on an intraday basis. (Max Allocation: 25K ) A small (5 K) allocation will be used to trade an Automated Futures trading system. The rest will be used to hold margined postions. Trade Selection. Using Implied Volatility and Directional criteria option credit/debit spreads, and calendar spreads will be traded. Using momentum and Volume criteria Equities will be traded. Using an Automated system Oil Futures will be traded. Depending on success, I might just stick with the GVP trades, entries and exits as this has proved to be consistently profitable Position Monitoring: All positions will be monitored on a daily basis at start of day and close of business. Option Spreads adjustments will be made as dictated by the specific strategy. Stock trades will be exited prior to the close of the day (As per day trading requirements) Personal Strengths and Weakness. Strengths : Good solid knowledge of the markets, analysis methods, understanding of the Greeks, volatility constraints etc. Weakness: No real or significant passion for the activity of trading itself. Consequently, less trading will be done around Futures and more on Options. Ideally, I will have some automated systems running in real time to help with the lack of passion. Trading Structure: Need to speak with Accountant, but currently plan to trade as a full time individual trader. In about 9 years, I plan to run a complete fund, with traders hired to trade the assets of high net worth individuals. Investigate the possibility and pros and cons of creating an offshore investment fund or hedge fund. Research Times: During the Weekend, detailed market analysis will be done of the markets that I follow and a series of new trades will be selected, based on analysis as well as a review of the market activities of the previous week. Positions review will also take place. Trading Times: Sample Trading Business Plan Page 3
On Monday afternoon 3-4:30pm ( Orders will be placed in to the market. Additionally, for Automated systems and to capture profits from Market Heat Positions, I will look at markets between, 12:30pm and 3:30pm CET during the week. Performance Review All open positions will be monitored at close of business on a daily basis, and once a week, an overall account balance (Opened and Unopened positions) will be taken. The Equity method to be used will be TOTAL Equity.however, for the Futures segment of the account CORE Equity will be used. Instruments Trading Holding Timeframe. Options: 2-3 Months. Equity and Futures: (For Monthly options/ weekly for the Weeklies credit/debit spreads.) Daily. Core Equity Assignments. On every additional 10 K of trading funds to the account (After Withdrawals), Trading Equity will become Core equity. Per Trade Risk (Broken by Asset Class) Options Risk Equity: - 35% of Total Account Equity. (Profits will be lock in/closed out on a > than 25% ROI.) Futures Risks : Equities Risk: 5% of Core Equity allocation. 10% of Core Equity Allocation. Max Number of Open Positions (Per Asset class) Options:- 8 Outright Calls/Puts 2 weekly Credit spreads 1 Debit weekly spread RARELY) and one calendar spread running with rolls- Based off Volatility Analysis. Futures:- Equities: - 1 (Long or Short) 2 ( 1 Long /1 Short) Position Entry Methodology Sample Trading Business Plan Page 4
Options: Futures : Full position Full Position on signal. (As per automated system) Equities:- 20% of Max on entry / Full at 50 cents profits. Sample Trading Business Plan Page 5