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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.