Money Management – Trading Plan Inclusion
Individual Trade Risk:
- Position sizing is to be such that maximum risk per trade is to not exceed 1% of account equity.
Trading Session Money Management
- Daily timeout is to occur at 2% drawdown from session highs.
- Daily stop is to occur at 3% drawdown from session highs.
- Percentage figures are calculated on the trade session highs as price amounts.
Business Money Management
- I will stop trading at 20% drawdown.
- I will take this trading halt as an opportunity to review my trading plan, review my trading performance with the benefit of hindsight, and return to a simulation platform until
- (a) consistent profitability is again proven in that environment, and
- (b) the account balance has been replenished via other sources.
A Graduated Approach to Increasing Size
- All increases in number of contracts will be
- (a) preceded by a profitable month at the previous position size;
- (b) only initiated when our equity balance allows the increase while still maintaining our individual trade risk of 1%; and
- (c) proven in a sim environment through demonstration of a profitable week of trading.
- If a session stop is hit, I will consider the need for a return to the previous size and/or sim environment. If two session stops are hit, with no intermediate equity high, I must return to the previous size.
- All increases in number of contracts will be
Income to Maintain Lifestyle
I am not in a financial position to allow full-time trading, however my work is from 10am to 5pm. This, plus my wife’s income, is sufficient to cover our expenses and maintain our current lifestyle.
I will not transition to full-time until my trading has developed to a level which can regularly provide the equivalent of twice my working income, in order to allow for capital growth and income needs.
This structure allows me to day-trade the commodities markets from the 06:00pm to 11:30pm open for a period of 4 hours, after attending work. In the morning I will allocate 1 hour for review.