Developing

Developing an
an Annual
Annual
Trading
Trading Plan
Plan
John Carter
www.tradethemarkets.com

Sponsored by the CBOT and Interactive Brokers

John Carter - TradetheMarkets.com 1

 Developing an Annual
Trading Plan

• Part I: Daily Pre-Market Checklist

• Part II: Trader Psychology

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 Developing an Annual
Trading Plan

• Part I: Daily Pre-Market Checklist

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 My 2007 Business Plan
1. Why am I trading again in 2007?

ƒ Potential Financial Rewards

ƒ Freedom to work from anywhere
ƒ Freedom to choose who I want to work with
ƒ Freedom to dictate my own schedule
ƒ Continuing mental growth and new
challenges
ƒ Would miss it if I stopped

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 2007 Business Plan
2. Markets to Trade

ƒ CBOT mini-Sized Dow

ƒ CBOT Electronic Ags
ƒ CBOT Electronic Gold
ƒ CBOT 30 year bonds and 10 year Notes
ƒ Various Other Markets

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 Why These Markets?
ƒ CBOT mini-Sized Dow (YM): First choice
for intraday trading. Setups to use are
Pivots, Gaps, and Squeezes. This
contract offers a better spread than the
other mini contracts, and it is very easy to
get a handle on the Dow by watching the
30 stocks on an auto sorting list.

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 Why These Markets?
ƒ CBOT Electronic AGS (C, W, S)): Intraday plays
for gaps and 21 EMA crosses. Also use for
swing plays.
ƒ CBOT US 30 Year T-Bonds (US): Doldrums play
ƒ CBOT 10 US Year T-Notes (TY): Squeeze
plays, pivot plays.
ƒ CBOT Electronic Full Sized Gold (ZG) / mini-
sized Gold (YG): Squeeze plays, box plays
ƒ Currencies: Box Plays, Squeeze Plays

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3. Profit Protection

ƒ Withdrawal 50% of profits at the end of each

quarter.
ƒ Why? This is the best way to protect profits.
ƒ This is also a reminder that the numbers on the
screen are real and represent real cash.
ƒ Never add money to your account or meet
margin calls. “Feeding the Beast.”
ƒ Ok to add money to a positive % account.

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4. Number of Contracts to Trade

ƒ Conservative: 1 lot per $50,000

ƒ Moderate: 1 lot per $25,000
ƒ Aggressive: 1 lot per $10,000
ƒ Super Aggressive: 1 lot per $5,000
ƒ Hyper Intraday Aggressive: 1 lot per $1,000

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5. Drawdowns: Rules & Regulations

ƒ If you are down 12% for the month, cut

position size in half for the rest of the
month.
ƒ If you are down 16% for the month, stop
trading for the rest of the month.
ƒ If you hit a 30% total drawdown, it is time
to take a 4 week break from trading.
ƒ Maximum overnight exposure is 1/3 lot
size.

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6. Profits: Rules & Regulations (per $100,000)

ƒ After winning days and losing days, focus on

making an average of $500 per day. $500 per
day = $120,000 per year, or +120%. Slow and
steady wins the race.
ƒ T, W, TH are your best trading days, focus on
making $1,000 on these days.
ƒ If you are up over $2500 before 12 noon, stop
trading for the day.
ƒ If you made over 10% for the week, take
Monday off.
ƒ If you are up 20% for the month, take the rest
of the month off.
ƒ Track daily profit & loss on a spreadsheet
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7. Rating Your Performance

ƒ Write down the trades in a journal as you take

them. Track results of each trade.
ƒ Note if you followed the parameters or
changed them while you were in the play. If
so, why?
ƒ The results of each trade will add up to the
total P&L for the day.
ƒ Any trade you take that is not listed label as an
“impulse play” which is your weakness. Track
its performance.
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8. Tracking Your Daily Ups & Downs

ƒ You get in trouble when you are doing

well, then you go for that “bigger plate at
the buffet.”
ƒ Keep track of the days where you let
greed get the best of you, then work on
reducing the number of those days.

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 John Carter’s First Trading Setup

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John’s current trading setup in Austin, TX

15
 Rewards for Performance

ƒ When you hit 60% for the year, take the

next 4 weeks off.
ƒ Take 2 weeks in Europe, 1 week in
Bahamas
ƒ Upgrade home theatre system
ƒ Buy more land

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 Peak Performance

ƒ When you have a 10% week, go do

something to tame your Euphoria by
taking Monday off and doing something
that humbles you such as golf, flying a
plane, workout with black belts in Tai
Kwon Do, etc.
ƒ Leave the markets between 12 PM and 2
PM Eastern and take a mental break.

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 Peak Performance

ƒ Quit trading after 12 Noon on Fridays.

ƒ Trade lighter during the last 3 days of options
expiration. Consider not trading at all during
this time.
ƒ Focus heavily on the first two trading weeks of
the month. Then take a 3 day weekend to get
away and recharge.
ƒ If you reach $2500 per 100K by 12 Noon,
continue to trade until you have a losing trade.

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 Peak Performance

ƒ Take off the entire week of Thanksgiving.

ƒ Take off the last two weeks of the year.
ƒ Do something physical at least 4 times a week
and 6 is better. Tai-Kwon Do, Cardio,
Weights, Core Strength Training, Waterskiing,
Jogging, etc. The more the better.
ƒ Traders and Vices don’t do well together:
Watch intakes of caffeine, alcohol, etc.
ƒ Stay healthy with good eating habits and
vitamins
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ƒ In reality, traders are not trading stocks, futures
or options.
ƒ They are trading other traders.
ƒ Be aware of the psychology and emotions
behind the person who is taking the opposite
side of your trade.

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ƒ The most important lesson of becoming a
successful trader is learning how to accept a loss
without any frustration, anger or shame.
ƒ The key is to have two specific sets of rules:
Trading Methodology Rules and Money
Management Rules.
ƒ By following the rules, you learn to trust yourself.
Once you trust yourself, you can then focus on the
market’s opportunities (instead of focusing on trying
to not lose money).

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ƒ Focus on developing your skills instead of focusing
on the money.
ƒ The markets move endlessly, with zero regard to
you. They are not “after you.”
ƒ Traders become consistently profitable once they
learn self-discipline, emotional control, and the
ability to submit their will to that of the market.
ƒ The less you care about being right or wrong, the
easier it will be to enter and exit positions, to take
losses, and be ready for the next opportunity.

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 Developing an Annual
Trading Plan

Summary –
• Every successful traders should have
a trading business plan.
• Make trading psychology, knowing
how your emotions are a part of your
trading, a part of the plan.
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 Released in December, 2005

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 For Free Copy of:
*Traders Business Plan
*Excel Auto-Pivot Calculator
Please email:
[email protected]
John F. Carter
Trade the Markets.com
www.tradethemarkets.com
Contact:
[email protected]
John Carter - TradetheMarkets.com
512-266-8659 27
Q&A / Contact Information
John Carter
www.TradeTheMarkets.com
[email protected]
Tel. 888-898-8122

Chicago Board of Trade

www.cbot.com
[email protected]

Rob Moore
Interactive Brokers
www.interactivebrokers.com
[email protected]