Creating a Trading Plan (Part 4)
Routines & Resources
Welcome to the fourth and final installment of my series on creating a trading plan. At this point the majority of the work is done and you’re in the home stretch. We’ve previously covered what your trading goals are, what instruments you’ll trade, entry and exit rules, risk management, market timing and today we will cover our last subjects: routines, resources, and miscellaneous rules.
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One of the most important things a trader can do is have a consistent daily, weekly and monthly routine. This ensures that regardless of what the market is doing, you are always in tune and ready to act when the opportunity presents itself. This doesn’t have to be long or extensive, but something you carve out the time to prioritize and consistently do.
Example:
Daily Routine: Review all holdings and indexes. Update add on points and stops. Plan the next days trades and create any alerts needed.
Weekly Routine: Run scans and review weekly charts. Identify proper basing patterns and add those stocks to watchlist. If a stock is actionable and there is room in the portfolio, place it on the focus list, plan entry and create alerts.
Monthly Routine: Complete post analysis of all trades placed last month.
Another key element of a trading plan that will help with your routine as well is identifying and utilizing the right resources. This may include a certain program or service for running screens, analyzing fundamentals, charting, a newspaper or a mentor service. It is vital that whatever resources you choose to use fit your trading style and align with your trading goals.
Example:
Screening and Fundamentals: Marketsmith
Charting: Tradingview
News: Investors Business Daily Newspaper
Lastly, we want to put into writing any miscellaneous rules that don’t quite fit into one of our previous categories. Some examples of this can be hold rules, or not trading when you’re on vacation.
Examples:
Hold Rule: If a stock moves up 20% or more in 3 weeks or less from a proper pivot point, must hold the stock for at least 8 weeks.
Misc Rule: Do not take a trade if it is not planned the night before.
Overall, having a trading plan is important to have as it helps to keep you focused, informed and disciplined. It's a blueprint for your trading activities, and helps you make well-informed decisions keeping you on track with your trading goals. Without a trading plan, it is easy to lose focus and make impulsive decisions that can lead to costly mistakes. By creating a trading plan and sticking to it, you are increasing your chances of success as a trader.
Thanks for joining me over these last four weeks creating your trading plan. Please feel free to share your plan when you are done, I’d love to see them.
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The content presented is for informational and educational purposes only. Nothing contained in this newsletter should be construed as financial advice or a recommendation to buy or sell any security. Please do your own due diligence or contact a licensed financial advisor as participating in the financial markets involves risk.