business plan for traders

• Sample Business Plans

Trading Business Plan

Starting a trading business can be challenging because you have to build contacts, negotiate, and whatnot. But amidst worrying about all these things, planning is the last thing you want to worry about.

While anyone can start a new business, you need a detailed business plan when it comes to raising funding, applying for loans, and scaling it like a pro!

Need help writing a business plan for your trading business? You’re at the right place. Our trading business plan template will help you get started.

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Download our free trading business plan template now and pave the way to success. Let’s turn your vision into an actionable strategy!

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How to Write A Trading Business Plan?

Writing a trading business plan is a crucial step toward the success of your business. Here are the key steps to consider when writing a business plan:

1. Executive Summary

An executive summary is the first section planned to offer an overview of the entire business plan. However, it is written after the entire business plan is ready and summarizes each section of your plan.

Here are a few key components to include in your executive summary:

• Introduce your Business: Start your executive summary by briefly introducing your business to your readers.This section may include the name of your trading business, its location, when it was founded, the type of trading business (E.g., retail trading, wholesale trading, import-export), etc.
• Market Opportunity: Summarize your market research, including market size, growth potential, and marketing trends. Highlight the opportunities in the market and how your business will fit in to fill the gap.
• Mention your product range: Highlight the product range of your trading business you offer your clients. The USPs and differentiators you offer are always a plus.For instance, you may include consumer goods, industrial & construction supplies, or beverages as your product range.
• Marketing & Sales Strategies: Outline your sales and marketing strategies—what marketing platforms you use, how you plan on acquiring customers, etc.
• Financial Highlights: Briefly summarize your financial projections for the initial years of business operations. Include any capital or investment requirements, associated startup costs, projected revenues, and profit forecasts.
• Call to Action: Summarize your executive summary section with a clear CTA, for example, inviting angel investors to discuss the potential business investment.

Ensure your executive summary is clear, concise, easy to understand, and jargon-free.

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2. Business Overview

The business overview section of your business plan offers detailed information about your company. The details you add will depend on how important they are to your business. Yet, business name, location, business history, and future goals are some of the foundational elements you must consider adding to this section:

• Retail trading
• Wholesale trading
• Export-import
• Dropshipping
• Describe the legal structure of your trading company, whether it is a sole proprietorship, LLC, partnership, or others.
• Explain where your business is located and why you selected the place.
• Owners: List the names of your trading company’s founders or owners. Describe what shares they own and their responsibilities for efficiently managing the business.
• Mission Statement: Summarize your business’ objective, core principles, and values in your mission statement. This statement needs to be memorable, clear, and brief.
• Business History: If you’re an established trading business, briefly describe your business history, like—when it was founded, how it evolved over time, etc.Additionally, If you have received any awards or recognition for excellent work, describe them.
• Future Goals: It’s crucial to convey your aspirations and vision. Mention your short-term and long-term goals; they can be specific targets for revenue, market share, or expanding your services.

This section should provide a thorough understanding of your business, its history, and its future plans. Keep this section engaging, precise, and to the point.

3. Market Analysis

The market analysis section of your business plan should offer a thorough understanding of the industry with the target market, competitors, and growth opportunities. You should include the following components in this section.

• Target market: Start this section by describing your target market. Define your ideal customer and explain what types of services they prefer. Creating a buyer persona will help you easily define your target market to your readers.For instance, business owners, wholesalers, or retailers would be an ideal target audience for a trading business.
• Market size and growth potential: Describe your market size and growth potential and whether you will target a niche or a much broader market.For instance, the retail trading market size in the USA was $7.9 trillion in 2022, so it is crucial to define the segment of your target market and its growth potential.
• Competitive Analysis: Identify and analyze your direct and indirect competitors. Identify their strengths and weaknesses, and describe what differentiates your trading business from them. Point out how you have a competitive edge in the market.
• Market Trends: Analyze emerging trends in the industry, such as technology disruptions, changes in customer behavior or preferences, etc. Explain how your business will cope with all the trends.For instance, eCommerce has a booming market; explain how you plan on dealing with this potential growth opportunity.
• Regulatory Environment: List regulations and licensing requirements that may affect your trading company, such as business registration, insurance, licensing, etc.

Here are a few tips for writing the market analysis section of your trading business plan:

• Conduct market research, industry reports, and surveys to gather data.
• Provide specific and detailed information whenever possible.
• Illustrate your points with charts and graphs.
• Write your business plan keeping your target audience in mind.

4. Products And Services

The product and services section should describe the specific services and products that will be offered to customers. To write this section should include the following:

• Describe your products: Mention the trading products your business will offer. This may include product categories, product range, product features, product sourcing, etc.For instance; for wholesale trading business consumer goods, food & beverage, industrial & construction supplies, etc. are some of the product ranges.
• Logistics & shipping
• Warehousing & storage
• Distribution & fulfillment
• Additional Services: Mention if your trading company offers any additional services. You may include services like, product customization & branding, packaging & labeling, supply chain consultation, etc.

In short, this section of your trading plan must be informative, precise, and client-focused. By providing a clear and compelling description of your offerings, you can help potential investors and readers understand the value of your business.

5. Sales And Marketing Strategies

Writing the sales and marketing strategies section means a list of strategies you will use to attract and retain your clients. Here are some key elements to include in your sales & marketing plan:

• Unique Selling Proposition (USP): Define your business’s USPs depending on the market you serve, the equipment you use, and the unique services you provide. Identifying USPs will help you plan your marketing strategies.For example, advanced equipment, vast product range, or experience & expertise could be some of the great USPs for a professional trading company.
• Pricing Strategy: Describe your pricing strategy—how you plan to price your products and stay competitive in the local market. You can mention any discounts you plan on offering to attract new customers.
• Marketing Strategies: Discuss your marketing strategies to market your services. You may include some of these marketing strategies in your business plan—social media marketing, brochures, email marketing, content marketing, and print marketing.
• Sales Strategies: Outline the strategies you’ll implement to maximize your sales. Your sales strategies may include direct sales calls, partnering with other businesses, offering referral programs, etc.
• Customer Retention: Describe your customer retention strategies and how you plan to execute them. For instance, introducing loyalty programs, discounts or offers, personalized service, etc.

Overall, this section of your trading business plan should focus on customer acquisition and retention.

Have a specific, realistic, and data-driven approach while planning sales and marketing strategies for your trading business, and be prepared to adapt or make strategic changes in your strategies based on feedback and results.

6. Operations Plan

The operations plan section of your business plan should outline the processes and procedures involved in your business operations, such as staffing requirements and operational processes. Here are a few components to add to your operations plan:

• Staffing & Training: Mention your business’s staffing requirements, including the number of employees or traders needed. Include their qualifications, the training required, and the duties they will perform.
• Operational Process: Outline the processes and procedures you will use to run your trading business. Your operational processes may include inventory management, sales & marketing, order processing, customer service, etc.
• Equipment & Machinery: Include the list of equipment and machinery required for trading, such as office equipment, warehouse equipment, transportation vehicles, packaging & testing equipment, etc.Explain how these technologies help you maintain quality standards and improve the efficiency of your business operations.

Adding these components to your operations plan will help you lay out your business operations, which will eventually help you manage your business effectively.

7. Management Team

The management team section provides an overview of your trading business’s management team. This section should provide a detailed description of each manager’s experience and qualifications, as well as their responsibilities and roles.

• Founders/CEO: Mention the founders and CEO of your trading company, and describe their roles and responsibilities in successfully running the business.
• Key managers: Introduce your management and key members of your team, and explain their roles and responsibilities.It should include, key executives(e.g. COO, CMO.), senior management, and other department managers (e.g. operations manager, customer services manager.) involved in the trading business operations, including their education, professional background, and any relevant experience in the industry. Organizational structure: Explain the organizational structure of your management team. Include the reporting line and decision-making hierarchy.
• Compensation Plan: Describe your compensation plan for the management and staff. Include their salaries, incentives, and other benefits.
• Advisors/Consultants: Mentioning advisors or consultants in your business plans adds credibility to your business idea.So, if you have any advisors or consultants, include them with their names and brief information consisting of roles and years of experience.

This section should describe the key personnel for your trading business, highlighting how you have the perfect team to succeed.

8. Financial Plan

Your financial plan section should provide a summary of your business’s financial projections for the first few years. Here are some key elements to include in your financial plan:

• Profit & loss statement: Describe details such as projected revenue, operational costs, and service costs in your projected profit and loss statement . Make sure to include your business’s expected net profit or loss.
• Cash flow statement: The cash flow for the first few years of your operation should be estimated and described in this section. This may include billing invoices, payment receipts, loan payments, and any other cash flow statements.
• Balance Sheet: Create a projected balance sheet documenting your trading business’s assets, liabilities, and equity.
• Break-even point: Determine and mention your business’s break-even point—the point at which your business costs and revenue will be equal.This exercise will help you understand how much revenue you need to generate to sustain or be profitable.
• Financing Needs: Calculate costs associated with starting a trading business, and estimate your financing needs and how much capital you need to raise to operate your business. Be specific about your short-term and long-term financing requirements, such as investment capital or loans.

Be realistic with your financial projections, and make sure you offer relevant information and evidence to support your estimates.

9. Appendix

The appendix section of your plan should include any additional information supporting your business plan’s main content, such as market research, legal documentation, financial statements, and other relevant information.

• Add a table of contents for the appendix section to help readers easily find specific information or sections.
• In addition to your financial statements, provide additional financial documents like tax returns, a list of assets within the business, credit history, and more. These statements must be the latest and offer financial projections for at least the first three or five years of business operations.
• Provide data derived from market research, including stats about the industry, user demographics, and industry trends.
• Include any legal documents such as permits, licenses, and contracts.
• Include any additional documentation related to your business plan, such as product brochures, marketing materials, operational procedures, etc.

Use clear headings and labels for each section of the appendix so that readers can easily find the necessary information.

Remember, the appendix section of your trading business plan should only include relevant and important information supporting your plan’s main content.

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This sample trading business plan will provide an idea for writing a successful trading plan, including all the essential components of your business.

After this, if you still need clarification about writing an investment-ready business plan to impress your audience, download our trading business plan pdf .

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Frequently asked questions, why do you need a trading business plan.

A business plan is an essential tool for anyone looking to start or run a successful trading business. It helps to get clarity in your business, secures funding, and identifies potential challenges while starting and growing your business.

Overall, a well-written plan can help you make informed decisions, which can contribute to the long-term success of your trading company.

How to get funding for your trading business?

There are several ways to get funding for your trading business, but self-funding is one of the most efficient and speedy funding options. Other options for funding are:

• Bank loan – You may apply for a loan in government or private banks.
• Small Business Administration (SBA) loan – SBA loans and schemes are available at affordable interest rates, so check the eligibility criteria before applying for it.
• Crowdfunding – The process of supporting a project or business by getting a lot of people to invest in your business, usually online.
• Angel investors – Getting funds from angel investors is one of the most sought startup options.

Apart from all these options, there are small business grants available, check for the same in your location and you can apply for it.

Where to find business plan writers for your trading business?

There are many business plan writers available, but no one knows your business and ideas better than you, so we recommend you write your trading business plan and outline your vision as you have in your mind.

What is the easiest way to write your trading business plan?

A lot of research is necessary for writing a business plan, but you can write your plan most efficiently with the help of any trading business plan example and edit it as per your need. You can also quickly finish your plan in just a few hours or less with the help of our business plan software .

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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Trading Business Plan Template

Written by Dave Lavinsky

Trading Business Plan

Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their trading companies.

If you’re unfamiliar with creating a trading business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great plan.

In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a trading business plan step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What is a Trading Business Plan?

A business plan provides a snapshot of your trading company as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Trading Company

If you’re looking to start a trading company or grow your existing company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your trading business to improve your chances of success. Your business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Trading Companies

With regards to funding, the main sources of funding for a trading company are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for trading companies.

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How to write a business plan for a trading company.

If you want to start a trading business or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your trading business plan.

Executive Summary

Your executive summary provides an introduction to your trading business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of trading company you are running and the status. For example, are you a startup, do you have a trading business that you would like to grow, or are you operating a chain of trading companies?

Next, provide an overview of each of the subsequent sections of your plan.

• Give a brief overview of the trading industry.
• Discuss the type of trading business you are operating.
• Detail your direct competitors. Give an overview of your target customers.
• Provide a snapshot of your marketing strategy. Identify the key members of your team.
• Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail what type of trading business you are operating.

For example, you might specialize in one of the following types of trading businesses:

• Retail trading business: This type of business sells merchandise directly to consumers.
• Wholesale trading business: This type of business sells merchandise to other businesses.
• General merchandise trading business: This type of business sells a wide variety of products.
• Specialized trading business: This type of business sells one specific type of product.

In addition to explaining the type of trading business you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of customers served, the number of products sold, and reaching $X amount in revenue, etc.
• Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the trading industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the trading industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section:

• How big is the trading industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential target market for your trading business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals, schools, families, and corporations.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of trading business you operate. Clearly, individuals would respond to different marketing promotions than corporations, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other trading businesses.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes other types of retailers or wholesalers, re-sellers, and dropshippers. You need to mention such competition as well.

For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as

• What types of customers do they serve?
• What type of trading business are they?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you make it easier for customers to acquire your product or service?
• Will you offer products or services that your competition doesn’t?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a trading company, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type of trading company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you sell jewelry, clothing, or household goods?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the products and/or services you offer and their prices.

Place : Place refers to the site of your trading company. Document where your company is situated and mention how the site will impact your success. For example, is your trading business located in a busy retail district, a business district, a standalone facility, or purely online? Discuss how your site might be the ideal location for your customers.

Promotions : The final part of your trading marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

• Advertise in local papers, radio stations and/or magazines
• Reach out to websites
• Distribute flyers
• Engage in email marketing
• Advertise on social media platforms
• Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your trading business, including answering calls, scheduling shipments, ordering inventory, and collecting payments, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to acquire your Xth customer, or when you hope to reach $X in revenue. It could also be when you expect to expand your trading business to a new city.  

Management Team

To demonstrate your trading business’ potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing trading businesses. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a trading business.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.  

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you charge per item or per pound and will you offer discounts for bulk orders? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.  

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your trading business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.  

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and traders don’t realize is that you can turn a profit but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a trading business:

• Cost of equipment and supplies
• Payroll or salaries paid to staff
• Business insurance
• Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your facility location lease or a list of your suppliers.  

Writing a business plan for your trading business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the trading industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful trading business.

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Trading Business Plan

Published Mar.29, 2024

Updated May.04, 2024

By: Alex Silensky

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Table of Content

According to a report, 13% of day traders maintain consistent profitability over six months, and a mere 1% succeed over five years. This is primarily due to inadequate planning and undercapitalization. A well-crafted trading business plan can help you avoid these pitfalls, and this article will guide you.

In this article, you’ll learn:

• The current trends and growth forecasts in the stock trading industry
• A breakdown of the costs involved in starting a trading company
• The key components of a trading business plan (with a trading business plan example)
• Strategies for securing funding and overcoming the barriers to entry

By the end of this article, you’ll understand what it takes to create a business plan for an investment company , positioning your trading business for long-term success in this lucrative but highly competitive industry.

Pros and Cons of Trading Company

Let’s explore the pros and cons associated with running a trading company before diving into the specifics of a trading site business plan. Understanding them will help you make informed decisions:

• Potential for significant profits.
• Flexibility in terms of time and location.
• Opportunity for continuous learning and skill development.
• High risk due to market volatility.
• Emotional stress and psychological pressure.
• Requirement for constant vigilance and discipline.

Trading Industry Trends

Industry size and growth forecast.

According to a report , the global stock trading and investing applications market size was at around $37.27 billion in 2022 and projects to grow at a CAGR of 18.3% from 2023 to 2030 (Source: Grand View Research). The following factors drive this growth:

• Increasing internet penetration
• Rising disposable income
• Growing awareness of investment opportunities.

