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The heartbeat of any successful investor – The Trading Plan

By November 16, 2011February 2nd, 2024Active Investor Education, Uncategorized

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Active Investment in the stock market is a serious activity. It should be treated as a business with the objective of increasing the wealth of its shareholders.

This starts with the Trading Plan. Your trading plan is your guide; it is your Business Plan. It must be developed and documented before investing in the market just like a Business Plan must be developed and documented before opening the doors of a business.

Many traders and investors brush off the Trading Plan as hog wash, instead choosing to rely on their gut feel, intuition and an “it’ll be right” attitude.

Let me tell you that your trading plan is important stuff. It covers the how’s and the why you are investing in the market, it stipulates your goals and objectives, it dictates what markets and instruments you’ll trade and it discloses how much risk you’ll take in order to achieve your desired financial rewards. Creating a Trading Plan makes you think through your personal situation and it gets the information out of your head and onto paper.

Why commit your Trading Plan to paper?

Without committing words to paper we tend to generalise, break rules, are flippant in our thinking and in our decision making, we lack discipline, are unorganised, unstructured and have no real purpose and thus no plan.

When written correctly and when committed to paper, your Trading Plan will keep you on the straight and narrow, it will keep you passionate about your investments and it will keep you on the path to gaining consistency, even during the most challenging times.

Ask yourself this question. Would you write your Trading Plan in the same way as you would for someone else? I assume NO. Your approach to writing a Trading Plan should be as if you were writing it for someone else and as if you were going to manage someone else’s money. Suddenly, if someone else was to evaluate you on what had you written on paper, your level of pride, detail and completeness goes up a notch. You would cover the critical aspects because you know that someone else is going to evaluate and test you on the quality of the content. This is a valid approach to writing a Trading Plan.

In order for me to help you grow in this area, I’ve revisited my own Trading Plan and extracted what I believe to be the core learning material. Any good Trading and Investment Plan will include a mission statement, your goals and objectives, your strategy, system or approach to the market, how much risk you are prepared to take, what market/s you will trade and finally the framework or processes you will adopt to manage your money.

Over the coming weeks I’m going to discuss the topics at the heart of the Trading Plan. By the end of my posts, you will have the framework to undertake and complete your very own Trading Plan. For those already with a Trading Plan in place, I encourage you to revisit it and decide if it still meets your investment objectives. Over the years I have spoken to many an investor who has developed a Trading Plan to only file it away in the bottom drawer. It is only when inspired to review the Plan that some investors find that they have either shifted off course or that the plan is no longer relevant.

Until next week.


  • Tjungue Leongue says:

    Hi Gary,
    I’ve been a member of SWS since the beginning of August of this year. I’ve been paper trading since early August, and am still currently doing so. I’ve found, and trust the system work very well, and am happy to invest 100k from my SMSF into your SWS in the near future, but am unsure on how to formulate a trading plan. Would you be able to further advise and assist me in this matter?

  • Sean says:

    Hi Tjungue,

    I’m happy to respond on behalf of Gary.

    For SPA3 specific trading plan information, we would refer you to the SPA3 Reference manual located in the GPS help file and the SPA3 Template Trading Plan and video which are located in the SWS Members area and education centre.

    This information will be suffice to build yourself a Trading Plan that is personal to your situation.

  • Steve says:

    I hope you will be posting some examples of good trading plans. Great post, thanks for the help.

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