Dec 132010

Yesterday I went over my trading goals with my risk manager (who’s also my wife).  She was a little concerned about my lack of progress.  I think I’ve made a lot of progress considering I completely changed my trading plan 2 months ago and last month was my best day trading month ever.  But the bottom line is I’m not still making what I made doing my software architecture & development consulting.  So I came up with a plan for the upcoming months.

The main metric I am tracking is my avg profit per contract per trade (trade expectancy per contract) and the net profit per day.  The first is important because I want that to be efficient and averaging just 2 ticks is not efficient.  I need to fix that before piling on contracts.  The second is important because ultimately that’s what measures our income each month.

Phase A (in progress):

1. Increase my avg profit per contract 50% from $20 to $30.  Result will be increase from $250/day to $375/day.  Last week my avg profit was $27 so I’m making progress here.
2. Add a second market to increase trade opportunities by 50%.  Result will increase from $250/day to $375/day.  I was hoping to use the Euro so I could trade the same market all day but it has proven to be too volatile for me.  So I’ve chosen EuroStoxx for the european morning second market and took my first real money trade today.  For the US morning session I am currently looking at the 10 year notes.  I’d like something liquid that is similar to ES, unlike Crude & Euro which are volatile and move totally different.  TF is out because it’s too correlated to ES and it’s volatile.  So 10Y Notes seems like a good choice.  It’s slow which gives me time to think.

The two above combined will result in an increase from $250/day to $560/day.

$560 is approximately 2/3 of my IT salary per day & $122k/year.  This would be excellent and if I never improved beyond this I could still live a comfortable life.  Maybe not in Paris but somewhere where housing is cheaper.

Phase B:

Increase my avg profit per contract 33% from $30 to $40.

Result is increase from $560 to $750/day which is approximately my IT consulting salary & $163k/year.

Phase C:

Increase contracts from 2 to 3.  50% increase.  Result is increase from $750 to $1125/day surpassing my IT salary & $245k/year.

Phase D:

Increase contracts from 3 to 4.  33% increase.  Result is increase from $1500/day which is $327k/year.

Phase E:

Continue increasing contracts & avg profit per contract.  It will be easier to increase avg profit because I’ll be able to scale out more and leave a runner for the big winners.  I figure by the time I get to this phase I’ll be quite happy with my income, will have a lot more experience, and will have plenty of time to improve without stress or pressure.

There is a catch in these results:  By going for a bigger avg profit per trade I’ll be looking for setups that have bigger potential.  That means fewer trades.  I’ve been overtrading as it is which explains why I’m averaging just 2 ticks/day.  So the above figures could be off by say oh 25%.  I don’t need to be exact at this point.

Napoleon Hill and my former project managers would advise me to put dates on these milestones.  I’m going to have to think about that because I don’t want to rush myself but at the same time a little pressure is good, if not Parkinson’s Law says I’ll take forever.  Which is kind of what has been happening as I’ve been trading 2 contracts for 7 months now.  It’s time to take it to the next level.  So let’s say 1 month per phase and see how it goes.

  4 Responses to “Trading Plan – Goals for the months ahead”

  1. Hi Micheal,

    yes, it is very important to have goals set-up and make oneself measureable to succeed in an endeavor. But imho it can be dangerous to focus to much on monetary goals – especially in the beginning of the journey because it can distract you from what is really important: manage the process well day in day out.

    Btw, why do you think 2 tick per lot is not enough? If you have 5 trade per day on average this sums up to around 200 ticks a month which is 4000 Euros if you trade the bund with 2 lots. And if you can make 2 ticks per lot per trade on average you can increase your size easily. If you trade 6 lots which is not so much you make 12k Euros a month which is more than your former IT salary.


  2. Napoleon says to be very specific with goals including exact dollar amounts. I tried that 2 years ago and just put that I’d have $1 million in my account. Obviously that didn’t work. I was really naïf back then. So now I am breaking it down.

    My main focus when day trading is sticking to the plan, not monetary goals. The metric of expectancy is my primary focus. But I also need monetary goals because that’s ultimately what counts. I know that if my expectancy is good and I trade my plan then the money will come.

    2 ticks avg could be enough to make a living but I think it’s inefficient. I think I can make more by going for better setups and staying in the winners. 2 ticks tells me I cut winners short which is exactly what I’ve been doing. But you raise a good point. I guess I’m following FT71’s influence here.

    I really think my 2 tick average came because I started october working on scalping the DOM. That was my focus for a while. And the no bs day trading guy says he’s getting out with at least a couple ticks and that’s what I was doing. This is fine for scalps but when trading off levels I think there is potential for more. So my idea was to scalp into trades and then hold. The problem is almost every trade pulls back and that’s enough to trick a scalper into getting out. That’s precisely what’s been going on with me.

    I welcome all feedback on this and it’s a process of self-discovery figuring out what I can do and how to improve it.

  3. You have already said it: 2 ticks can be a lot if you are scalping and it can be a meager result if you go for a major intraday swing. I have read the no-bs booklet, too, and I think it is useful, but only if you practice DOM reading a lot. And ft71 can ony get 1-3 ticks MAE because he seems to be a great DOM reader, but as he said you don’t need it in order to be profitable with VP.

    For me it helps if I have my first scale where a scalper would exit, too, because this is the exit with the highest prob and then have the next targets at logical VP areas.

    Do you use an emotional journal in which you write down your feelings during trading, especially when you are in a trade? I have started so 1 week ago and e.g. the resounding of my fear to let a winner become a loser can be much better handled if I express it. I have to accept those emotions and confront it with the probability logic of my plan – day out day in.


  4. I’m curious just how successful one can be at trading levels without great DOM skills. I find if I look for confirmation I sometimes miss it or get an extended entry. If I enter with a limit order on the dom then sometimes it just keeps going. I’m still experimenting here.

    I agree about getting one off quickly. That will work if price bounces off these levels consistently. Need a high win rate on the first scale to make up for an inverted R:R.

    I do keep a word journal. Sometimes I run camtasia and narrate my trades. I have found that keeps me more disciplined. It’s as if I’m narrating my trade to a group of traders who will mock & ridicule me if I don’t follow the plan. Yesterday I did this and I followed my plan pretty well. And at the end I can review the video if I need to or if not just delete this. This is a standard practice at SMB and they have video reviews with other traders.

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