(Image Source: Grand View Research)

The Services

As per our private equity firm business plan , a stock trading business offers various services, including:

• Facilitating Trades on behalf of clients
• Algorithmic trading services to automatically execute trades
• Market Insights (research reports, market analysis, and economic forecasts)
• Technical and Fundamental Analysis (price charts, historical data, and company fundamentals)
• Investment Recommendations
• Seminars and Webinars
• Online Courses
• Demo Accounts
• Portfolio Diversification
• Stop-Loss Orders
• Hedging Strategies
• Direct Market Access (DMA)
• Global Market Access
• Trading Platforms
• Mobile Apps
• High-Frequency Trading (HFT)
• Legal and Compliance Services
• Educate clients about Risk Disclosure

How Much Does It Cost to Start a Trading Company

According to Starter Story, you can expect to spend an average of $12,272 for a stock trading business. Some key startup costs include:

How Much Can You Earn from a Trading Business?

Earnings in the trading business can vary significantly and depend heavily on:

• Trading strategy and approach
• Market conditions and volatility
• Risk management techniques
• Capital allocation and leverage

While specific income figures are difficult to predict due to these factors. However, here are some statistics showing the earning potential of a stock trading business:

• According to Investopedia, only around 5% to 20% of day traders consistently make money.
• According to Indeed Salaries, the average base salary for a stock trader in the U.S. is $80,086 per year.
• 72% of day traders ended the year with financial losses, according to FINRA.
• Among proprietary traders, only 16% were profitable, with just 3% earning over $50,000. (Source: Quantified Strategies)

What Barriers to Entry Are There to Start a Trading Company

Barriers to entry into the stock trading business include:

• Regulatory Requirements: Obtaining necessary licenses and registrations from governing bodies like the SEC and FINRA is a complex and time-consuming process.
• Capital Requirements: Trading activities require significant capital to manage risks and leverage opportunities, which can be a substantial challenge for new or small firms.
• Technological Expertise: Developing or acquiring sophisticated trading platforms, algorithms, and data analysis tools is costly and requires specialized expertise.
• Market Knowledge and Experience: Gaining in-depth knowledge and practical experience in the complex and dynamic financial markets takes years of dedicated study.
• Competitive Landscape: Breaking into the highly competitive trading industry dominated by established firms and well-funded proprietary trading desks is challenging for new entrants.

You can overcome these barriers by developing unique strategies, leveraging innovative technologies, and offering competitive and specialized services to differentiate yourself in the market. Do check our financial advisor business plan to learn more.

Creating a Trading Business Plan

A well-researched stock trading business plan is crucial to start a trading business. A general trading company business plan is a comprehensive document that defines your goals, strategies, and the steps needed to achieve them. It helps you stay organized and focused and increases your chances of securing funding if you plan to seek investors or loans.

Steps to Write a Trading Business Plan

You can use a business plan template for a trading company or follow these steps to prepare a business plan for a personal trading business:

Step 1: Define Your Goals and Investment Objectives

Step 2: Conduct Market Research

Step 3: Develop Your Trading Strategy

Step 4: Establish Your Business Structure

Step 5: Develop a Financial Plan

Step 6: Outline Your Operational Procedures

Step 7: Create a Marketing and Growth Strategy

Step 8: Implement Risk Management

Step 9: Create an Exit Strategy

What to Include in Your Trading Business Plan

Executive summary, company overview.

• Market Analysis
• Trading Strategy and Risk Management
• Operations and Technology
• Financial Projections
• Management and Organization
• Appendices (e.g., research, charts, legal documents)

Here’s an online trading business plan sample of ABC Trading:

ABC Trading, a recently established stock trading firm, provides online trading services to individuals and institutional investors. Key highlights of our business include:

• Vision – Becoming a leading online trading platform with a wide range of trading products and services.
• Values – Our core focus is innovation, excellence, integrity, and customer satisfaction.
• Target market – Tech-savvy and risk-tolerant investors looking for alternative ways to invest their money and diversify their portfolios.
• Revenue model – Commissions and fees for each trade, as well as subscription fees for premium features and services.
• Financial goal – Break even in the second year of operation and generate a net profit of $1.2 million in the third year.

ABC Trading is seeking $500,000 seed funding to launch its platform, acquire customers, and expand its team.

Company Name: ABC Trading

Founding Date: January 2024

Location: Delaware, USA

Registration: Limited Liability Company (LLC) in the state of New York

Regulated By: Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA)

Our team comprises seasoned professionals with diverse finance, mathematics, computer science, and engineering backgrounds.

Marketing Plan

Marketing Strategy: We aim to leverage online channels, such as social media, blogs, podcasts, webinars, and email newsletters, to create awareness, generate leads, and convert prospects into customers.

Marketing Objectives:

• Reach 100,000 potential customers in the first year of operation
• Achieve a 10% conversion rate from leads to customers
• Retain 80% of customers in the first year and increase customer lifetime value by 20% in the second year

The customer profile of ABC Trading includes the following characteristics:

• Age: 25-65 years old
• Gender: Male and female
• Income: Above $100,000 per year
• Education: Bachelor’s degree or higher
• Occupation: Professionals, entrepreneurs, executives, or retirees
• Location: US or international
• Trading experience: Intermediate to advanced
• Trading goals: Income generation, capital appreciation, risk diversification, or portfolio optimization
• Trading preferences: Stocks, options, or both
• Trading style: Technical, trend following, or volatility trading
• Trading frequency: Daily, weekly, or monthly
• Trading risk: Low, medium, or high

Marketing Tactics:

• Create and distribute engaging and informative content on social media platforms
• Offer free trials, discounts, referrals, and loyalty programs
• Collect and analyze customer feedback and data to improve and personalize the customer experience
• Partner with influencers, experts, and media outlets in the trading and finance niche

Marketing Budget:

We will allocate $10,000 for our marketing campaign, which we will use for the following purposes:

Operations Plan

ABC Trading’s operations plan ensures the smooth and efficient functioning of the company’s platform and services and compliance with the relevant laws and regulations.

Operation Objectives:

• Maintain a 99% uptime and availability of the company’s platform and services
• Ensure the security and privacy of the company’s and customers’ data and funds
• Provide timely and professional customer support and service

Operation Tactics:

• Use cloud-based servers and services
• Implement encryption, authentication, and backup systems
• Hire and train qualified and experienced customer service representatives and technicians
• Monitor and update the company’s platform and services regularly
• Follow the best practices and standards of the industry and adhere to the applicable laws and regulations

Operation Standards:

Financial Plan

ABC Trading’s financial plan is to provide a realistic and detailed projection of the company’s income, expenses, and cash flow for the next three years, as well as the key financial indicators and assumptions that support the projection.

Financial Objectives:

• Achieve a positive cash flow in the second year of operation.
• Reach a break-even point in the second year of operation.
• Generate a net profit of $1.2 million in the third year of operation.
• Maintain a healthy financial ratio of current assets to current liabilities of at least 2:1.

Financial Assumptions:

• Launch its platform and services in the first quarter of 2024
• Acquire 10,000 customers in the first year, 20,000 customers in the second year, and 30,000 customers in the third year
• Average revenue per customer will be $50 per month, based on the average number and size of trades and the subscription fees
• Average operating expense per customer will be $10 per month, based on the average cost of salaries, rent, utilities, marketing, and legal fees
• Pay a 25% tax rate on its net income
• Reinvest 50% of its net income into the company’s growth and development

Projected Income Statement:

Projected Cash Flow Statement

Projected Balance Sheet

Fund a Trading Company

To successfully establish and operate a trading company, raising funds to finance daily operations and business expansion is crucial. There are different ways with their advantages and disadvantages:

1. Self-funding (Bootstrapping)

Self-funding, also known as bootstrapping, is when the founder or owner of the trading company uses their own personal savings, family business ideas , assets, or income to finance the business. This is the most common and simplest way to fund a trading company, especially in the early stages.

• Complete ownership and control
• Flexibility in decision-making
• Potential for higher long-term returns
• Limited access to capital
• Personal financial risk
• Slower growth potential

2. Debt Financing

Debt financing involves borrowing money from lenders, such as banks, credit unions, or microfinance institutions, to fund the trading company’s operations. The borrowed funds must be repaid with interest over a specified period.

• Retain ownership and control
• Potential tax benefits from interest deductions
• Disciplined approach due to repayment obligations
• Debt burden and interest payments
• Collateral requirements and personal guarantees
• Difficulty in securing financing for startups

3. Angel Investors

Angel investors are wealthy individuals who invest their own money into early-stage or high-potential trading companies in exchange for equity or convertible debt. Angel investors typically provide smaller funding than venture capitalists and offer mentorship, guidance, and access to their network.

• Access to capital and industry expertise
• Potential for additional mentorship and guidance
• Lower risk compared to traditional investors
• Dilution of ownership and control
• Potential for conflicting visions and expectations
• Limited resources compared to larger investors

4. Venture Capital (VC) Funding

Venture capital firms are professional investment firms that provide capital to high-growth startups in exchange for equity ownership. They typically invest large sums of money and are active in the company’s management and strategic direction.

• Access to substantial capital for growth
• Expertise and industry connections from the VC firm
• Validation and credibility for the business
• Significant dilution of ownership and control
• Intense pressure for rapid growth and return on investment

Depending on your business model, goals, and needs, you may also consider other options, such as grants, subsidies, partnerships, etc. Ensure to check for relevant documents, like the hedge fund private placement memorandum . The best way to fund your trading company is the one that suits your situation and preferences.

OGSCapital: Your Strategic Partner for Business Success

At OGSCapital, we specialize in professional business plans that empower startups, established companies, and visionary entrepreneurs. With over 15 years of experience, our seasoned team combines financial acumen, industry insights, and strategic thinking to craft comprehensive plans tailored to your unique vision. Whether you’re seeking funding, launching a new venture, or optimizing your existing business, we’ve got you covered.

If you have any further questions regarding how to write a business plan for your trading business, feel free to contact us. Our team at OGSCapital is here to support you on your entrepreneurial journey. You can also check our hedge fund business plan sample here.

Download Trading Business Plan Template in PDF

Frequently Asked Questions

What does a trading business include?

A trading business involves trading stocks and other financial instruments under a legal business structure. It includes:

• Market analysis
• Trading strategy
• Risk management

How does a trading company work?

A stock trading company facilitates the buying and selling of stocks (shares) on behalf of investors. These companies operate within stock exchanges, executing trades based on specific trading strategies.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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Trading Plan Template for 2024 [Free PDF | Sheets Download]

• 7 mins read ●
• Published: 11 May 2022
• Last Updated: 1 April 2024

Needless to say, having a plan before you start trading is essential to your success as a trader. Every experienced trader will tell you that when you enter the markets, you risk your money and, more importantly, your ego and confidence in yourself.

• A well-thought-out trading plan is crucial for forex trading success, safeguarding both finances and self-confidence.
• While many traders are naturally skilled, creating a clear trading plan can still be challenging.
• Using a trading plan template can streamline your strategy and increase chances of consistent profits.

This article will help you with everything you need to know about developing a trading plan . We’ll also include a trading plan PDF, a trading plan Excel template , and a Word document that you can download and use in your trading journey.

• What is a Trading Plan Template

Trading Plan Template FREE Downloads

• How to Build Your Own Trading Plan Template?

1. Set Your Goals – Financially and Emotionally

2. get familiar with trading jargon and analysis methods, 3. develop a trading strategy, 4. set a risk reward ratio, 5. always learn and grow, 6. make an organized trading track record.

• BOONUS: Trading Plan Infographic

What is a Trading Plan Template?

As the name implies, a trading plan is a set of rules and guidelines that a trader follows to execute a trade. Besides that, a trading plan might include suggestions for a healthy trading daily routine and tasks, hence a trading checklist , that will help you manage your account and control your emotions.

For example, with a trading plan, you can define your:

• trading goals
• strengths and weaknesses
• risk management strategy
• trading strategy
• entry rules
• daily routine
• and much more

“Plan your trade and then trade your plan.”

In this section, we have created trading plan templates that you can use for free in the format of your preference. 

• Trading Plan Template PDF
• Trading Plan Template Google Sheets
• Trading Plan Template Word

How to Build Your Trading Plan Template in 6 Easy Steps

So, now that you understand what a forex trading plan is, you need to create a specific plan that matches your style and personality. Personally, while working as a trader in a proprietary trading firm , I remember every trader had a different method, routine, tasks, and rules.

For example, some traders like adding sticky notes on their desktops while others prefer a clean table. Some traders enter hundreds of trades in one trading day while others enter one or two trades in a day. So, it’s up to you to define your own plan and trading strategies .

Nonetheless, based on my knowledge and experience, there are some must-have steps you need to consider to develop a successful trading plan .

You can download our trading plan template below and check the steps on how to develop your trading plan later in this article.

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First and foremost, you must define your goals. In other words, you will need to know what you plan to achieve from your trading experience.

To help yourself, ask these questions :

• Is it an additional income only? Your main income?
• Do you plan to get rich from trading?
• What is the trading capital you are willing to risk and what is your profit target?
• How many hours a day do you plan to spend on trading?

In that aspect, you’d be surprised to know that many people who become professional successful traders do not necessarily do it to make money.

Instead, some traders do it for fun, a hobby, or a competitive game. So consider these factors as well. If this is the case for you, then you need to know it before you start trading. Maybe it can give you an advantage over other participants in the forex market .

Before you make your first trade in the forex market, you first must understand the trading jargon and the different analysis methods.

If needed, take a quick trading course to learn how the forex or the stock market works, read articles, books, financial sites, etc. Additionally, you better explore the two methods to analyze financial assets – technical analysis and fundamental analysis . 

Then, find the best way for you to analyze the markets and read Forex charts. It’s up to you to decide whether you want to use line, bar, or candlestick charts and, more importantly, what technical indicators you want to use.

Additionally, you can learn how to read popular chart patterns and use them to find trading opportunities. Once again, you have to try before you know it.

No one is born a great Trader, one gets great by learning

There are no two traders that are precisely the same. Therefore, you must find your trading strategy and trading style. This is a result of trial and error. It might take weeks or months until you get to the point where you have established a successful trading strategy, and there’s no way to escape this step.

When you make your first step in the trading world, you’ll get familiar with the different trading strategies – position trading, swing trading, day trading, and scalping trading. Moreover, you can try different strategies such as the naked trading strategy or the 5-3-1 forex trading strategy .

Keep in mind that there are many trading strategies to choose from, but you’ll have to find your unique trading style and strategy within time. For that matter, you need to use a trading plan at the beginning of your journey to find the right strategy that matches your personality.

Trading risk management is a predefined strategy to minimize losses and maximize profits. There are lots of tools and risk management rules a trader can use to protect themselves from losses and effectively manage their trading account.

Having said that, there’s one tool used by many traders, which is the most basic and the most effective of all – That is the risk-reward ratio .

In simple terms, a risk-reward ratio is a method to calculate the potential profit of a trade/day/week/month to a potential loss. In other words, it is a method to define your trade risk, that is how much risk you are willing in a trader, or in a day (the method is particularly for day trading).

For example, if you decide to use a risk-reward of 2:1, you are essentially willing to risk $1 for each trade to earn $2.

Trading is not like most professions. The markets always change, the technology evolves, and even the dynamic of the markets is constantly changing. Trust me, financial markets are not the same as they used to be fifteen years ago, and most likely, they will change again in the future.

I mean, the cryptocurrency market is one good example of the unpredictable nature of the trading world and financial markets.

This way or the other, you must read trading books and articles, watch trading movies , and listen to trading podcasts – everything you can do to increase your knowledge. Yes, knowledge is power, but in trading, knowledge is essential.

“An investment in knowledge always pays the best interest.” Ben Franklin

In the final step, make sure you analyze your trading past performance and keep track of your winning and losing trades. Yes, it’s an annoying task, especially when you have a losing day.

Writing down your losing trades is a punch to your ego, but it will help you improve your performance and trading decisions in the future. By doing so, you can learn your worst-performing days of the week, hours, financial instruments, etc. 

Luckily, in most retail investor accounts, you can enter your trading platform and extract your daily/weekly/monthly performance. So, in the words of Forrest Gump: “One less thing to worry about”.

BONUS: Trading Plan Action Plan Infographic

Here is an infographic with 6 action steps for your trading plan.

You can also check our blog post about using a trading journal template [free Google Sheets and Excel spreadsheets included]

Over to You

In a nutshell, every trader must have a well-defined solid trading plan . Developing an organized trading system is the first step in becoming a professional and successful forex trader and will increase your chances of success over the short and long term.

For now, you can use our free Forex trading plan template to start with. Then, add notes, tasks, or any other inspirational quotes you think will help you to trade better.

Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.

