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Tuesday, 3 June 2008

Trading Business Plan - The Way To Trade Like A Pro!

My research and observations overwhelmingly indicate that to make a good living out of the share (stock) market, a well thought-out trading business plan is a must have.

All top traders seem to have their own trading business plan. It allows them to trade in a business-like and professional manner. I am convinced that it is the only way to make consistent and significant money in this industry.

As I am planning to get back into trading in the next couple of weeks, I have created a new business plan for it.

Having a business plan is all well and good, but it would be of no use if I don't have the discipline to execute it. I have been burnt a few times from trading in the past, but I realise now it was because I didn't have the discipline to stick to what worked for me. So hopefully I have learnt from past mistakes!



theKimsta Trading Business Plan

1. Objective

a. To make consistent and significant money trading in the Share market in a professional and business-like manner.

2. Initial Setup

a. Effective Date: 01/06/2008.

b. Starting Capital: $10,000 cash (to be transferred from cash savings account).

3. Trading Platform

a. Leverage using Contracts For Difference (CFD).

4. Return Objective

a. To make at least 52% return on capital per annum (or 1% per week, on average).

5. Risk Management

a. Maximum Risk per Trade (RT) = 5% of position.

b. Maximum Risk on Capital per trade (RC) = 2% of capital.

c. Position Size (PS) = Risk on Capital per trade (RC) / risk per trade (RT)
E.g. PS = (2% x $10,000)
/ 5% = $4,000 per trade.

d. Stop loss must be placed at time of trade based on RT (5%).

e. Trailing stop loss should be set at RT (5%) with 2.5% increments.
That is, stop loss should be moved up at every 2.5% gain in price.

f. Stop loss must only be moved up with share price, never down.

g. Do not add to a losing position, unless intentionally scaling in to fill a predetermined order.

h. At least 50% of trading capital must be maintained as spare equity.

i. Maximum number of open position (OP) at any one time is given by:
OP = (50% x capital)
/ (Average Margin* x position size).
E.g. OP = (50% x $10,000) /
(10% x $4,000) = 12.5
*Average Margin is assumed to be 10%, that is, 90% Loan-to-Value Ratio (LVR).

6. Trade Duration and Direction

a. Trade duration can range from a several days to several weeks.

b. Trade position can be either in the “long” or “short” direction.

7. Share Selection

a. Shares from the ASX200 index only, with CFD margin of 5% or 10%.

8. Trade Strategies

a. Dividend Yield Play (DYP) - in a bull market.

b. Trend following, using multiple moving averages (MMA) and Renko chart patterns.

c. Candlestick chart patterns.

d. 50% Retracement patterns.

9. Time of Business

a. Research, analysis, and order placements should be conducted after normal working hours, e.g. around 7-10 pm during the night.

b. Avoid trading or monitoring market prices during business hours, unless not at work.

10. Monitoring & Record Keeping

a. Records of trades shall be kept in a separate spreadsheet (e.g. shares, position size, open date, exit date, brokerage, interest, dividends, etc.).

b. All expenses relating to trading business should be kept for tax purposes.

11. Tools And Resources

a. BullChart charting software, plus end-of-day data subscription.

b. IG Markets CFD trading website.

c. Ex-dividend watchlist email service.


Sunday, 1 June 2008

Progress Report - May 2008

Capital on 31 May '08:
  1. Share Trading: $250
  2. Net Value of Managed Funds: $17,960
  3. Cash Savings: $26,944
  4. Internet revenue: $458
----------------------------------------------------------------------------------------
TOTAL Equity: $45,612
============================================

Notes:
  • Net Value of Managed Funds ($17,960) = Market Value ($37,860) - Debt ($19,900)


Monthly Change:
  1. Share Trading: -$250
  2. Managed Funds - Performance: +$510
  3. Managed Funds - Savings Plan Contribution: +$1,000
  4. Cash Savings - Interest: +$152
  5. Cash Savings - Contribution: +$688
  6. Internet Revenue: +$249
----------------------------------------------------------------------------------------
TOTAL CHANGE: +$2,349
============================================

Notes:
  • Total F.A.S.T. Method savings contribution for the month is $1,688 = Manged Funds Savings Contribution ($1,000) + Cash Savings Contribution ($688).
  • Internet Revenue ($249) = AdSense ($8) + Internet Research work ($241)
  • Cash Savings interest rate is 7.00% p.a.

