Help With Business Plan

[RedChinaStu]

Hello everyone,

I am very new to forex trading. Although I have some financial industry experience I have never traded except dabbling in equity markets from time to time.

Having decided recently that working for other people is no way to get rich I have decided to start my own forex trading business so I can start to work for myself. I like the fact the market trades 24 hours and I can learn and eventually trade without quitting my day job. I have a family to support so that is not feasible from the start but I hope to one day become a full time trader.

When I say I want to start a forex business. I don't mean I will formally incorporate a company, more that I want to treat it as I would any other business venture. So my first two priorities are to educate myself about the forex market and trading, and to write a detailed business plan for my venture.

The first part of that is coming along nicely thanks to the excellent resources available here and on babypips.com. Both sites are proving to be incredibly illuminating and will be the bedrock of my education, I am sure. The second part is a lot harder - mainly because I have no idea how realistic I am being. I would appreciate any comments on my plan so far from more experienced traders so I can more accurately detail my plan and work out my strategy.

Here is a brief summary of where my thinking is at the moment:

• As I am working full time during the week I do not have much more than 2-3 hours a day to trade. I am currently based in Hong Kong which means that I will be most likely be trading the end of the London session crossing with the opening of New York. I currently commute for 90 mins per day which I will also utilise for keeping abreast of market conditions and fundamental factors. I plan to trade four days a week.

• Because of the markets I am trading I plan to focus on GBP and USD to begin with. This is because they will be active enough during the time I will be trading.

• As I cannot trade full time I would prefer to trade longer trends rather than intraday trading. This is because I am unlikely to be able to take advantage of ideal entry points on a daily basis regularly due to my hours. Longer trends seem to mean less pressure to get the entry point exactly right as you are trading over a longer term.

• I will trade on a demo account without leverage until I am able to produce profitable results for 4 consecutive months. I hope to achieve this within my first year. Once I achieve this I will experiment with leverage to maximise my profits in the demo.

• After several profitable months using leverage I will open a small account to get a feel for the difference between demo and live accounts. This account will be no larger than GBP 500 which I will target to grow for 6 consecutive months. The reason for waiting for months before stepping up is to prove that my trading system works and to gain experience before trading with more money.

• On achieving my previous objectives I will look to open a larger account with a balance of between GBP 10k and GBP 20k. I hope to achieve this within two years but this will be dependent on my previous demo and small account performance. Once I am trading live I would aim for a profit of 4% per month. This is the point where I struggle to find any concrete guidelines - I've read that you can double your money every month and that 10% per month is a normal profit for an experienced forex trader. But I also know a lot of people lose money doing this trying to be too greedy. I am more interested in building a solid trading system that can provide me with a full time income in the next 5-8 years than blowing my money trying to be too aggressive.

I am happy to expand on my plan if you need any clarification but I already felt like this post was turning into War and Peace so I thought I'd leave it at that.

Any tips, comments, criticisms or any other form of feedback are most welcome.

Thanks,

RCS

 

[Pharaoh]

No fair coming in with a logical and well thought out plan. It ruins everyone's chances of scoring points with easy advice.

 

[Aesop02]

Really nice to see someone come along with a plan in place, looks like you know what you're aims and targets are. Glad to see you're going to take the proper time on a demo account, don't rush this, use the time efficiently to get the most from it. Also a good plan for when you eventually go live

 

[RedChinaStu]

Wow - that's a surprise! Was expecting to be told I was living in dreamland!!!

One specific question to follow up though, is 4% per month realistic as a genuine regular return on my account? I'm basing my forecasts on this number but I don't want to aim for that if I have to take insane amounts of risk to get there. I don't intend to use 100:1+ leverage, hopefully stick to under 3:1 so I don't want to put undue pressure on myself if it's simply unrealistic.

 

[Pharaoh]

I've seen people claim to make a lot more than that every month, but very few care to show live proof of those claims.

Realistically, if you want to minimize risk, just aim to not lose money each month at first. Then analyze your trades and see if you can increase lot size safely and/or whether you need to adjust your TP/SL settings to improve your risk/reward ratio without damaging your win/loss ratio.

Regarding leverage, I think your concept is good. The one thing I'd add is to not be afraid to apply some leverage when appropriate. My "best trade ever" involved catching an amazing trend that lasted for over a month. I trailed my stoplosses and kept slowly scaling in to increase my position size. Opportunities like that are rare, but having a rational plan in place to grab one if it falls into your lap is a good thing.

 

[Blaiserboy]

You did not mention that you are keeping a detailed record of each trade and why you made that entry. You may even want to make a screenshot of each entry and mark it up as to why you think it is a valid entry. That will encourage you to look closely at your criteria before making entries. I feel that you should also have a number of entry criteria spelled out so that you can measure your performance and make necessary adjustments after you have a history.

 

[ukelelefx]

Nice effort RCS. Every trader should have a trading plan to guide us on how we would approach the market. We also need a trading journal to record all the trades we take so that we can refer to them for learning purposes.

Maybe you can consider adding the following in your journal:
- date and time of trade entry
- entry price, stop loss and take profit levels
- trade result (win/loss)
- chart snapshot when you entered and exited the trade
- explanation on why you took the trade (fundamentally/technically)
- how you felt after you entered and exited the trade

 

[duderex]

I wish I can have that kind of plan. Fortunately my business is only a simple one.

 

[candle7779]

What do you mean saying simple? As this for your strategy?

 

[dkami]

You did not mention that you are keeping a detailed record of each trade and why you made that entry. You may even want to make a screenshot of each entry and mark it up as to why you think it is a valid entry. That will encourage you to look closely at your criteria before making entries. I feel that you should also have a number of entry criteria spelled out so that you can measure your performance and make necessary adjustments after you have a history.

Good point!
Here's an example of how you could record a trade for your records
View attachment AUDUSD trade1.pdf