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Disclaimer: The information on the HowToTrade.com website and inside our Trading Academy platform is intended for educational purposes and is not to be construed as investment advice. Trading the financial markets carries a high level of risk and may not be suitable for all investors. Before trading, you should carefully consider your investment objectives, experience, and risk appetite. Only trade with money you are prepared to lose. Like any investment, there is a possibility that you could sustain losses of some or all of your investment whilst trading. You should seek independent advice before trading if you have any doubts. Past performance in the markets is not a reliable indicator of future performance.

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Trading Plan Template & Examples: Step-by-Step Guide to Creating a Solid Trading Plan

Bonus Material:

Trading plans are an important part of any trader’s toolkit. The problem is, most traders don’t actively lay out a plan before they begin trading.

The result? They lose money and wonder why . Furthermore, many traders don’t know how to create a trading plan , or what to include.

Successful traders understand that trading plans are crucial to profiting consistently. In this article, I’ll walk you through creating your own plan, step-by-step, plus you can get a head start by using my free trading plan template, download below :

What is a trading plan?

A trading plan is an integral part of a trader’s strategy, outlining how trades are executed. It establishes rules for buying and selling securities, position sizing, risk management, and tradable securities. By following this plan, traders maintain discipline, consistency, and leverage proven strategies.

Why you should create a trading plan

Ask a new trader what they intend to do before the trading day and then ask them what they did at the end of the day. They almost certainly didn’t follow their plan. 

Trading plans are there for us to follow. Trading plans mean we take trades that are consistent with our rules and risk, and it means we remove a lot of emotion and discretion . This is important because humans are not rational agents and outsourcing this work means we can achieve a better P&L and make more money. 

A trading plan should resemble a business plan. A trader’s capital is their business and so we need to include everything that might be useful, but it should always cover the below.

What to include in your trading plan

• The time required to spend on your trading

Your trading goals and targets

• Your risk tolerance and risk management rules

Available capital for trading

Specific markets you wish to trade, the trading strategies you’ll use, your motivation for trading.

Read more information on what to include in your trading plan (with examples) below, and download your free template here:

The time required for trading

We need to define the time we need in order to trade successfully. For example, if you’re in full-time employment, then it’s unrealistic to spend six hours a day trading the market.

For example: Here is a part of my trading plan…

“To trade the UK stock market on a full-time basis I realistically need to spend at least 8-10 hours per day in order to take advantage of intraday opportunities and manage open positions in real time”.

It’s important to set realistic targets in trading. Once you have a target, you can reverse engineer how to achieve it.

For example: A target of increasing a trading account by 20% is an achievable target. To do that, we need to look at our trading capital and work out which trading strategies we’ll use.

Using breakouts to trend follow is a strategy I have had much success with, and I explain how I do this in my guide to breakouts.

There are several trading styles:

• Swing trading: This is a common strategy that attempts to capture moves over several days or weeks. Swing traders look for shorter term trends and then move onto the next trade.
• Momentum trading: This is a trend-following strategy based on upward movement and momentum. It can be a successful strategy over months and years as the stock continues to move higher. This is often coupled with increasing fundamental strength and accelerating earnings.
• Scalping or intraday trading (also known as ‘day trading’): Intraday strategies refer to trades placed and closed within the same trading session. 

Your risk tolerance and risk management rules 

Risk management is the most important part of trading. Position sizing is the first and last line of defence in our trading accounts.

If you take position sizes with 20% of your account, then that means you are risking 100% of that position every time it is risked in the market. Even if the chances are 99%, then eventually that 1 in 100 chance of the stock going to 0p and losing 100% of the position will happen.

Whilst a 20% drawdown on the trading account isn’t fatal, the law of compounding means that we will now need to gain 25% of our account just to get back to where we started. 

Never underestimate the numbers here – a 33% drawdown requires a near 50% gain just to get back to where we started. 

It’s important to put in place risk management rules that will protect the account and prevent us from taking on too much risk.

Only you will know how much risk you’re willing to take, but if you put yourself in a position where you could do yourself material damage, then eventually that outcome will be presented.

If taking a loss hurts, then it means you are trading too large. Most traders blow their accounts due to overexposure. I’ve never heard of a single trader who blew their account due to continuously taking small losses. Position sizing and risk management is covered in detail in my trading handbook.

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Traders should always be clear about what money should be used for trading and what money should stay in their bank accounts. 

Far too many traders have drawdowns in their trading accounts and decide to top up their account with a bank transfer.

Unfortunately, they end up putting far too much money into their account and do not keep track of their losses.

You should never trade with money you can’t afford to lose. I’ve had emails from people asking me what to do because they’ve lost the deposit for their house and they haven’t told their partner. Sadly, there is little that can be done at that point because the money is already lost.

In your trading plan you should be clear about how much is going into your trading account and how much you will top this up each month if that is going to be your strategy to grow your account further. 

However, the best way of growing your trading account is by making money trading successfully in the market. Once you can consistently do this, then it makes sense to increase your funds and scale up. 

A trading plan should also include the specific markets you wish to trade. Do you plan on trading UK stocks, US stocks, foreign exchange (forex), or cryptocurrencies? Once you’ve picked a market, you still need to drill deeper. 

For example: If you pick UK stocks will you trade all of these, or just AIM, or just the Main Market? Will you trade only small cap stocks? Will you trade both SETS and the SETSqx platforms ? 

In my case, I trade all UK stocks, and don’t discriminate between any of them. However, my focus is on smaller stocks under £500 million market cap. 

Your trading strategies are the ways you are going to make money. This part of the trading plan is important because by defining your strategies it will be clear to follow.

For example: I want to trade small-cap stocks that have momentum behind them, and I will find this momentum through technical breakouts and positive RNS announcements.

I will trade gaps and also place orders into the auctions in order to get better fills. I will use various brokers for different types of execution. I will take secondary raises that have news catalysts that can potentially drive the shares higher.

What is your why? What are your goals, and what is your motivation? Trading is hard and there are ups and downs – it’s easy to motivate yourself when the going is good and you’re making lots of money. But it can be harder when you’re suffered several losses in a row, and you keep seeing your account grind lower or flat for weeks on end. 

Writing down your why will make it easier to stay focused and commit to the long-term process and improvement.

For example:

• I want to trade because I enjoy the challenge and I also want to be my own boss.
• I want the freedom that comes with the lifestyle of a full time trader and I want to be around my wife and future children as they grow up.
• I want to offer my family a better life, and by continuing to work on my skillset is putting me closing towards my goals.

Good trading plan example

How do you write a trading plan?

• Know your trading playbook
• Manage your risk 
• Have a realistic profit target

1. Know your trading playbook

You should have a playbook of trades that you know how to execute in the market. A playbook is a list of trades, each with step-by-step instructions on how to trade the pattern. 

If you don’t know what you should trade in your trading plan then building a playbook of trades is a good place to start. 

2. Manage your risk

Risk management is a crucial skill for any trader. I’ve written an in-depth article on trading risk management for further information.

The reason risk management is so important is that without it we would blow up our accounts. Nobody would think about driving a car with no brakes because it would obviously crash – risk management is the brakes and safety system for our trading accounts.

Everyone has different risk profiles. Some are happy to take on high amounts of risk accepting that they may take hefty losses in order for the possibility of excess return. 

Full-time traders like myself tend to be more cautious knowing that if they lose too much capital, they may have to go back to work. 

You should include in your trading plan how much you’re prepared to risk on particular trades in your playbook and how much in your account overall.

3. Have a realistic profit target

Having an idea of a profit target will mean that you don’t end up falling into the trap of never selling. Far too many traders watch a stock rise, see it pullback, then immediately regret not nailing down profit into strength.

By setting out clear take profit targets this avoids indecisiveness and will ensure you execute ruthlessly. 

Bonus tip: Trade the stocks in play

Trading is about being in stocks that are moving. Volatility is the lifeblood of a trader, and a dead stock means dead money. 

The stocks ‘in play’ are the stocks that have moved or are moving in recent sessions, and the stocks we should be immediately keeping tabs on. Stocks can cycle in and out being in play, and so we need to keep track of those that offer the greatest volatility to trade.  

Download my free one-page trading plan template

My opening plan trading template has everything you need to begin the trading day. It forces you to check and review your open positions, so you’re always knowing what to do. 

It also suggests to list the current stocks in play, and how you can trade them, and in what size. Additionally, it asks “What can happen?” so a trader using this template will never be caught out.

By thinking ahead about potential scenarios and how to trade them, this gives the trader an advantage over others who do not put the work in. Traders who punt around their money without a clue or a plan are commonly referred to as “liquidity”.

To download the free template, click the button below and follow the instructions.

About The Author

Michael taylor.

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Analyzing Alpha

Setup a Trading Business: The Complete Guide

By Leo Smigel

Updated on October 13, 2023

Trading as a business involves trading stocks and other financial instruments under a legal business structure, such as a sole proprietor, partnership, or limited liability company (LLC).

Everyone wants to make money, and everyone wants to be free.

You can accomplish both if you’re a successful trader.

And you’re in luck because there’s one thing I know how to do exceptionally well – it’s trading as a business.

You might say, Leo, I don’t need to start a trading business – I’m a new trader. Well then, I’ve got a question: How many successful companies do you think started without a plan? Sure, there are some, but I would bet those with a sound plan faired better over the long run.

And trading is no different. Trading is most successful when it’s done most businesslike.

And for those who are already profitable and ready to go full-time, I’ve got some massive tax-saving tips for you, so stay tuned.

I’ve also sprinkled secrets about becoming a full-time trader that you’ll be hard-pressed to find elsewhere.

I will explain everything you need to know step by step and show you how to become a professional trader running your own successful trading company, whether you’re incorporated.

Before You Can Start Trading

Before creating any business, you need to start with a solid plan and understand where you fit in the market.

But before we jump into the nitty-gritty details of running your trading business, you need to answer five show-stopping questions.

1. What Is Your Why?

Why do you want to be a trader? Many traders start trading because they want to get rich.

Now, it’s possible to become rich trading; however, understand that if you’re not a profitable trader already, the chances of success are slim.

Most studies say that only 5% of traders become profitable. And according to the Small Business Association, this is in stark contrast to starting a business where 33% are still around after year ten.

In other words, if it’s money you’re after, it’s much easier to create an online business than to become a profitable trader.

And no matter how smart you are, trading will slap you around until you’re begging to quit.

You need more than the pursuit of money to keep you in this game.

You need an unwavering passion to play, and you need an advantage.

2. What’s Your Trading Edge?

A trading edge is an observation or approach that creates an advantage over the rest of the market players. Anything that can add a few points to the winning side of the equation builds an edge in your favor.

Most traders lose money in the financial markets because they lack an edge.

I’m also going to say something controversial here:

Risk management isn’t an edge – it’s just good trading – and I can prove it.

Let’s play the coin toss game. If you guess correctly, you get a dollar and lose a dollar if you don’t. You can play this game all day long and cut your losses short, but you’re never going to make a million dollars.

Why? Because you have no edge. The probabilities are not stacked in your favor.

You need an edge to make it full-time, and you need multiple to make it a career.

You need to be the casino – you need to have multiple edges that compound over time. Don’t be a gambler with the odds stacked against you.

So how do you find an edge?

Most edges come from a better understanding of market structure, faster execution speed, or better data and analysis.

For example, a market structure edge may be an exceptional ability to exploit the post-earnings announcement drift (PEAD) anomaly. Another may be the early identification of trends through sophisticated technical or data analysis.

You want to ensure you are on the right side of the stock market as much as you can.

And if you’re struggling to find an edge, I’ve got you covered.

I backtested Scot1and’s slingshot trading strategy at a high level to verify if it has an edge – which it does. If you’re not familiar with Scot1and, he’s a professional trader. He shares his trades publicly on Twitter and has multiple triple-digit years under his belt, with his highest being 305% and last year (2021) being 150%.

Scot1and wanted to find a way to get into solid stocks before the runup and invented the slingshot trading setup. That’s one of his many edges. And this setup can work for you, too, assuming it meshes with your market philosophy and psychological makeup – but more on that later.

Once you have successfully identified and defined your edge, or better yet, edges, it’s time to consider your risk tolerance.

3. What’s Your Risk Tolerance?

Risk tolerance refers to the degree of risk you’re able to take. And while there are multiple ways to define risk, we’ll consider volatility and drawdown for our purpose.

Since your comfort level with uncertainty determines risk tolerance, it can be challenging to be aware of your risk appetite until faced with a potential loss.

You should strive to gain a clear understanding of your risk appetite and your ability to stomach large swings in the value of your portfolio.

When traders trade above their risk tolerance levels, at best, they’ll lose sleep and make suboptimal decisions the next day, and at worst, they’ll sell out at the exact wrong time.

Risk tolerance is all about understanding yourself – a key characteristic you should possess as a flourishing trading business owner.

And let me tell you when you start a trading business, and it becomes your primary source of income, your risk appetite will change a lot – even for algorithmic traders.

Most traders’ greatest struggle in establishing a profitable trading business revolves around trading psychology.

Finding edges in the market isn’t difficult. I just showed you the slingshot strategy, which is a potential edge that you can incorporate into your trading.

What’s hard isn’t knowing what you should do; it’s doing what you should do – it’s trading like a business.

And risk tolerance is just one aspect of trading psychology.

Psychology And Trading

Trading psychology refers to the emotional aspects of an investor or trader’s decision-making process – it’s how emotions affect your trading, and trading affects your emotions.

There are some important considerations to make here.

Most traders fall into thinking they can achieve trading success with little thought of their psychological makeup.

Successfully aligning your trading strategy with your psychology implies you may need to give up on or change some of your values and beliefs.

For instance, do you value your need to be “right”?.

A trader who values being “right” is more likely to refuse to set a stop and take a slight percentage loss in case the trade goes haywire.

Do overnight moves keep you up at night?

Then perhaps day trading is a better style for you.

You need to find a trading style that suits your trading psychology and addresses your strengths and weaknesses.

This doesn’t mean a risk-averse person can’t adopt a swing-trading style. It also doesn’t mean that if you value being right, you’re perpetually wrong when following your stops.

It just means that traders need to understand why they’re embracing a trading approach and have safeguards against their deficiencies – often, you can flip a weakness on its head.

For example, let’s go back to someone struggling to stop out.

The first issue might be that they do not understand what they’re trading and why they’re trading it. If they’re trading specific mean reversion scenarios, they shouldn’t be using stops – position sizing is the key to risk management; however, let’s assume that the trader was a long-only swing trader.

If they’re a breakout trader not following their stops, likely, they don’t have a deep understanding of what a breakout is and how they work.

Now I could spend hours discussing breakouts, but for now, let’s understand two things:

• Roughly 70% of breakouts fail.
• Successful breakouts rarely retrace to the low of the day.

With this market knowledge, this trader that has to be right now understands that her win percentage should be between 25-35% and where to place their stop. Additionally, their understanding aligns with their market understanding allowing her to be correct and less likely to pull the cord on the stop.

I find deep understanding solves most trading psychology challenges – but just because you’ve got your edge and your psychology in order doesn’t mean you can trade like a business just yet.

4. What Are Your Return Assumptions?

Return assumptions refer to the returns a trader or investor expects to make from a particular investment or their trading activities via their trading efforts in the financial markets.

All active traders share one common goal: to utilize their trading capital to make as much money as possible while assuming a certain level of risk.

For that reason, it’s critical to set your expectations right and figure out a rough idea of what kind of return you might achieve before you kick off your trading endeavors.

So, how do you determine a reasonable rate of return?

Whether you’re a business or a trader, the answer is the same.

Look at you and your competition’s average annual returns per each different system or setup, and determine a number you think you can realistically achieve.

Target Compound Annual Growth Rate (CAGR)

This average annual return is the target compound annual growth rate or CAGR. It’s the average return or profit you make divided by your capital.

To keep the math easy, if you make $10,000 on a $100,000 account, your annual return is 10%.

You need to calculate an appropriate CAGR accurately as it flows through to all of your other business calculations, like how much money your trading business needs to generate each year to cover its expenses.

Without history to back it up, investors shouldn’t set their target CAGR above 15%, and traders shouldn’t set their CAGR above 40%.

And yes, good traders have the potential to compound their capital faster than investors due to the structural advantages of having less money to move.

Here are the top ten filers by 10-year annualized performance to give you context.