Remaining:
  • A further $954,388 is required within 115 months in order to reach a capital of $1,000,000
  • An average monthly income of $8,299 is required from this point forward

Summary:
  • Account increased by $2,349 due to improving managed fund performances and contributions from salary of $1,688.
  • The Australian share market gained 1.0% during the month.
  • Keep moving forward in order to increase income streams and accelerate wealth creation.
  • Next month's F.A.S.T. savings plan contribution is $1,739.

[Go to April 2008 Report]


Activity Summary - May 08

Website Improvement:
  • Added "Bookmark" button to facilitate bookmark and sharing of articles.
  • Added Ratings feature from Outbrain.
Traffic:
  • Total Hits to website: 5792; Unique Visitors: 3954
  • Hits increased by 3994 (+222%) during the month
  • Average 128.8 hits per day during the month
  • Traffic sources: StumbleUpon (78.3%), Direct Hits (16.9%), Google Search(2.4%), Blogger (0.7%), Del.icio.us (0.5%), Facebook, TopBlogArea, Yahoo!
Search engine keywords:
  • creative ideas to become millionaire
  • john demartini "forced accelerated savings"
  • how to become a property millionaire quickly
  • "forced accelerated savings"
  • anthony robbins audio blogspot
  • anthony robbins wholesale products
  • common ways rich people make money
  • "forced accelerated savings technique"
  • factors to consider for buying house
  • self made young millionaires

General:

Keep Moving Foward

I came across this inspirational quote last night while watching Disney's animation, Meet The Robinsons (2007):

We keep moving forward, opening new doors, and doing new things, because we're curious... and curiosity keeps leading us down new paths.
- Walt Disney




There is a great lesson to be learnt here:

As long as we keep moving forward despite unfavourable circumstances, we keep moving forward despite failures and setback, and we keep moving forward until we achieve our dreams and visions, anything is possible in this world.

Remember to Keep Moving Forward in all endeavours of your life.

Sunday, 25 May 2008

Free Download: As A Man Thinketh eBook

James AllenI referred to the book, As A Man Thinketh, by James Allen (1864-1912) in the previous post on Convert Your Skills, Knowledge, Passion And Talents Into Cash. As A Man Thinketh, published in 1902, is a powerful philosophy that will make you achieve perfection through the purity of thought. More than that this little book will help you convert your thoughts into concrete actions that will result in the achievement of anything that you deeply desire in your heart.

In this book Allen (pictured left) propounds that a man is his dream. He goes on to explain that what a man thinks about is what he becomes. In the book, readers are introduced to the effect of thought on circumstances; effect of thought on health and body; thought and purpose; thought factor in achievement; vision and ideals and serenity.

Quotes from As A Man Thinketh:
  • A man is literally what he thinks, his character being the complete sum of all his thoughts.
  • Cherish your visions. Cherish your ideals. Cherish the music that stirs in your heart, the beauty that forms in your mind, the loveliness that drapes your purest thoughts, for out of them will grow all delightful conditions, all heavenly environment, of these, if you but remain true to them your world will at last be built.
  • The soul attracts that which it secretly harbors, that which it loves, and also that which it fears. It reaches the height of its cherished aspirations. It falls to the level of its unchastened desires - and circumstances are the means by which the soul receives its own.
  • Every action and feeling is preceded by a thought.
  • Right thinking begins with the words we say to ourselves.
  • If anything is excellent or praiseworthy, think about such things.
As A Man Thinketh is partly responsible for the creation of the entire Personal Development industry. Most contemporary PD authors and teachers credit this little book for providing foundation to their principles. Earl Nightingale, widely regarded as the father of modern day personal development, called the ideas in this book, "the strangest secret". The secret, he said, is "we become what we think about".


Youtube Video - James Allen and The Law of Attraction:



This book is now in the public domain within the United States and most other countries, which means it can be downloaded and shared for free.




