After two days of hard work and backtesting of system, I have managed to prepare a trading plan for myself.
It looks more of a trading system than a trading plan. As AW has mentioned a trading system fits inside a trading plan. here's something that would give you an idea and help you chalk out a trading plan
http://www.trade2win.com/media/knowledge/tim-wilcox/T2W_Trading_Plan_Template_2005.pdf
(Draft of rules given for NR7 trading by AW is my main source of inspiration for writting my trading plan; Aw's suggestion of using 3,8,13 has also produced a base for my system. I always believe in building one floor onto another,rather than starting from the scratch)
Not a big fan of small periods for MA other than being too hard to see the crossovers I find them moving too fast. I just use candlesticks directly for short TF so wont comment on the trading system.
Position Sizing: (This I will have to modify after 3-4 years when I will switch to full time trading)
-As I will be doing part time trading for next 3-4 years, I will be trading only in nifty (no other script is possible for me to manage), hence any given time I would be in single trade. So, I would be putting 75-80% of my capital on single trade with 20-25% of the capital kept for margin covering in case trade is going against me and is within my stop loss.
Money management:
-I will be taking risk of no more than 5 % of my total capital on one trade. Accordingly, I will calculate the points of risk I am ready to take and will take the trade only if these points are within my risk limit of 5% .
-I will not be leaving more than 150 points on the table overnight.
- If you reduce the no of indicators you are watching you can increase the number of scripts to watch.
- 75-80% capital in a single trade and 5% risk. Guess what that is - "A recipe for disaster". Let me explain with an example using NF and 1Lakh capital.
Take one lot position, Rs.30k used with 20pt SL = Rs.1000 risked
In %age terms, 30% capital, 1% risk.
When the position moves in favour by 30pts take more lot move the SL up by 15pts. Now 60% capital used, risked 1.5% but on a profitable position, and so on..
This is just an example to show you how we can take up massive positions but without increasing risk. What it costs is time. You will need to look into lower timeframes to get into good RR positions and build up positions. I would insist you rework the position sizing.
Mental Setup:
-I am gonna understand my system very well by identifying its strong and week points.
-I will not look for any other exits rule than those defined above.
-I will not look at daily, weekely charts of nifty; any other technical tools than those defined under system; any other international indices and channels like CNBC.
-I will spend my all energy focussing execution of trade rather than caring about profit and loss points on the trade.
Will again skip commenting on this part because I regulary watch News, CNBC in particular, watchout for global indices for cues, regularly look for comments from seniors here on nifty direction and calls and pay special attention to their TA.
When not to trade my plan:
-In case I dont have open position and mind is occupied with other things.
And finally, I suppose is just phrased incorrectly. It must have been "When not to trade", because when not to trade your plan is when you have a better trading plan or when you are not trading at all.
One other thing I would like to add, I don't know how many agree to this - Dennis Gartman who once published The 20 Ridiculously Simple Rules of Trading wrote in his final rule:
"20. Finally, all rules are meant to be broken. The trick is knowing when... and how infrequently this rule may be invoked!"