Now, I know for some of you, these CAGR numbers are tiny, but exceptional returns are the exception, not the rule.

Minimum Absolute Return

Understanding what you can likely achieve makes it time to figure out precisely what you need to succeed.

The absolute minimum return refers to the minimum return that a trader sets over a predetermined time frame.

This return needs to cover your business expenses, which I’ll cover shortly, and the owner’s draw. The draw is the salary you need for yourself and your dependent’s living expenses.

The minimum absolute return is typically your breakeven level. It’s not the target.

Target Absolute Return

The target is your target absolute return. This is the profit you want your trading business to create over the period, typically a year.

You calculate your target absolute profit target by multiplying your target CAGR by starting capital and subtracting fees, which we’ll cover shortly.

I would advise against creating a profit target and working backward since you may need to inflate your CAGR artificially.

The last thing you want to do is overestimate your trading income and underestimate your trading loss.

Maximum Drawdown

Maximum drawdown refers to your maximum downside risk over a period. It’s the maximum observed loss from a peak to a trough.

For instance, if your portfolio value is $100,000 and you lose $30,000, your drawdown would be ($30,000 – $100,000) / $100,000 = 30% or $30,000 in dollar terms.

It’s important to note that maximum drawdown only measures the extent of the most considerable loss, excluding the frequency of significant losses.

Maximum drawdown determines how much capital you’ll need to start your trading business, assuming you’ve included multiple market cycles in your analysis.

Capital Required

Armed with an understanding of your absolute minimum return and maximum drawdown, we can finally determine how much capital you’ll need to start your trading business.

Capital required refers to the amount of money a trader needs to carry out trading activities within the financial markets.

Consider your capital as the raw material that powers your trading activity in the stock market or any business.

So let’s go through the math.

If you need to generate $50,000 per year and expect your minimum CAGR to be 10%, you would need $50,000 / 10% = $500,000 without a drawdown.

Keep in mind if your CAGR return is that low, it’s likely you don’t possess enough of an edge, but I kept the numbers simple for explanation purposes!

But that’s not all. If your maximum drawdown is 20% or $200,000, you’ll also need to add that to your initial capital.

And with all businesses, you’ll need to put in a considerable amount of time.

5. Time Commitment

Time commitment refers to the number of hours per week applied to your new trading business.

It’s essential to treat and act “businesslike” at all times.

Only by approaching each trading day with full intent and purpose can you aspire to succeed.

This extends beyond just executing your trading strategies.

It also includes learning, studying, researching new strategies, and improving your mindset as a trader.

Can you fit it all into your schedule? Do you have enough time to make it work?

These are critical questions to ask yourself before starting your trading startup.

Let’s think about this a little more.

Understanding A Trading Business

Although different from the traditional brick-and-mortar business, a trading business’s anatomy can be broken down similarly.

Think of your trading strategies as your new products and services.

Through these strategies, you’ll be generating your trading income.

And just like how traditional businesses need to constantly improve their products and services based on customer and market feedback, you’ll be doing the same, which leads me to my next point…

Trading Losses Are Expenses

Trading losses are going to be inevitable. You want to take advantage of this market feedback to improve your product. Be sure to analyze each loss and learn from them. They will be your best teacher.

But at the same time, you simply want to treat your losses as a cost of doing business.

Think of the casino business and a game of roulette.

Of course, the casino makes money when the player loses.

But does the player always lose?

So, if we have a player who is always betting on the color red, they have an almost 50-50 chance of winning each time.

There will be times when the player hits lots of reds in the short-run, and the casino loses money.

However, the house always wins.

In the long run, given that the roulette contains a neutrally colored zero, the casino has the edge (remember, we spoke about the edge earlier).

Act like a casino; if you have an edge in the financial markets, you will win long-term.

Short-term losses are simply the cost of conducting business.

Capital Preservation

But continued losses should signal to the management team that it’s time to rethink the plans.

Intelligent management knows preserving your capital to live another day is more important than making more money in the short term.

New traders often have this backward.

The truth is that the only aspect of the trading process you have significant control over is how much money you will lose in a trade.

It’s critical to size your bets correctly.

And speaking of plans, let’s go over what your trading business plan should include.

Your Trading Business Plan

A trading business plan, similar to a typical business plan, is a document that details everything that you need to know to run your trading business. It includes your objectives, how you intend to make money, your edge, what you will trade and why, and how you will grow your business.

It’s time to address the actual birth of your business as a new independent trader.

What Is Your Company’s Mission Statement?

A company’s mission statement defines its culture, values, ethics, fundamental goals, and agenda. The statement outlines what the company does, how it does it, and why. Prospective investors may also refer to the mission statement to see if the company’s values align with theirs.

A well-crafted mission statement articulates the purpose of your business.

It helps to serve as a framework for your business. Outlining what your business stands for, along with your objectives and values.

What is your mission statement? Why are you doing this? Is it just for the money? What’s your driving purpose for embarking on a trading career?

It’s critical to understand the why because it empowers the how.

What Is Your Company’s Philosophy?

A company philosophy refers to “the way we do things around here.” Conventionally, it relates to the fundamental beliefs of the people and the organization.

Your company’s philosophy boils down to your market beliefs.

Do you believe that it is fundamentals or emotions that drive the markets?

Or is it the Fed?

Your trading edges come from a deep understanding of how you view the market. And you need this deep understanding to stick to your strategies during a drawdown.

The last thing you want to do is have a shaky market philosophy and jump ship at the wrong time.

So what is your market philosophy? These will guide your principles.

What Are Your Company’s Principles?

Company principles refer to the principles that a company abides by throughout its day. These could be building a great workplace culture, conservative cash flow use, or taking significant, calculated risks.

What principles does your company abide by throughout your trading day?

These should stem from your philosophy.

For instance, if you believe that the Fed moves the market, are you selling your positions if the Fed is not printing money?

If you’re a trend follower, do you implement Paul Tudor Jones’ rule of refusing to purchase any stock below its 200-day moving average?

Having the various principles aligned with your market philosophy and mission will help you maintain the necessary discipline with your trading.

It will also help you understand what assets to trade.

Your Trading Universe

This is the range of financial instruments that a trader plans to trade across the investable universe, including all tradable assets. In reality, most investors do not invest so broadly and have a narrower universe that could be constrained to event-driven biotech stocks.

This is your total addressable market, and your edge governs it.

Assuming the above, if biotech is in a long-term downtrend, do your edges still allow you to make a profit? If not, you may need to grow your edges and the total addressable trading universe.

What Are Your Company Rules?

Company rules refer to the established rules, in writing, made by the company’s higher level of authority and bound to follow by all employees and stakeholders.

Often these rules revolve around conduct, hours worked, and customer service levels. And larger trading organizations should define these; however, the rules I’m referring to for a trading business help you protect your capital and add discipline to your trading operations to boost profitability — essentially money management rules, which I like to think of in four distinct categories.

1. Portfolio Management Rules

Portfolio management entails building and overseeing a selection of investments or investment strategies that will meet the long-term goals set above.

Most investors take the approach of diversifying their assets, which is a reliable measure.

However, a superior alternative is implementing uncorrelated strategies within the same asset class.

For instance, buyers tend to reduce their leverage during sell-offs, which causes both stocks and bonds to drop, even though these two asset classes are generally uncorrelated.

Therefore, having a mix of long and short stock strategies can help you offset this risk.

What are your portfolio management rules?

An example would never be allocating more than 25% of capital to a single strategy.

2. Risk Management Rules

Risk management is the process of identifying, assessing, and controlling threats to an organization’s capital and earnings. These risks stem from various sources, including financial uncertainties, legal liabilities, technology issues, strategic management errors, accidents, and natural disasters.

Remember that the aspect of trading you have considerable control over is how much you’re willing to lose on any given trade.

So, always go into a trade knowing your pre-defined price targets to take profits and the price points you’re willing to get out for a small loss if the trade goes against you.

The worst thing you can do is hold on to a losing trade that invalidates your thesis, hoping it will eventually become a winner.

An example of a breakout strategy risk management rule would be to set your stop at the low of the day, invalidating the idea if it moves against you, but never more than the average daily range.

3. Position Sizing Rules

Position sizing refers to the size of a position within a particular portfolio or the dollar amount that an investor will trade. Investors utilize position sizing to determine how many security units they can purchase, which helps them control their risk and maximize returns.

How much you will earn or lose from your trades is directly tied to the size of your trading positions.

Your position size will also impact your ability to diversify your trading positions.

If too large a portion of your trading account is tied up in one trading position, you won’t have the necessary capital to open other trades.

We never know which of our positions will be the big winners.

There is no worse feeling than watching the market rally, and you are in 3-4 positions that decide to sit out the rally.

Keep in mind that even with proper position sizing, there is a risk that an active trader’s position loses more than their specified risk if a stock gaps below the stop-loss order.

This is why it’s essential to position size correctly, especially around earnings announcements, which you may want to avoid altogether.

A common position sizing rule is to never risk more than 25% of your account on any single trade.

4. Leverage Trading Rules

Leveraged trading, also known as margin trading, margin finance, or trading on margin, allows you to open a trading position with a broker using a small amount of capital to take a much larger position.

Suppose you commit $10,000 on a 10X leveraged financial instrument. You’ll be trading as if you had put in $100,000.

Thus, any capital gains you make have a tenfold effect, but the same applies to losses, so using leverage implies an element of risk.

If you’re taking on leverage, ensure that your edges are well defined and diversified, and you have a clear leverage rule.

I will never go above 500% leverage, and this scales down as the volatility of the instrument increases.

Leverage is extremely risky in almost all cases. But there is one exception to this:

When trading crypto, using leverage can help mitigate the risk of an exchange hack at the cost of margin interest fees.

SWOT Analysis

With your rules established, it’s time to perform a SWOT analysis.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a SWOT analysis is a technique for assessing these four aspects of your business.

SWOT analysis is a simple tool that can help you analyze what your company currently does best and devise a successful strategy for the future.

1. What Are Your Strengths?

Strengths define what you excel at.

Perhaps you have a programming background, and you can create trading algorithms.

Perhaps you’re a decisive person who can make solid, carefully constructed decisions rather quickly.

Perhaps you’re able to stay calm and collected and perform under pressure.

For me, as you’ve probably guessed, it’s the first one that helps mitigate my weakness.

2. What Are Your Weaknesses?

Weaknesses prevent you from operating at your prime.

For instance, you may have difficulty dealing with market sell-offs and tend to get “sucked in” by the emotion of everyone else panicking.

The best way to mitigate this is to have a plan to take advantage of these opportunities.

The second best way is to reread your business plan and stay away from the news and social media on such days.

Plus, keep in mind that these sell-offs are often an opportunity in the market. Smart institutions often accumulate on sell-off days due to their liquidity constraints. If you’re a breakout trader, you should identify what stocks are acting stronger than the market.

As they say, one man’s misfortune is another man’s opportunity.

So, take note of your weaknesses and negative triggers. That way, you’ll be able to easily spot them and make logical decisions rather than emotional, irrational ones that will hurt your profitability.

My weakness?

I pay both my living and business expenses from my trading income. I would feel immense pressure to make money every day and override my trading systems in the early days.

I’m sure you can all guess what happened.

Understand what your weaknesses are, that they may change over time, and figure out how to mitigate them.

3. What Are Your Opportunities?

These refer to favorable external factors to grow your business or competitive advantage.

For instance, can your trading strategies be applied to additional trading instruments or different markets?

Crypto trading is attractive as an algorithmic trader as it trades 24/7 against relatively unsophisticated traders.

4. What Are Your Threats?

In contrast to opportunities, threats refer to factors that potentially harm your business.

Government measures towards reducing fossil fuel use towards energy production in favor of renewable energy sources pose a threat to any non-renewable energy sector business or energy stock in your portfolio.

And these types of risks apply to your trading business.

Changes in capital gains tax laws, crypto regulation, or even black swan events are threats.

Do you have proper hedging strategies in place?

With an understanding of your strengths, weaknesses, opportunities, and threats, it’s time to do some benchmarking.

Performance Measurement

Performance measurement is the process of collecting, analyzing, and reporting information regarding the performance of an individual, group, organization, system, or component.

They say what gets measured gets improved. And like other traditional businesses, trading businesses are no different.

To monitor your trading performance, you require data.

You can collect data manually from your trading platform and record it in a spreadsheet, but I highly recommend that discretionary traders use journal software that records the information.

Although there are hundreds of metrics you could track, you should track the following key performance indicators (KPIs) classified by market and strategy at a bare minimum:

• Profit & Loss
• Total number of trades
• Win percentage
• Average time in trade
• Largest winning trade
• Largest losing trade
• Average winner
• Average loser
• Maximum drawdown
• Profit factor
• Gain-to-Pain Ratio

Feel free to check out my website for definitions and example calculations for these metrics if you have questions.

Operating Costs

As promised earlier, we need to understand your trading business’s fixed and variable costs to determine the absolute minimum return.

Fixed costs are expenses that remain constant for a period of time irrespective of the level of outputs. Variable costs are expenses that change directly and proportionally to business activity level or volume changes.

So, what do these look like for your new trading business?

Fixed Costs

Here are some fixed costs trading businesses have at varying degrees:

• Computer & equipment
• Trading software
• Administration software
• Internet & telephone

You’re most likely already paying for the trading software, and the good news is that most of the home office expenses are relatively inexpensive.

But don’t forget to consider the most significant expense of them all — paying your managing member.

To understand your trading business’s true profitability, you need to track your monthly draw in your accounting software.

Variable Costs

Here are some variable costs involved with your trading business:

• Transaction fees
• Slippage costs
• One-time data costs

Office Location

Another aspect you also want to think about is if and where to set up an office.

As a trader, you can set up an office anywhere you like across the globe — granted, some time zones are more convenient than others.

You can set up your own home office.

You can also buy or rent your own business office.

A big driver of this decision is how well you can balance life and work while at home.

If you’ve got kiddos at home and cannot concentrate, the answer is typically straightforward.

Additionally, scaling to multiple employees is a little easier if you’re an algorithmic trader, as you can more easily separate roles.

These aspects determine whether it makes sense to stay at home or hang up a shingle somewhere outside of your personal space.

Regardless of where your office is, you’ll want to make sure you maximize the tax benefits.

Benefits For Incorporating

There are many benefits of incorporating your business, including asset protection through limited liability, corporate identity creation, perpetual life of the company, transferability of ownership, and an ability to build credit and raise capital and tax savings.

But if trading is your primary source of net income, you should consider incorporating it for tax purposes.

Securities are considered capital assets. The sales of these assets are taxable income considered as capital gains.

This can create massive tax liabilities on your trading operations, so it’s usually ideal for an active trader to incorporate as a company.

Additionally, trading is not considered a business activity by the IRS, so it is not possible to deduct business expenses as they are ineligible for tax deductions in this case.

This is noteworthy since costs such as software, internet access, and data access can be significant for most active traders.

However, you can receive similar tax treatment to other business owners by creating a separate business entity to conduct your trading activities.

You can form a sole proprietorship, partnership, or S-Corp, and file for trader tax status (TTS), which exempts you from the $3,000 capital loss limitation and wash sales adjustments.

A trader can form a single-member LLC to elect S-Corp trader status. The main tax benefits of creating an S-Corp are to arrange tax deductions for health insurance premiums and a retirement plan contribution.

In addition, an S-Corp does not pass through negative self-employment income (SEI), and the employee benefit deductions work tax efficiently.

C-Corps are not ideal for a trader status because the IRS might charge a 20% accumulated earnings tax and the 21% flat tax.

Before incorporating a company, ensure you qualify for it. The business must be eligible for claiming TTS.

While there’s no specific ruleset, we can look at prior court cases to determine eligibility guidelines.

As a trader, you need at least four trades per day. Trade executions on approximately four days per week. More than 15 trades per week, 60 per month, and 720 per year.

Your average holding period must be under 31 days.

Additional factors include having a material trading account size ($25,000 for pattern day trader designation on securities and $15,000 for other instruments).

Spending over four hours per day with the intention to run a business to make a living.

Plus, having trading computers, multiple monitors, and a dedicated home office.

Please keep in mind I’m not a lawyer or an accountant; please consult these professionals so they can understand your specific situation and tax law.

The Bottom Line

We’ve covered much of what you need to know for setting up your trading as a business.