[Related Article: Convert Your Skills, Knowledge, Passion And Talents Into Cash]


Saturday, 24 May 2008

Convert Your Skills, Knowledge, Passion And Talents Into Cash

Becoming rich in money starts with becoming rich in your thinking. This is the first essential step to becoming a self-made millionaire. Being rich in our thinking is a habit that we can all get ourselves into.

The great philosopher, James Allen wrote more than century ago, "all achievements, whether in the business, intellectual, or spiritual world, are the result of definitely directed thoughts". He also wrote in his classic book, As A Man Thinketh, that "man is the master of thought, the moulder of character, and the maker and shaper of condition, environment, and destiny." I suggest you read that quote again and again until you fully understand it because it is a profoundly powerful message. I believe that the achievements of the entire human civilisation are possible because our forefathers subconsciously believe in that notion.

To put it in more relevant terms, we control our fortune by controlling our thoughts.

Let's see how we can put this philosophy into practice in real life. As Dr Demartini suggested in one of his seminars, we need to think that we are already wealthy. However, that wealth is just in other forms at the moment, such as your skills, knowledge, talents, passion or values.

In order to generate money from the other forms of wealth that we already have, we need to be able to convert them into the form we want, that is cash.

So you ask, "how would you go about converting the other forms of wealth into cash?". For that you need to thoroughly and objectively evaluate yourself first. You need to ask yourself questions like:
  • "what am I good at doing?"
  • "what is unique about me that nobody else have?"
  • "what is my passion or interests?"
  • "what do I know a lot about or are an expert at?"
  • "what do I value most?"
After you find the answers to these questions, you will know what you are capable of doing and in which area you can concentrate on to convert your skills, knowledge or other assets into cash.

Here is a possible scenario: let's say that you found out you are good at talking and expressing yourself in front of other people and have an expert knowledge of psychology. (Remember that these skills and knowledge are already a form of wealth for you - they are your assets)

The million dollar question is: how would you convert good speaking skills and expert knowledge of psychology into wealth? Well my friends, if you look hard enough you will find many potential opportunities! You could become a professional, motivational speaker traveling from state to state, you could become a business coach or a personal development coach, you could write a book, an email newsletter or even a blog about psychology, you could do interviews about it on TV, radio, magazines and the Internet, etc, etc. This is just a brief list of potential opportunities, I'm sure you could add many more to the list if you think about it further.

Once you understand the process, you can easily find ways to convert other forms of wealth into cash.

As you can see, this is a very practical strategy and it is one that could put you on the path to achieving your goals very quickly.

Related article: Free Download: As A Man Thinketh


Monday, 19 May 2008

My F.A.S.T. Savings Plan In Action

Today I am implementing a regular savings plan based on Dr Demartini's F.A.S.T. method which I talked about in the post on "Dr Demartini's F.A.S.T. Savings Plan Will Make Millionaires". But instead of putting money away for savings on a quarterly basis, I will do it on a monthly basis. It will supersede my existing savings plan.

The amount to be put up for savings will be according to the following table, which I have created (click on image to enlarge).

F.A.S.T. Monthly Savings Plan
If you look closely, the savings amount is not constant but increases by a rate of 3% per month (the F.A.S.T. rate). This means that if we started this savings plan at $1,500 in January 2008, we would need to be able to save $1,688 in this month and $2,076 in December 2008.

I have chosen the F.A.S.T. rate to be 3% per month so that it allows me to become a millionaire within 9 years and almost a multi-millionaire just one year after that (provide I can follow the plan closely). Varying this rate affects the savings plan significantly.

The money saved up monthly is expected to be put into a low risk, low fee, savings account, which is currently earning a nice 7.00% p.a. But let's assume the average cash interest rate for the next 10 years is 5% p.a. (in Australia).

The beauty of this strategy is that it forces us to look for new ways to increase our income all the time in order to meet the savings requirement of the plan, which can get pretty demanding by the 4th or 5th year.

So, the first couple of years of this plan is manageable, but soon enough I will have to increase my income significantly. It will be a good challenge!


Note: If you want the MS Excel version of the above table please contact me.

Related Article: Dr Demartini's F.A.S.T. Savings Plan Will Make Millionaires