It requires several moving parts, from determining your why, identifying an edge, creating your rules, and even getting into the nitty-gritty of incorporating a legal entity.

The exact, crystal clear method you specifically choose to become a successful trading business owner will not be drawn on a map for you.

Just kidding, there is a map.

It’s called Analyzing Alpha.

Be sure to subscribe to our newsletter below to receive exclusive email content that’s jam-packed with value to help you on your journey to becoming a truly successful and profitable trader.

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Starting a Trading Business

• Kunal Desai
• October 27, 2015

Learning to trade stocks is no different than learning any other profession.  You must develop the same level of skill and expertise as a doctor or lawyer, and apply a high degree of commitment and attention to detail for every aspect of the job. Starting a trading business is a similar process to launching any business.

If you want to trade on your own, with your own money, then you need to look at your trading business like any other business. So many traders come in looking at trading as a hobby or a side project, rather than looking at it as if they are the CEO of their own business.

Side projects & hobbies cost you money; the sole goal of trading as a business is TO MAKE MONEY!  So many of the unsuccessful traders I have met over the years have treated their trading like a hobby.

It’s fun for them and gives them a rush of excitement so they keep doing it, but that’s not what leads to consistent profits. Here’s what you need to do to start your trading business.

1. Get Educated .

Just like in any other profession, you have to understand every piece of the job down to the microscopic details. Think about everything a doctor learns and goes through before their first surgery. Just because you watched a few videos and read some books doesn’t make you a trader.

Having a specific method that you know from A to Z and have practiced over and over is necessary before a dollar is ever risked. That’s why in our trading courses where I teach my students every single thing I know about trading, we put our students on trading simulators where they go out and practice what they learned. Our students only go live and trade with real money once they have shown that they can go out and make money every single day.

2.   Build a Trading Business Plan .

Would you go into a bank and ask for a loan to start a restaurant with no business plan? Probably not!  Your trading needs to be the same way. Before they start the simulator, my Bootcamp students all complete a business plan. I want them to really take what they learned in Bootcamp and start to think about how it applies to them.

What style of trading will you do? Day or swing?

What is your system for risk management?

What tools/software will you utilize?

What setups will you focus on?

Putting together a comprehensive plan will give you areas to focus on when you’re trading on the simulator, as simulating without focus is not real practice. When you practice, it needs to be deliberate and mimic real life conditions.

3. Test it Out!

After your have learned and focused your education on a specific business plan, you need to go test it all out.  Either hop on a real time trading simulator like TC2000, ToS, etc., or put a small amount of capital to work! As you know, what looks good on paper often doesn’t make sense in real life conditions, so take meticulous notes on what needs to change in your business plan as you are simulating your strategy.

It will answer some questions for you: does your strategy mix well with your work schedule? Does it make money? Does it suit your personality, etc.  What it will also do– this is important– is keep a log of your trades to give you an idea of your tendencies. What are your strengths and weaknesses? What are your best setups?

To be a consistently profitable trader, you will need a toolbox of go-to setups that are your own and that you can use every single day. Identifying what you’re good at and then practicing it over and over will help you build expertise in these setups.  You need thousands of repetitions to really start to see all the angles as a trader and to build that expertise  that starts here!

4. Structure your Trading Business .

Tax status . Will you trade in an LLC, INC? Will you pursue the trader tax status through the IRS?  It is best to talk to an accountant about these things.  This is a very small part of trading as you only pay taxes if you win! Making money should be your major focus, as the rest is easy if you can do that!

Brokers.  Your broker will change depending on your style. If you’re day trading vs swing trading , the type of commission structure you need will vary. As a day trader, if you pay a flat rate like Ameritrade or Etrade charge, it’s nearly an impossibility to make money unless your account is 500k or more.

Day trading requires often scaling in and out of trades, so a flat fee of $9.99 will cost you hundreds of dollars a day in fees. This makes the cost of doing business so high that the probabilities of covering your fees as a new trader are small.  Some brokers like Interactive Brokers charge per share vs per trade.

That means you just pay for the shares you trade, not a flat fee. 100 shares is 27 cents.  200 shares 54 cents etc.  You can take hundreds of trades, but you still just pay for the shares you trade!  For a swing trader, this means much less as you may only make 5-10 trades a week, so the fees make less of an impact. My swing trades and IRA’s are through Ameritrade  .

Tools.  Often traders need a supplement to the tools their brokers offer. Additional charting or scanning capabilities are needed in some cases. Also, once you have the Go-to setups that you are going to be trading, being able to find them is key! Developing scans to find and alert yourself to opportunities is very important!

I use Trade-Ideas and  TC2000  for my scanning and charting.  Now when I’m trading intraday, I do very little scanning as the homework I do at night gives me more than enough ideas, my goal is to now just execute my plan vs sit there sifting through data during the day, which just throws my focus off.

5.   GO TRADE!

All it will take is everything you got! Your passion and energy for this will help determine your success.  Trading is a lifelong pursuit, so focus on the process each day and learn how to eliminate mistakes and accentuate your strengths. This means keeping a journal of your trades, but also your emotions, so you can see where the screw ups happen and pinpoint them.

PROCESS PROCESS PROCESS . Don’t focus on results or dollars – if you do, it will end you. Think about all the things you need to do leading up to that! It’s the little things that lead to a great day! And keep hammering at it! Reducing and finding ways to minimize slumps are key, as 1 slump can end you.  Remember, your number 1 job is to manage risk at all times. You’re a professional risk manager.

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Trading As A Business – My Step By Step Guide

You have all probably heard that you need to treat trading as a business if you want to be successful. But what does this actually mean? Instead of letting it be just another meaningless phrase, let’s take a deeper look to fully understand it.

The ideas behind “treating trading like a business” are very important to get you on the right track and after we have taken a look at the different aspects, I am sure you will get some ideas on how to take your trading to the next level and treat it more like a business.

Your setups are your products and services

Every business has either physical/virtual products or services to sell in order to generate profits. The business, hopefully, knows everything there is to know about their products, where it is from, how it is built, what the benefits are, what the potential struggles are, how to keep improving their product, what their customers want, and how to use it in the best possible way. The business must be the #1 expert in what they are offering. Obviously.

As a trader, your setups and your strategies are your products. Your setups are a set of rules and triggers to help you find potentially profitable trades. Whether your setups consist of classic patterns, indicators, pure price action or a combination doesn’t matter here.

What is important is that YOU must be the expert in your setups and patterns. You must know every little detail, when the setup works best, during which market conditions it doesn’t work, in which markets and timeframes to use it, how to improve the odds, how to set stops and pick targets, when to move stops and how to manage trades, when to add to a position or take some off the table, when to stay out, etc.

Most traders lack consistency and are far from being experts because they always change their approach. Do you think a business can be profitable if they’d change what they are selling every week? No!

So, really commit. In my trading, for example, I trade very specific patterns and most of my trades look very similar. This comes from years of specializing in only those setup types. For years I have been looking for the same things, patterns and price clue every single day, without deviation.

Losses are costs and a part of doing business

We have all heard this phrase and I hate it. Why? Because it has lost its meaning.

Every business has costs and you need to buy material, build plants, hire workers and invest in research and marketing. But for a business, it only makes sense to spend money if you’d expect to get a return on your investment. If you hire someone without skills, blow your marketing money for the wrong target audience, buy over-priced and useless material or purchase a private jet although your company is barely profitable, should you really look at those costs as a part of doing business`?Well, obviously not.

Yes, losses are part of trading but there are losses and then there are losses .

Losses are only good if you have followed your rules and most people lose because they don’t have an approach or break their rules. Those losses are not part of trading and your trading business.

Thus, always ask yourself: was this loss my own fault (breaking rules, etc) or did I fully respect my rules and the trade just didn’t work out?

Only if you can rule out the possibility that you messed up, then a loss becomes tolerable and part of doing business.

Selling your business and retirement

I keep saying it:

Most people want to be full-time traders and trade for a living but then trade like they have to retire tomorrow.

A businessman usually opens his business because he believes in what he is doing, he has a long-term vision for his operation and he is following a self-determined lifestyle. Only very few businesses start with the goal to close down operations in 6 months and sell everything for millions of Dollars and then sit on the beach all day long and sip a cold beer. Those people are driven by the wrong motives and the failure rate is then absurdly high.

Traders must also understand that they are in it for the long term. But even more important, they have to understand the implications that come with such a vision and a long-term approach:

• One trade does not matter. Stop stressing out about single events. You will take thousands of trades.
• Risk should be low. A trading career is not built on a few hundred percentage annual return but on small, modest and low-risk gains. Variance is deadly and emotionally taxing if you want to do this as your profession.
• Be patient. Learn your craft step by step and fully understand that time is on your site. It’s still worth it if it takes 5 years to become profitable.

What would the pro do?

Professionals and the ones at the top do things differently and approach the area of expertise disciplined, organized and with conscientiousness. The next time you are about to do something, ask yourself “what would the pro do in my situation?” Would he really add to a losing trade, or widen his stop loss, or chase price, or listen to a random guy in a trading forum to bet his money, or buy into an ICO of something he doesn’t understand because he can 10x his money tomorrow? You can see where I am going with this…

Stop doing those things you know you should not be doing and start living in the pro mindset.

I know from experience that it won’t be easy and you won’t succeed all the time, but get into a habit of consciously looking at your decisions and actions and ask “what would the pro do now?” It will get you into a different mindset where you move in a better direction step by step.

Your office

Maybe it’s my German nature but I am a big proponent of having a clean and organized work environment. It will not only improve your productivity but it also signals to yourself that trading is something you take seriously. If you can, dedicate a part of your home as your “trading office” where the only purpose is trading and doing trading-related things. No Facebook and no Youtube – just trading.

I find that when I keep my office, my desk and my computer clean and organized, I work better and I enjoy it more as well. Avoid distractions and prove to yourself that trading is important to you. I don’t have my phone in my office, I block social media sites during work and I don’t watch Netflix in the background.

Have a plan for your business

How do you start your trading day? Do you just fire up your trading platform and start hunting trades across all timeframes?

A business usually always has a plan, businessmen know what their goal is, what their objectives are, they are prepared, they analyze costs and opportunities and they also analyze past projects and keep accurate numbers of everything that goes on.

A trader must have a plan before he starts his trading to avoid being just reactive. I sit down every weekend and every morning and I analyze all my Forex pairs, I look at the timeframes that I trade and then I create my trading ideas. I know when I want to get in, when I stay out of a market, what the price action has to look like for me to get interested and what a no-trade scenario is. For that, I use my trading plan and I also use price alerts to stay on top of things.

This is only possible, though, if you know your products and services a.k.a. your setups and strategies. It all ties together.

Have you ever seen a business that operates without a real plan and without analyzing how their projects worked out? No, such businesses quickly fail because you don’t have any idea where the money is coming from, where it is going and how to fix things.

Your ‘ Why ‘ and company statement

Every business has a mission and they usually know exactly why they are in business. Under Armour wants to do great sports apparel, Steve Jobs believed in Apple and a design-driven tech company, the IKEA founder loved building things, Mark Zuckerberg wanted to create a network for people, Thomas Edison was a passionate inventor, Elon Musk wants to take humanity to the next level etc.

And whereas there is nothing wrong with those things in general, it just doesn’t go deep enough and once you hit your first brick wall, just being driven by money will not motivate you to push through.

Instead, think about ‘why’ you want money in the first place. Do you want to stay close to your family, see your kids grow up and work from home, work less but on more fun projects, start another business based on your passion and have trading as a side income, or are you just fascinated by the financial markets and money isn’t the objective at all?

Whatever it is, be clear about it and see how trading fits into your overall lifestyle choices. You are more likely to succeed if you really understand why you are doing things.

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Create a Winning Forex Trading Business Plan: Key Components and Strategies for Success

Table of Contents

Introduction

A trading business plan is an essential component of successful Forex trading. It serves as a roadmap, guiding traders in making informed decisions, managing risks, and achieving consistent profitability. In this article, we will explore the key components of a Forex trading business plan, offering insights on setting trading goals, developing a strategy, risk management, broker selection, and more. By incorporating these elements into your trading business plan, you will be better prepared to navigate the dynamic world of Forex trading.

Setting Clear Trading Goals

The first step in creating a trading business plan is to establish clear trading goals. These goals should be tailored to your individual financial situation, risk tolerance, and personal preferences. Consider the following when setting your trading goals:

• Short-term, medium-term, and long-term goals : Your goals should cover various timeframes, ranging from daily or weekly targets to longer-term objectives, such as annual returns or overall account growth.
• Profit targets and performance metrics : Establish specific profit targets and performance metrics to measure your progress, such as return on investment (ROI), win rate, or risk-adjusted return.
• Aligning goals with your risk tolerance and personal financial situation : Ensure that your trading goals align with your risk tolerance and financial situation. For example, if you cannot afford significant losses, it is essential to set conservative profit targets and maintain strict risk management protocols.

Developing a Trading Strategy

A solid trading strategy is the foundation of your trading business plan. Here are some key considerations when developing your strategy:

• Fundamental analysis and technical analysis : Fundamental analysis involves analyzing macro-economic and geopolitical factors that affect currency prices, while technical analysis involves using charts and technical indicators to identify trading opportunities. Determine which type of analysis aligns with your trading style and use it as the basis for your strategy.
• Identifying your trading style : There are three primary trading styles: day trading, swing trading, and position trading. Choose the one that best aligns with your personality, time constraints, and financial goals.
• Selecting the best trading strategies and techniques for your style : Each trading style requires different strategies and techniques. For example, day traders may use scalping strategies, while position traders may employ trend following strategies. Research and experiment with different strategies to find the ones that work best for your trading style.
• Adapting your strategy to various market conditions : The Forex market is dynamic and constantly evolving, so it’s essential to adapt your strategy to changing market conditions. Learn to identify different market phases, such as trending or ranging, and adjust your strategy accordingly.

Risk Management

Risk management is a critical component of a trading business plan. Without proper risk management, traders can quickly incur significant losses. Consider the following when managing risk:

• Position sizing and leverage : Determine the appropriate position size and leverage for each trade based on your risk tolerance and account size.
• Stop loss and take profit orders : Always use stop loss and take profit orders to limit your losses and lock in profits.
• Risk-reward ratio : Maintain a favorable risk-reward ratio by ensuring that your potential profit is always greater than your potential loss.
• Managing emotions and maintaining discipline : Trading can be emotionally challenging, so it’s essential to maintain discipline and manage emotions such as fear and greed. Stick to your trading plan, and avoid overtrading or deviating from your strategy.

Choosing the Right Broker

Selecting the right broker is crucial to the success of your trading business plan. Consider the following when choosing a broker:

• Evaluating broker reputation, regulation, and financial security : Choose a broker with a good reputation, strong regulation, and financial security.
• Analyzing trading platforms and tools : Ensure that the broker offers a trading platform and tools that align with your trading strategy.
• Comparing fees, spreads, and commissions : Compare the fees, spreads, and commissions of different brokers to ensure that you are getting the best value for your money.

Creating a Trading Routine

Creating a trading routine is essential for consistent success in Forex trading. Consider the following when creating a trading routine:

• Establishing a daily schedule for market analysis, trade execution, and monitoring : Set aside specific times each day for market analysis, trade execution, and monitoring.
• Maintaining a trading journal : Keep a trading journal to track your progress and identify areas for improvement.
• Regularly reviewing and updating your trading plan : Periodically review and update your trading plan to ensure that it continues to align with your goals and strategies.

Education and Skill Development

Continuous education and skill development are critical to the success of your trading business plan. Consider the following when seeking education and skill development:

• Continual learning through books, courses, webinars, and other resources : Stay up-to-date on Forex trading trends and best practices by engaging in continuous learning through various resources.
• Networking with other traders and participating in trading communities : Join Forex trading communities and engage with other traders to gain insights and feedback.
• Utilizing demo accounts to practice and refine your strategy : Practice and refine your strategy using demo accounts before committing real money to trades.

Performance Evaluation and Plan Adjustments

Periodic performance evaluation and plan adjustments are necessary for continuous improvement in Forex trading. Consider the following when evaluating your performance and making plan adjustments:

• Periodic performance analysis and goal assessment : Regularly analyze your performance and compare it to your trading goals and metrics.
• Identifying areas for improvement and implementing changes : Use performance analysis to identify areas for improvement and implement changes to your trading strategy and plan.

By incorporating these elements into your trading business plan, you can create a comprehensive and effective roadmap for successful Forex trading.

Creating a trading business plan is essential for successful Forex trading . By setting clear trading goals, developing a solid trading strategy, managing risk, choosing the right broker, creating a trading routine, seeking education and skill development, and regularly evaluating performance and making adjustments, traders can navigate the dynamic world of Forex trading with confidence and consistency. Remember, a trading business plan is not a one-time task, but rather an ongoing process of learning, adapting, and refining your approach to achieve your trading goals.

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Creating a Trading Business Plan

Day trading is not easy; it is a serious business and you should treat it as such. Google, Microsoft, Ford, and just about any other successful organization has a business plan as a roadmap towards success. In the webinar, Mike will cover creating, implementing, and adjusting the components of a trading business plan to create a solid foundation in which to begin your journey as a retail day trader.

You can download the Trading Plan Template in various formats here:

Word: Traders Business Plan Template

OneNote: Journal Template

PowerPoint: Journal Template

Excel (Macro Enabled): Trading Template

BBT – Day Trading Business Plan (PDF): Business Plan

The Ultimate Trading Plan Template

A proper Trading Plan is essential to your success as a trader.

Anyone thinking of starting a business wouldn’t begin without a plan, if they do, they probably won’t like the end results. Day trading is no different than any other business.

As they say, “If you fail to plan, then you’ve already planned to fail.”

You’re about to learn the same process I’ve used for the past 20 years. It’s also what I currently teach our students.

After completing this post, you should be confident in your ability to write a rock solid trading plan. To speed up the process, I provided a link to our Trading Plan template at the end.

Let’s get into it…

What is a Trading Plan?

A Trading Plan defines a trader’s goals, expectations, routines, risk management, and trading strategies. A successful plan will include the logic underlying the strategies and processes a trader deploys.

Elite traders already know they have won the game before placing a single trade for two reasons.

First, they have a well defined edge that’s repeatable. 

The primary goal of your trade plan is to precisely define your processes and strategies, with the end of goal of creating a repeatable process.

Second, elite traders fully understand there is a random distribution between wins and losses for any given set of variables that define an edge , resulting in flawless execution.

First, you need to focus on developing your process. You will work on developing the mindset of winning trader and the ability to think in probabilities (versus P&L) when you begin backtesting and simulated trading.

A simple google search and you will find endless styles and formats for trade plans.

For me, my plan acts as the CEO of my business. defining the big picture items such as rules, processes, routines, analytics, theories and goals.

A lot of traders include their trading strategies in their trade plan, but I prefer defining them in a separate Playbook. I do this for several reasons…

First, I’ve been trading for over two decades, in that time I’ve developed and traded a lot of different strategies.

I’ve always found it beneficial to have all my strategies broken down individually. This becomes extremely valuable as you get more into strategy development.

A lot of the strategies I’ve built were a result of combining the different tools, theories and processes from other strategies I’d previously traded in my career.

Second, I think a Trade Plan that focuses solely on the macro level picture will help you in your review.

When I began my career I was surrounded by elite traders every day. My mentor and the owner’s of the firm kept me in line and made sure I was following their processes. If I was trading poorly, they held me accountable.

Accountability Partner

If you haven’t already chosen someone as an accountability partner, it should be the first thing you do after reading this post.

Your trade plan will be shared with your Accountability Partner in order to review your progress.

Your playbook will be used in strategy development and shared with your peers for trade review.

Obviously your accountability partner can play both roles if they have a trading background.

However, it’s more important your accountability partner is someone your close to that is committed to helping you achieve goals.

A good accountability partner will call you out and question you when you’re not following your rules, and due to your respect for the individual it should sting a little.

For the remainder of this post we’re going to focus solely on your trade plan.

Once you’ve completed your plan, I have you covered on your playbook as well. (link to Playbook Guide at the end)

Why You Need a Trading Plan

Good trading should be effortless. The preparation is where the hard work comes.

Imagine two runners, on one hand someone completely out of shape trying to run 1 mile in 10 minutes versus a world-class runner. The process looks effortless for the world-class runner, and it is. They put all of the hard work into their preparation, resulting in a process that is effortless.

Your Trade Plan and Playbook are part of your preparation.

The objectivity and clarity that a solid plan provides is essential in a market that requires split second decision making to capitalize on opportunities.

It will empower you to trade objectively, with confidence and less emotional involvement.

Let’s take a look at some categories you will want to include in your plan.

Trading Plan Outline

This outline is a strong base to get you started. You can use this plan for all markets, including Stocks, Forex, Futures, Options, and/or Crypto.

Remember, there’s no formal rules so get creative!

1. Premarket Routine

Developing routines in our lives helps us to stay on track and reach goals. 

By analyzing our current routines and making adjustments, we’re able to form new habits. A skill that is rewarded in this business.

Here’s a great video on the importance of simple routines, especially when starting your day.

Try it, what do you have to lose?

Outline the tasks you will perform prior to trading each day.

Examples: -Read trading plan -Review a personal journal entry twice a week and reflect -Read prior day’s trade journal -Review prior day’s trades -Check economic numbers -Read playbook -Mirror reflection -Pre-market Analysis

2. Visualization/Mantras

Visualization and Mantras are great tools to include in your morning routines.

Examples: -Visualize yourself taking a trade and going through all the steps outlined in your Playbook -I accept that I have no idea what the outcome of any individual trade will be -I accept that today could be a negative day -I accept the loss of my next  trade financially -I accept I will get stopped out on trades that reverse and rip in the direction of the setup

3. Hard Rules

You want to get very specific with some macro rules for your trading business. They should be reviewed with your accountability partner on a monthly basis at minimum. I recommend meeting weekly or daily if you’re a new trader or not yet profitable.

Examples: -3 losing trades switch to SIM remainder of session -Take a random trade, switch to SIM remainder of session -Two max loss days back to back, SIM for remainder of week -No trading outside RTH

4. Risk Management

You don’t need to over complicate your risk management. Below is what I recommend to my students.

Example: -1% max per trade -3% max per day -5% max per week -15% max per month -Adjust trade size on Monday mornings

IMPORTANT! You should never trade real money until you have proven your ability to be profitable on a simulated account!

I promise, if you can’t make money on a simulated account, you won’t do it on a live account.

Don’t start trading a live account until you’ve proven you have acquired the necessary skills to make money on SIM.

5. Aftermarket Routine

All traders make mistakes. The question is whether or not you will analyze those mistakes to learn from them?

When the trade day ends, you still have work to do.

You should do some journaling and reflection on your execution for the day.

Keeping a  trade journal of all your trades as well as grading every trade is essential for growth. Make sure to take screenshots of your trades as well so you can go back and review them.

Here’s a few more examples: -Complete Scorecard for ever trade taken that day -Complete journal entry discussing market conditions for the day and reviewing your execution -Input trades into spreadsheet or whatever you’re using for analytics -Meditate -Workout

Trading can be emotionally challenging at times. There’s not many professions where you go to work and perform your best yet at the end of the day you leave with less money than you started.

Keeping mentally fit is imperative in this business. It’s important you incorporate some stress relieving activities, such as meditating or working out, into your aftermarket routine.

6. Weekend Routine

On Sunday evenings I have a routine to prepare myself for the upcoming week.

-Read trade journal entries from the past week -Review trades from the past week -Check sizing -Goals for upcoming week -Meet with Accountability Partner

7. Monthly Routine

On a monthly basis you should perform a thorough analysis on your trading business.

Examine your processes and trading analytics, looking where you can improve.

Examples: -Review trade analytics and make adjustments to strategies -Backup everything -Check risk management and sizing -Write main goals for upcoming month

8. Goals/Achievements

The markets are always changing and presenting new opportunities as well as challenges. Even after 20 years, I still find myself learning new things.

Reflecting on why you started trading in the first place is important. Don’t ever lose sight of your goals.

Keep track of your goals and achievements in your trade plan as you progress as a trader. You will find it encouraging as you start to see your progress.

Examples: -Zero random trades for a week -Average trade score of X for the month -First chop comma ($1,000 net day)

While I think all these categories should be included in your own plan, remember to get creative and include anything you feel could potentially improve your trading.

Maybe include some pictures to motivate you.

Free Trade Plan Template (Download)

I created a template in Google Sheets with the categories and examples covered in this post to get you started on your trade plan.

If you would like the template and some other cool trading tools,  become a JT Insider. It’s free.

I also recommend you check out this guide “How to Become A Day Trader – (Here’s how I did it…)”. I share with you how I overcame my trading failures by developing an Objective Edge.

Final Thoughts

Whenever a student comes to me struggling, I ask them for their trade plan. The struggles typically lead back to a rule or set of rules they have outlined in their Trade Plan that they’re consistently breaking.

It’s an essential tool when reviewing your trading with your accountability partner. Remember to select someone close to you must be completely transparent with them or you’re only cheating yourself.

Don’t make trading more difficult than it already is. Write a solid plan and work on having the discipline to follow it.

Anything not mentioned you like to include in your plan? Leave a comment below!

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26 Comments

Awesome Information. Thanks for your valuable insights

Thanks Adam for the information. This is second year since i learn trading but i made alot of lesses.so i have learnt that the cause of loosing was i didn’t have a solid trading plan. Thanks you very much and God bless you .

Thanks for the comment Gabriel!

Thank Adam , i have been trsding for 4yrs now but never knew how to create a rock solid trading plan. I am creating one withyour guideline, i will get back to you in 6 months. Thanks alot

Thanks for the comment and your welcome!

Insightful, moral & honest. Thank you for sharing Adam

Thanks Frank!

Thank you very much Adam.The trading plan steps you have shared have been quite insightful and I have discovered that my great hindrance to success in Forex is lack of a trading plan.Many thanks once again!!

Thanks for the comment Irene! I’m glad you like the post. Having a solid trading plan that you never deviate from essential to becoming consistently profitable. Happy trading!

Thanks Adam Its very valuable.

Woow!.. ….. That was really intense and a helpful road map for beginners like me. Thanks Adam.

Thanks Geoffrey!

It is very helpful

very valueble content.

Thank you…!

Best information I could find for trading plans and I did a whole lot of research and this was the best and most effective. Thank you appreciate this!

Thanks for the comment Hussein!

This Will be epic.

Thanks for the comment Kahleal!

Thank you so much for this helpful and valuable information.God bless you

Thanks for the kind words Elijah!

Hey I want to thank you I’m not new as a trader I have a good strategy I was making money with it only to find out I dont have a trading plan that will make me unstoppable because in trading the strategy is not enough.

Thanks Nhlanhla!

Thank you! I knew I needed a trading plan but needed the guidance and you provided all this for free, more blessings to you.

You are very welcome!

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How to Create a Business Plan for Your Trading

• September 23, 2009
• Austin Passamonte

“Plan your trade and trade your plan” “Treat trading as a serious business” “Bulls win, Bears win, Hogs lose”

How many times have we heard/read those words, or something to their effect? Trading can be as unstructured and wide-open a venture or a structured and quantified approach as we dictate conditions and parameters for.

There are two general schools of thought when it comes to operating a trading method or approach. One side believes we should trade every minute of every day, trying to maximize all potential profit opportunity without missing a beat. Another side believes it is prudent to target specific goals and if hit, bridle back or shut down for the duration until next period arrives. In other words for intraday traders, trade all day every day or trade for x-dollar profit and call it a day until next session.

That’s a two-side discussion which will never find everyone in agreement. Common logic (coupled with human greed) points to the fact that some sessions or periods offer outsized profit potential. It’d be foolish to quit early and pass up large gains when presented. The competitive nature ingrained in most gamblers (gamers = game) who are likewise successful traders scoff at the notion of walking away while cards remain on the proverbial table. Anyone who has traded through periods of high volatility and extreme price action for days or weeks at a time can attest how easy it is to amass weeks’ or months’ worth of gross profit in rapid fashion there. Then there is the aspect of judging trader performance based on potential profit opportunity. If a session or stretch of time offers x-percent profit potential, a trader would be successful only if he/she realized y-booked gains.

All true to various extents. But no trading career is ever based on extreme market conditions. High volatility and large-range sessions are a welcome gift when presented. A brief, welcomed gift. Unfortunately, that end of the bell-curve measuring “normal” price action is no more common than dull periods with tight-range choppy price action as well. Results realized through any extended periods of time include brief blips of wild markets and huge profit potential, what we’d consider normal market movement as the bulk of time and likewise dull market action to offset the wild times before.

What if we opted to construct a business plan based on steady, consistent performance objectives that are reasonable to meet on a regular basis? Instead of grading our performance relative to max potential gains every day, what if we graded performance on achieving reasonable goals averaged consistently over extended periods of time?

As an example, here’s a business-plan objective created for one trading application of my own. Let’s look at that and see if any benefits exist:

ES Trading Business Plan

Description:

Trading S&P 500 futures (ES) based on (your choice) method approach with management objective of realizing (your choice) gross profit per session. Trader’s option to continue trade efforts that day if conditions warrant OR shut down with profit objective goals successfully met. Regardless of how or why, cease all trading efforts if/when max loss intraday of (your choice) is hit.

+4pts ES gross gains (example) targeted daily. -8pts ES gross loss (example) max loss shutdown.

$5,000 beginning balance = two ES contracts per full-trade size position 1/2 size = one ES contract full size = two ES contracts 2x size = four contracts

Projections: 100% Objective Attained

ES +4pts daily x 21 trading sessions (on average) per month | +84pts ES per month +4pts x two contracts full position | +$400 daily gross gain +$400 daily gross gain x 21 trading sessions | +$8,400 monthly gross gain (+168% monthly = +2,016% annualized r.o.i)

50% Objective Attained

ES +2pts daily x 21 trading sessions (on average) per month | +42pts ES per month +2pts x two contracts full position | +$200 daily gross gain +$200 daily gross gain x 21 trading sessions | +$4,200 monthly gross gain (+84% monthly = +1,008% annualized r.o.i.)

25% Objective Attained

ES +1pt daily x 21 trading sessions (on average) per month | +21pts ES per month (+42% monthly = +504% annualized r.o.i.) +1pt x two contracts full position | +$100 daily gross gain +$100 daily gross gain x 21 trading sessions | +$2,100 monthly gross gain

Realistically Speaking

In my opinion it’s unrealistic to think that anyone can frequently and consistently capture large percentages of intraday potential profits. Needless to say, just about everyone has toyed with a progressive table at one time or another and pondered possibilities. Start with a few dollars, compound that for awhile and sooner than later we’re talking gazillionaire. How much fun that would be. But that isn’t the true strengths of a progressive table as demonstrated above.

What if we held ourselves accountable to the concept of steady, consistent performance unattached to market behavior? In other words, if we manage to accomplish even 25% of that stated objective on a yearly basis, would that alone be considered a success? If so, would it make sense to judge our individual performance against any other measure? Too many times a trader will be their own worst boss when it comes to judging performance. Holding oneself accountable to unreasonable standards only leads to one end: mental self-destruction. You’ll literally drive yourself insane trying to achieve goals set outside of reasonable reach.

On the other hand, if we can visually see that small to modest incremental growth does lead to potential results acceptable enough in the end, that can serve as a guideline of measure to keep us grounded. Considering the very top-rated futures CTAs manage to attain roughly 200% annual returns, is it reasonable to believe anything similar regardless of initial start-up capital is equally admirable? Retail traders who begin with $5,000 and end with $25,000 total without compounding at year’s end accomplished the exact-same mathematical feat as professional CTAs who began with $500,000 and ended with $2.5 million. The sole difference is perception… aka “spendable” dollars in the end. There may be slight to vast differences when in comes to emotional management with small accounts versus large, but the science or math goes unchanged.

Traders need some sort of measuring stick to follow as a guide for measuring performance and production. It cannot be ridiculously low or unreasonably high to achieve. The term “reasonable” always returns to mind. Basing some type of table on personal ability, potential from market(s) traded and other known variables are pulled together for comparative measure. That type of baseline gives us permission to target realistic goals rather than unrealistic or even unstructured goals of performance. Many traders desire while others eschew such business plans. In the end we’ll all end up somewhere. How we get there and why is up to each of us along the way.

Austin Passamonte is a full-time professional trader who specializes in all commodity markets. Mr. Passamonte’s trading approach uses proprietary chart patterns found on an intraday basis. Austin trades privately in the Finger Lakes region of New York. Click here to visit CoiledMarkets

Do you trade FAS, FAZ, SSO, SDS, TZA or TNA? Introducing Leveraged ETF PowerRatings, a simple but powerful rating system for Leveraged ETFs. Click here to see today’s ratings.

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Day Trading Like a Business – Learn What it Takes

Sep 29, 2018

Written by: Al Hill

Traders who are most successful in day trading are those that can draw similarities between their day trading operation and a traditional business. While day trading may be polar opposites from a brick-and-mortar company, similar business principles will decide who has lasting power.

In this post, we will cover some of the basic questions many new traders have when considering day trading as a career. To be clear these are traders looking to go at this on their own either fully funded or with a prop firm.

Trading Plan

Starting a day trading business requires a few basic elements: trading capital, knowledge, trading equipment, measuring performance and how to pay yourself a salary. Let’s analyze each piece of the puzzle.

1. Trading Capital

Starting a day trading business without trading capital is impossible. SEC regulations require that day traders operating in the United States must have at least $25,000 in their trading account to be able to make quick trades commonly associated with day trading.

While you may get away with exceeding the limit for a few days, your operation will be quickly shut down until enough capital is obtained.

However, keep in mind that starting a day trading business most often requires more than the legal minimum investment.

Consider this: to make $75,000 a year on a $25,000 account, you would have to generate an effective 300% annual rate of return. These sorts of return will require you to take on enormous levels of risk. This level of risk taking is often what leads to traders blowing up their account.

2. Knowledge and a Day Trading Business Plan

Starting a day trading business also requires a firm understanding of the financial markets, as well as a solid business plan – a.k.a your trading plan . It should outline how much you’ll stake on each position, how you’ll cut your losses, how you’ll define winners, and how you’ll evaluate each trade.

The goal of the trading plan is to anticipate every outcome while reducing the risk that your emotions and “gut feelings” will get in the way of making money. Just as successful companies thrive on people, process and product you need to ensure your process for trading is ironclad.

No matter your level of experience, if you begin to trade “freely” you will ultimately fall victim to the market.

3. Trading Equipment

Trading Monitors

Starting a day trading business has a number of front-end costs to consider that should be marked in your day trading business plan. The first expenditure is a trading machine and software.

Most day traders have a minimum of two monitors to watch streaming data, charts, and brokerage software. Other day traders have entire walls of monitors that track every type of imaginable tick and chart type.

Also, you should invest heavily in a reliable internet connection – and a backup connection. An unreliable internet connection will result in losing trades and less control. Remember, you may have at any time hundreds of thousands of dollars in the market, and without an internet connection, you won’t be able to enter and exit your positions. Going cheap here could cost thousands in the long run.

4. Measuring Performance

You will need to measure your performance, first for yourself to keep track of your progress but ultimately as a means to attract investors.

At the end of the day, if you don’t have the numbers, you don’t have a business. Now, the numbers are relative. What I mean by that is if you are looking to attract aggressive investors or make a name for yourself quickly, your returns will need to come fast and in a hurry.

If you are more measured in your expectations,  then time will play into your performance and you can focus on showing a positive return over a 5 or 10-year period.

Measure Performance

I have written extensively on how to measure your performance  which goes really deep on this topic.

While these stats are super important and will help you gauge your performance, the one big metric I focus on like a hawk is my profit/loss for the week.

As you are trading like a business and not a hobby, your goal is to make profits.

I like to break my week down into three parts (1) get ahead, (2) stabilize and grow and (3) protect.

This is how I start each week in terms of my mindset. Now that is, of course, subject to change based on how things are going.

Monday and Tuesday are really about getting ahead. I don’t necessarily take more risks, because I try to always maintain control. However, I might not be as strict about the trades I take and I will let my profits run a little longer.

Wednesday and Thursday are building blocks to add onto the success from earlier in the week. This is also a time for me to make sure I build upon the earlier success in the week and not making any sloppy trades.

Friday is about protecting and not taking on too much risk. This is because you do not want to blow up your entire week based on one bad day.

I recently had a Friday like that where I literally gave back an entire week in 2 hours. Let me be the first to tell you this does not feel good and can really screw up your mentals heading into the weekend.

So for Fridays, if I’m up big for the week, I may limit the number of trades I place or limit the amount of money I use on each setup. This way I dramatically lower the risk of blowing up my week.

5. Stringing Together Winning Weeks

Winning Streak

Now that you are building up to your winning Friday the next thing you want to do is string together a number of winning weeks. This will allow you to continually push your account value up and to the right.

In the beginning, do not concern yourself with how much you are making. The only point of importance is that you are not blowing up your account or demonstrating any of the self-destructive behaviors that hold you back from trading success.

Once you start to put together a winning streak, momentum starts to move in your favor. You will start to take on a winning attitude and this game I believe is 80% mental and 20% strategy and technicals.

6. Winning Months

Now, this is the big metric I track and there is no wiggle room on this one. I have to finish up for the month. Let me restate this – I have to finish up for the month.

I will set a potential profit target but I historically aim too high. So the one big metric I focus on is finishing in the black.

You cannot control how much you will make in the market. There are so many factors that drive your potential profits but the one thing you can control is your own actions and refusing to finish in the red.

7. This Does Not Mean Trying to Force Your Will on the Market

Please do not misinterpret my point to say you should do whatever it takes to make the market provide you with money each month. What I am saying is if you are focusing on your daily outcomes. Then you have a game plan for managing your money for the week. Next, you build up these winning weeks to a full month.

If you follow this approach, the odds of you finishing in the red are slim to none. It’s not about forcing trades or trying to force the market your way (which is impossible).

It’s about doing the right things on a daily basis which ultimately over a twenty to twenty-two day period build up to you turning a positive return.

8. Paying Yourself

Never Take a Dime Out – Grow..Grow..Grow

This is where I feel many people on the web mislead traders in terms of the value of money. You hear about traders taking a small amount of money and growing it into some massive fortune.

While this makes for great commentary on the web, do any of us honestly believe this is a common occurrence?

Also, when do these traders pay themselves? How do they structure their lives in terms of paying bills, saving for retirements and family vacations?

These are all answers you need to account for if you plan on taking up day trading as a business.

Now, your first inclination is going to be to grow your account to some mythical number before taking profits. This, my friend, breeds poor habits over the long haul.

To place real value in the money, you need to take money out and use it in your everyday life. This will not only teach you the value of your hard work but will also allow your family members who sacrifice spending time with you to also see benefits of having to put up with your occasional mood swings.

9. How Much Do You Take Out?

This is going to be completely up to you. The minimum you will need to take out is your monthly commitments.

Once we get beyond this figure, what is another realistic number?

Set a Fixed Number

I like to set a monthly target for myself in terms of payout. Once I hit that number I immediately withdraw the funds from the account. The rest of the month can then be used to increase my account value.

You can also use an approach where you take 50 percent of your profit out. The challenge here is that you will have a tough time growing your account after paying taxes.

Starting a day trading business is rewarding and profitable. Whether you’re looking for flexible hours, a work from home environment, or a career with unlimited profit potential, a day trading business is a great way to start a side business.

I have laid out here the key aspects of what you need to consider before picking up trading as a profession. At the end of the day, you must turn a profit in order to consider yourself in the trading business.

Learn how to build your trading day, week and month by replaying the markets in Tradingsim . I have personally been able to trade months in only 5 days.

This way you can see what it takes and tweak your strategy in order to turn a profit.

Tags: Day Trader Salary

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9 Business Plan Examples to Inspire Your Own (2024)

Need support creating your business plan? Check out these business plan examples for inspiration and guidance.

Any aspiring entrepreneur researching how to start a business will likely be advised to write a business plan. But few resources provide business plan examples to really guide you through writing one of your own.

Here are some real-world and illustrative business plan examples to help you craft your business plan .

Business plan format: 9 examples

The business plan examples in this article follow this template:

• Executive summary
• Company description
• Market analysis
• Products and services
• Marketing plan
• Logistics and operations plan
• Financial plan
• Customer segmentation

1. Executive summary

Your executive summary is a page that gives a high-level overview of the rest of your business plan. While it appears at the beginning, it’s easiest to write this section last, as there are details further in the report you’ll need to include here.

In this free business plan template , the executive summary is four paragraphs and takes a little over half a page. It clearly and efficiently communicates what the business does and what it plans to do, including its business model and target customers.

2. Company description

You might repurpose your company description elsewhere, like on your About page , social media profile pages, or other properties that require a boilerplate description of your small business.

Soap brand ORRIS has a blurb on its About page that could easily be repurposed for the company description section of its business plan.

You can also go more in-depth with your company overview and include the following sections, like in this business plan example for Paw Print Post:

Business structure

This section outlines how you registered your business —as an LLC , sole proprietorship, corporation, or other business type : “Paw Print Post will operate as a sole proprietorship run by the owner, Jane Matthews.”

Nature of the business

“Paw Print Post sells unique, one-of-a-kind digitally printed cards that are customized with a pet’s unique paw prints.”

“Paw Print Post operates primarily in the pet industry and sells goods that could also be categorized as part of the greeting card industry.”

Background information

“Jane Matthews, the founder of Paw Print Post, has a long history in the pet industry and working with animals, and was recently trained as a graphic designer. She’s combining those two loves to capture a niche in the market: unique greeting cards customized with a pet’s paw prints, without needing to resort to the traditional (and messy) options of casting your pet’s prints in plaster or using pet-safe ink to have them stamp their ’signature.’”

Business objectives

“Jane will have Paw Print Post ready to launch at the Big Important Pet Expo in Toronto to get the word out among industry players and consumers alike. After two years in business, Jane aims to drive $150,000 in annual revenue from the sale of Paw Print Post’s signature greeting cards and to have expanded into two new product categories.”

“Jane Matthews is the sole full-time employee of Paw Print Post but hires contractors as needed to support her workflow and fill gaps in her skill set. Notably, Paw Print Post has a standing contract for five hours a week of virtual assistant support with Virtual Assistants Pro.”

Your mission statement may also make an appearance here. Passionfruit shares its mission statement on its company website, and it would also work well in its example business plan.

3. Market analysis

The market analysis consists of research about supply and demand , your target demographics, industry trends, and the competitive landscape. You might run a SWOT analysis and include that in your business plan. 

Here’s an example SWOT analysis for an online tailored-shirt business:

You’ll also want to do a competitive analysis as part of the market research component of your business plan. This will tell you which businesses you’re up against and give you ideas on how to differentiate your brand. A broad competitive analysis might include:

• Target customers
• Unique value proposition , or what sets the products apart
• Sales pitch
• Price points for products
• Shipping policy

4. Products and services

This section of your business plan describes your offerings—which products and services do you sell to your customers? Here’s an example for Paw Print Post that explains its line of custom greeting cards, along with details on what makes its products unique.

5. Marketing plan

It’s always a good idea to develop a marketing plan before you launch your business. Your marketing plan shows how you’ll get the word out about your business, and it’s an essential component of your business plan as well.

The Paw Print Post focuses on four Ps: price, product, promotion, and place. However, you can take a different approach with your marketing plan. Maybe you can pull from your existing marketing strategy , or maybe you break it down by the different marketing channels. Whatever approach you take, your marketing plan should describe how you intend to promote your business and offerings to potential customers.

6. Logistics and operations plan

The Paw Print Post example considered suppliers, production, facilities, equipment, shipping and fulfillment, and inventory. This includes any raw materials needed to produce the products.

7. Financial plan

The financial plan provides a breakdown of sales, revenue, profit, expenses, and other relevant financial metrics related to funding and profiting from your business.

Ecommerce brand Nature’s Candy’s financial plan breaks down predicted revenue, expenses, and net profit in graphs.

It then dives deeper into the financials to include:

• Funding needs
• Projected profit-and-loss statement
• Projected balance sheet
• Projected cash-flow statement

You can use a financial plan spreadsheet to build your own financial statements, including income statement, balance sheet, and cash-flow statement.

8. Customer segmentation

Customer segmentation means dividing your target market into groups based on specific characteristics. These characteristics can be demographics, psychographics, behavior, or geography. Your business plan will provide detailed information on each segment, like its size and growth potential, so you can show why they are valuable to your business. 

Airsign , an eco-friendly vacuum cleaner company, faced the challenge of building a sustainable business model in the competitive home appliance market. They identified three key customer personas to target:

• Design-oriented urban dwellers
• Millennials moving to suburbs
• Older consumers seeking high-quality appliances

The company utilized Shopify’s customer segmentation tools to gain insights and take action to target them. Airsign created targeted segments for specific marketing initiatives.

Put your customer data to work with Shopify’s customer segmentation

Shopify’s built-in segmentation tools help you discover insights about your customers, build segments as targeted as your marketing plans with filters based on your customers’ demographic and behavioral data, and drive sales with timely and personalized emails.

9. Appendix

The appendix provides in-depth data, research, or documentation that supports the claims and projections made in the main business plan. It includes things like market research, finance, résumés, product specs, and legal documents. 

Readers can access detailed info in the appendix, but the main plan stays focused and easy to read. Here’s an example from a fictional clothing brand called Bloom:

Appendix: Bloom Business Plan

Types of business plans, and what to include for each

This lean business plan is meant to be high level and easy to understand at a glance. You’ll want to include all of the same sections in one-page business plan, but make sure they’re truncated and summarized:

• Executive summary: truncated
• Market analysis: summarized
• Products and services: summarized
• Marketing plan: summarized
• Logistics and operations plan: summarized
• Financials: summarized

A startup business plan is for a new business. Typically, these plans are developed and shared to secure funding . As such, there’s a bigger focus on the financials, as well as on other sections that determine viability of your business idea—market research, for example:

• Market analysis: in-depth
• Financials: in-depth

Your internal business plan is meant to keep your team on the same page and aligned toward the same goal:

A strategic, or growth, business plan is a big-picture, long-term look at your business. As such, the forecasts tend to look further into the future, and growth and revenue goals may be higher. Essentially, you want to use all the sections you would in a normal business plan and build upon each:

• Market analysis: comprehensive outlook
• Products and services: for launch and expansion
• Marketing plan: comprehensive outlook
• Logistics and operations plan: comprehensive outlook
• Financials: comprehensive outlook

Feasibility

Your feasibility business plan is sort of a pre-business plan—many refer to it as simply a feasibility study. This plan essentially lays the groundwork and validates that it’s worth the effort to make a full business plan for your idea. As such, it’s mostly centered around research:

Nonprofit business plans are used to attract donors, grants, and partnerships. They focus on what their mission is, how they measure success, and how they get funded. You’ll want to include the following sections in addition to a traditional business plan:

• Organization description
• Need statement
• Programs and services
• Fundraising plan
• Partnerships and collaborations
• Impact measurement

Set yourself up for success as a business owner

Building a good business plan serves as a roadmap you can use for your ecommerce business at launch and as you reach each of your business goals. Business plans create accountability for entrepreneurs and synergy among teams, regardless of your business model .

Kickstart your ecommerce business and set yourself up for success with an intentional business planning process—and with the sample business plans above to guide your own path.

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Business plan examples FAQ

How do i write a simple business plan.

To write a simple business plan, begin with an executive summary that outlines your business and your plans. Follow this with sections detailing your company description, market analysis, organization and management structure, product or service, marketing and sales strategy, and financial projections. Each section should be concise and clearly illustrate your strategies and goals.

What is the best format to write a business plan?

The best business plan format presents your plan in a clear, organized manner, making it easier for potential investors to understand your business model and goals. Always begin with the executive summary and end with financial information or appendices for any additional data.

What are the 4 key elements of a business plan?

• Executive summary: A concise overview of the company’s mission, goals, target audience, and financial objectives.
• Business description: A description of the company’s purpose, operations, products and services, target markets, and competitive landscape.
• Market analysis: An analysis of the industry, market trends, potential customers, and competitors.
• Financial plan: A detailed description of the company’s financial forecasts and strategies.

What are the 3 main points of a business plan?

• Concept: Your concept should explain the purpose of your business and provide an overall summary of what you intend to accomplish.
• Contents: Your content should include details about the products and services you provide, your target market, and your competition.
• Cash flow: Your cash flow section should include information about your expected cash inflows and outflows, such as capital investments, operating costs, and revenue projections.

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Trading Plan

A blueprint for traders to take up logical trades based on specific preset criteria.

What Is A Trading Plan?

Understanding a trading plan.

• Creating A Trading Plan
• How To Make A Trading Plan

A trading plan is a blueprint for traders to take up logical trades based on specific preset criteria. The two main ingredients of disciplined trading are developing a trading plan and sticking to it.

Following are a few of the reasons why you need a trading plan: 

• More objective decisions,
• Better discipline,
• More room for improvement,
• Easier trading.

It elucidates what is supposed to be done, when, why, and how. It covers a trader's personality, personal expectations, rules, risk management, and trading systems. 

It eliminates any lousy decision-making in the heat of the moment. Your emotions can get the best of you when money is on the line, causing you to make irrational decisions. You want to avoid that.

A detailed and thorough trading plan and risk control measures are the best ways to safeguard your financial interests. 

Regarding  risk control , a few adages seem particularly fitting for new traders: "Trade with money you can afford to lose. Trade positions are so small that you may think, 'What's the point of even putting on the trade."

The key message is that if you can somehow minimize the personal significance of a trade, you will be better able to control your emotions. As you have fewer emotions at stake, there is almost nothing to lose. 

Making a detailed plan is imperative for every trader's market success. This article will guide you in making your first trading plan.

Key Takeaways

• A trading plan is a comprehensive, written strategy that outlines a trader's approach to buying and selling securities, including specific criteria for entry, exit, and risk management.
• Essential elements of a trading plan include trading goals, risk tolerance, market analysis, trading strategies, and rules for trade execution and management.
• Effective trading plans incorporate risk management techniques such as position sizing, stop-loss orders, and limits on the amount of capital exposed to any single trade to mitigate potential losses.
• Regularly reviewing and evaluating the performance of a trading plan allows traders to identify strengths and weaknesses, adjust strategies, and continuously improve their trading approach.

A well-documented and detailed plan is a base for the trading process. It prepares investors for potential outcomes and lays out alternative options if the market does not perform as expected. 

Trading is not easy money. You must be innovative and creative in the process. The creative trader is the winning trader, focusing on the process rather than the profits. 

The more you know about your creative processes, the better you'll be at trusting your intuitions. Ironically, the first prerequisite for developing a plan is avoiding trying to be creative. 

Trading might seem tedious, as you have to do the same repeatedly. But sensible repetition with making the necessary changes over time is the guide to success.

In short, a trading plan means setting parameters for getting into and out of trades, how much money you're putting at risk, and a profit-making strategy. Think of it as a tool for keeping a cool head as you build and reshape positions when markets are on the move.

It begins with a simple self-assessment:

• What led you to have that suspicion? Are you considering fundamental or technical variables based on market movements and chart patterns?
• Which trading approach do you favor? For instance, do you want to square off positions on the same day or keep them overnight? Do you trade with the trend or against it?
• What do you think the market is doing? Is momentum typically skewed upward or downward?
• You can start drafting a plan once you've gained some perspective and have picked a list of stocks or exchange-traded funds ( ETFs ) suitable for your preferred research approach— fundamental analysis , technical analysis , or both.

Creating a Trading Plan

In trading, if you don't draw out a plan for your trades and develop strategies to follow, you have no way to measure your success. A trading plan helps you stay calm during a business and also ensures you have something to look to when you are confused about what step to take next or when you are stuck in a situation.

A vast majority of people do not trade according to a plan. Hence it is not a mystery why they lose money. 

Suppose you enter a trade that you shouldn't have and now are not sure about what to do. Here, a detailed trading plan would come in handy to rescue you from a losing trade.

Trading with a plan is comparable to building a successful business. We will never be able to beat the markets. Moreover, it's not about winning or losing. It's about being profitable overall.

A detailed plan should include the following components:

Component 1: Define Your Intention

Every individual has their reasons for getting into trading. For some, it may be capital appreciation, while for others, it can be pocket money. 

A crucial stage in developing your trading strategy is outlining your goals and the amount of time you're prepared to invest.

Write down your trading goals after asking yourself why you want to become a trader. Understanding your motivations for trading will enable you to separate the deals you should make from those you don't. 

Trading is an art, and it's like a business. You have to develop the eyesight to spot chart patterns and trends and learn to exploit these opportunities at the right time. 

The famous aphorism, "Time is money," is highly relevant in trading, wherein you have to be quick with your fingers, or the Trade is gone. Do not mistake this for FOMO- quality trades do show up frequently. 

You must learn to develop the skill to identify these trades and time them in your favor to pocket the big bucks.

Sometimes, we spot opportunities everywhere (our mind becomes greedy), and out of these, if we take unplanned trades, we may incur a loss. Hence, it would be wise to decide why you want to trade.

Component 2: Your Time Horizon/Trading Style

There are different types of traders, and their trading style is based on the time they hold an active position. The following are the different types of trading styles:

• Positional trader:  Position trading is a strategy wherein a trading position is held for an extended period (generally weeks or months) to achieve profit. 
• Swing trader:   Swing Trading is a strategy focusing on taking smaller gains in short-term trends and cutting losses quicker. 
• Day trader :   Day trading  involves actively buying and selling securities within the same day. It consists of relatively large volumes of short and long trades to capitalize on the intraday swings in price action.
• Scalper: Scalping is a method of high-frequency trading where the trader typically makes multiple trades each day, trying to profit off small price movements.

After determining your trading style and time horizon, you can move to the next element in your plan- " Entry Strategy ."

Component 3: Entry Strategy

This element of your plan is crucial and will test your market knowledge. 

Let's break it down into smaller chunks:

Trend:  Firstly, you have to identify the market trend. There are generally three movements- short, intermediate, and long-term.

Market Structure:  The next step in the process is to locate where the price is relative to the trend you identified in the first step. It will allow you to deploy relevant strategies for the different scenarios. 

Let us say the price in the current market structure is sitting in an uptrend, and simultaneously, the intermediate/long-term trend also happens to be bullish; this will give you a higher conviction to go long in the Trade.

Price Action:  The concept of price action is an entire world in itself. It comes under the domain of technical analysis. 

This step is the most fun of them all. Here, you've to analyze the charts, mark critical supply and demand zones, and more.

Here's an example of a stock consolidating and nearing a breakout:

In the chart above, the price has just broken through a resistance level— where selling might be strong enough to prevent a further price increase. 

Limit your trading to equities that have overcome resistance levels and where trading volume is above average—not just for the trading day as a whole but also for the particular hour.

Following consolidation, the price typically moves powerfully in either direction. In this situation, a trader searching for an entry opportunity would consider purchasing slightly over the resistance level at 2621. 

The trader might also set a  stop order  at  2593  to help reduce their risks in the case of a reversal.

The stop order would change into a market order to sell the stock if the price fell below  2593 . The risk is not reduced; however, there is no assurance that the execution of a stop order will occur at or close to the stop price.

Here's another illustration of a stock that has pulled back from a recent peak and is suffering a retreat. 

We're looking for a potential entry point if the stock takes a short break before surging again.

Start by searching for a point of support or a price at which demand would be sufficiently strong to halt future drops, such as when the stock returns to a moving average or a previous low.

Indicators: Trading indicators are quantitative computations shown as lines on a price chart and can be used by traders to spot specific market signals and trends.

Leading and lagging indicators are two examples of several categories of trading indicators. 

A lagging indicator looks at historical trends and signals momentum, whereas a leading indicator forecasts future price moves. Visit our  technical analysis  page for more details on this topic.

Component 4: Calculate Risk to Reward Ratio (RRR)

Before you  start trading , calculate how much risk you're prepared to take on – both for individual trades and your trading strategies. Deciding your risk limit is very crucial. 

Even the safest financial assets contain some risk since markets are dynamic and ever-changing. It's entirely up to you as a rookie trader whether you want to take on less chance to get a feel for the market or more significant risk in the hopes of making more gains.

Even if you constantly lose more games than you win, you can still turn a profit. It simply boils down to reward vs. risk. 

The  risk-reward  ratio that traders prefer to utilize is one of three or higher, which means that the potential profit from a transaction will be at least twice as great as the possible loss.

Compare the amount you're risking to the possible gain to determine the risk-reward ratio. As an illustration, if you're investing $200 in a trade with a potential increase of $600, the risk-reward ratio is 1:3.

Component 5: Position Sizing

Position sizing is a crucial idea in practically all investments, and it typically has something to do with intraday trading.

Investors can determine the number of units they can buy within the level of risk they are willing to take by carefully assessing position sizing. They will benefit from maximum returns with fewer risks, thanks to this.

A sound trading strategy lays out the parameters for how much risk you're willing to take on every trade. Consider that you don't want to expose yourself to the possibility of losing more than 2 to 3 percent of your account in a single transaction. 

Here is an example: A trader interested in a stock trading at $100 per share with a total capital of $200,000. 

The highest trading budget the trader could set was $10,000, or ten percent of the account. Thus, the trader can only purchase 200 shares ($20,000 x $100).

Let's assume the trader doesn't want to lose more than $4,000 on this transaction out of a total investment of $200,000. The trader can withstand a decline of $20 per share. 

The trader has a stop-loss target of $80. This stop order may never need to be used, but it's there in case the Trade goes wrong.

Component 6: Exit Strategy

When creating an exit strategy, account for both trades that go in your favor and those that don't. Even though you might be tempted to continue profitable deals, you should resist the urge and seize the opportunity to benefit.

When a trade is going your way, you can consider, for example, selling a portion of your position at your initial target price and letting the remaining run. It is known as trailing your posts. 

Or if the stock drops below a support level, you can place a stop order at that price to help manage your risk and be ready for when a trade goes against you.

You can use the 21- EMA ( Exponential Moving Average)   or the 9-EMA to trail your positions. One should be aware of the emotions that arise while seeing a green figure in the P&L that may make you exit the Trade out of fear of losing the available profits. 

Following your trading plan should be your goal, no matter what. Never exit impulsively out of fear, or it turns into a habit. 

Pro tip:  Be conservative while placing targets and generous while placing a stop-loss. 

The reason behind this is that there are times when you place a tight stop-loss, and the price might just hit it and rally in your direction, thereby making you an unnecessary loss, which you do not want. 

Likewise, it is wise to have a target a few points lower than the actual target as there is a tendency for the price to reverse from a few moments lower and not hit the same target levels.

How to make a Trading plan

You can use the following structure to help you formulate your own trading plan. Keep in mind that the trading plan is the personal blueprint, and therefore you should not copy or imitate someone else trading strategy.

1. Why do I want to trade?

Example: I want to learn more about the financial markets and become an individual trader. I want to be able to make a living out of it.

2. What type of trader do I want to be?

Example: I am a student and also do a part-time job, so right now, I will focus on saving money for trading.

In the meantime, I would learn more about the markets, and once I've figured out what type of trader I want to be (Positional Trader, Swing Trader, Day Trader, Scalper), I will implement relevant strategies related to my trading style.

3. What am I looking to achieve out of trading?

Example: Ultimately, I want to grow my capital by 20% in the next six months. To achieve this, I plan to take up opportunities three or more times every week, but only when they fit my strategy. 

Along with this, if I am meeting my target every six months, I would want to increase my risk every three months, with proper risk management in place.

4. How do I plan my entry?

Example: I will spend a minimum of 2-3 hours every day studying charts and identifying important supply and demand zones, price action zones, market trends, etc. 

Additionally, I would look at the global markets and study the financial statements of a company before taking up a trade. This will help me improve my analytical skills to a great extent and give a boost to my conviction.

5. What is my RRR (Risk Reward Ratio)?

Start by comparing the amount of money you want to risk on each trade with the potential gain. Traders generally prefer a RRR of 1:3. Therefore, if your risk on a trade is $300 and you have estimated a potential profit of $900, the risk-reward ratio is 1:3.

6. How many positions can I take?

Position sizing and RRR are the names of the game. Once you've ascertained the amount of loss that you can take, the next step is to calculate the number of shares you can transact relative to your risk.

7. When do I exit my positions?

Example: Being a new trader with relatively zero trading experience, it would be sensible not to be too greedy and fall into the emotional trap. 

Once I see the price hitting my target level, I will exit my positions and keep my laptop/desktop aside. I will not be greedy and look at the charts to squeeze out more profits. 

On the other hand, if my stop-loss gets triggered, I will accept the loss and not indulge in revenge trading to cover up the loss.

Finally, you need to maintain a trading journal either in pen-paper format or in an Excel sheet to record all your trades for weekly review. 

Reviewing your trades every week will assist you in understanding what mistakes not to make and what steps need to be taken more often to book consistent profits. 

The process of elimination is a universal concept that finds its application in almost everything. 

In trading, if you know what 'not to do,' that is much better than knowing 'what to do because doing the right thing will surely guarantee profits, but doing the wrong thing will eat up the gains and leave you with pennies, which you do not want. 

Here's an in-depth video explaining how to make a trading plan:

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

• A business plan is a document detailing a company's business activities and strategies for achieving its goals.
• Startup companies use business plans to launch their venture and to attract outside investors.
• For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
• There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

• Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
• Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
• Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
• Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
• Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

Harvard Business Review. " How to Write a Winning Business Plan ."

U.S. Small Business Administration. " Write Your Business Plan ."

SCORE. " When and Why Should You Review Your Business Plan? "

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Trading Plan: Will Nifty, Bank Nifty defend 10-day EMA on last day of week?

According to experts, as long as the nifty 50 holds above the 10-day ema (25,087), the consolidation is likely to continue in the coming sessions, with resistance at 25,300-25,350. the bank nifty is also expected to be rangebound, with support at 51,281 (10-day ema) and a hurdle at 51,750 on the higher side..

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Israel's Tower Semiconductor, Adani plan $10 bn chip project in India

Semiconductor manufacturing marks the latest foray for billionaire gautam adani, whose conglomerate has businesses across ports, power utilities, transmission and coal trading.

Semiconductors (Photo: Bloomberg)

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First Published: Sep 06 2024 | 5:35 PM IST

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Verizon to buy Frontier in US$20 billion deal to boost fibre network in US

Frontier has a total debt of US$11.25 billion as of June 30, which will be refinanced by Verizon as part of the deal

• The deal will also help Verizon better compete against rivals AT&T and T-Mobile as they double down on unlimited plans and bundling options. PHOTO: BLOOMBERG

Verizon said on Thursday (Sep 5) it will buy fibre-optic i nternet provider Frontier Communications in an all-cash deal worth US$20 billion, as the US wireless carrier looks to grow its subscriber base.

The deal will also help one of the biggest US network providers better compete against rivals AT&T and T-Mobile as they double down on unlimited plans and bundling options.

Verizon has offered US$38.50 per share, representing a premium of 37.3 per cent to the closing stock price of Frontier on Sept 3, a day before reports of a potential acquisition first emerged.

Frontier has a total debt of US$11.25 billion as of June 30, which will be refinanced by Verizon as part of the deal.

Shares of Frontier were trading below the offer price at US$35.10 after surging nearly 38 per cent in the previous session. Verizon was down marginally.

Frontier has 2.2 million fibre subscribers in 25 states, which will combine with Verizon’s roughly 7.4 million such users in nine states and Washington.

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“The acquisition of Frontier is a strategic fit,” Verizon CEO Hans Vestberg said, as it provided an opportunity to be more competitive in additional markets.

Together, the companies will have 25 million fibre passings, or the number of potential customer locations a fibre network passes by, Verizon executives said on a conference call. AT&T has about 28 million such locations, according to Morningstar.

The deal is expected to close in about 18 months and will help Verizon, whose fibre network is largely in the Northeast and mid-Atlantic regions, tap into Frontier’s coverage in multiple states in the Midwest, Texas and California.

Verizon invests US$100 million in AST plan for wireless from space

It would also be a reunion of sorts. Verizon had in 2016 sold its TV and i nternet business in California, Texas and Florida to Frontier in a US$10.54 billion deal, which included a portion of its fibre networks and customers.

Analysts said the deal would provide only a modest boost to Verizon.

Verizon’s fibre network covers less than 10 per cent of the US and the acquisition will give it roughly another 3 per cent, while AT&T covers less than 15 per cent, MoffettNathanson analyst Craig Moffett said.

“You would describe it as going from small to a little bit less small, but that’s about the best you could say about it,” Moffett said. “There’s simply no conceivable path where they can reach meaningful scale with fibre.” REUTERS

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