Happy New Year, I hope you had a fun holiday! I took some time off from writing, but I'm back. It was good to get away for a bit to recharge and work on some projects that needed some catching up on.
Even though the new year is now staring us square in the face, we need to put resolutions OUT of our minds. Oscar Wilde said:
“Good resolutions are simply checks that men draw on a bank where they have no account.”
What we really need is a plan. Plans have legs, fists and a backbone. They are the map that shows us how to get there.
But what is your plan?
That's not always an easy question to answer. The possibilities are endless and the task of nailing down a core list of items to check off can be daunting.
But don't worry, it doesn't have to be difficult but you have to actually DO them. Here is how to get started with your trading plan for the coming year.
What Do You Really Want?
Making a billion dollars trading is great, but what will that money actually get you? Of course, we are not necessarily talking about a billion dollars, but whatever sum of money you want to make a year in trading.
A Lamborghini would be nice, but is that what you really want? Maybe you just want some additional income so you can put in fewer hours at your job. Or perhaps you want to take your family on that vacation you have been talking about for the last 5 years. Take a moment to write that down.
What I really want my trading to provide is _______________.
Be sure to concentrate on the feeling you will get or give other people. For example: The togetherness your family will feel while on vacation, the options you will have with more income or, if you must, the sheer exhilaration you will feel when you drive that new Aventador.
Good.
This might sound really kumbaya, but stick with me for a minute.
Now Step Backwards
Imagine that you already have that thing that you want and are feeling exactly how you want to feel after achieving it. This is the key because you really want a feeling, not money.
Now tell me how you did it. Huh?
That's right, act as if you achieved your goal and tell me exactly what you had to do to get it. A friend showed me this exercise and I thought it was silly before, but as he talked me through, it really forced me to think through the steps of how I could have achieved that goal.
Not so silly anymore.
For Example…
OK, let's take a simple example. Say that your first goal is to pay for your family mobile phone bill with your trading. Everyone in your family is always stressing about going over with minutes, data and number of text messages, so you want to be able to afford a plan where everyone is free to do whatever the hell they want.
Now pretend that your trading is already paying for your phone bill every month. What does that feel like? You wouldn't fight with your kids/spouse about it and it would be one less thing on your mind. Beautiful.
So how did you do it?
First, here is the maths. To fix this problem, you need $200 per month to cover the bill (including taxes).
Now let's say that you think you could realistically make 3% a month trading. So going back to a little basic algebra:
(Trading Capital) x .03 = $200
Therefore…
(Trading Capital) = $6,666.67
So you need about a $7,000 account, making an average of 3% a month.
This is one way that you could say that you achieved this:
“I started working odd jobs on the weekend and built up a trading account of $7,000. In the meantime, I searched online and found a trading method that was relatively low risk and creates an average return of 3% per month. I learned the method, backtested it and demo traded it for 6 months before I ever risked real money. When I was finally confident in the system, I started trading and was able to cover my family's phone bill. It feels so good not to have to worry and fight about that anymore.”
Now it becomes clear. Your plan is:
- Work odd jobs to build up a $7,000 trading account.
- Find a trading method where there is documented proof that it averages about 3% a month or more (of course, past performance is not a guarantee of future results).
- Learn the method.
- Backtest the method.
- Demo trade the method until you are comfortable, consistent and averaging 3% a month or more.
- Trade the method with your $7,000 account.
- Use the profits to pay the phone bill.
Yes, there may be months where you lose money, so be sure to have some buffers. No guarantees in trading.
But I hope that this example gives you an idea of how to create a concrete plan and not just another worthless New Year's Resolution.
Now go take action on your plan!!
Care To Share?
What is your plan? Feel free to leave a comment below.
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Photo: jerryonlife
Thank you Hugh! I happened to come across forex last may 2012. No idea what it is, blow many accounts. Now I decided that this is my thing so I try to learn more about it. By chance I found your site which is great. I love the podcast, the blog and all the info you are sharing.
This is a great website. You are sharing valuable information, one I wished I had known last year. I understand that it is a lot of work doing what you do now. Really appreciate it.
I still in a practice mode and don’t really make a living from trading yet but at least I stop losing money (because I shift my focus to learning). I believe that is a big improvements for me.
I already subscribe to your blog and hope to learn a lot more from you ^_^ and many heroes out there.
Best regards,
Merryweather
Hi Merryweather,
Glad to hear that you like Forex and have decided to get educated! You are very welcome and I’m glad that the information I post has helped you.
Best of luck and let me know if there is anything I can do to help in the future.
Cheers,
Hugh
Thanks Hugh. I do have one follow up question…what kind of Mac do you trade on? Something newer, something older?
MacBook Pro, Early 2011. I bumped up the memory to 8GB and that has been working great.
Hi Hugh,
I really like the redesign to the site! I stumbled across TH last year and look forward to the next post and interview. Speaking of the interviews, great job! I know that’s not easy and your style and the tone of the interviews, especially dealing with a topic that can be dry and complicated, is perfect.
I have been inteterested in Forex (and world economies in general) for years and while I don’t trade I enjoy reading about those that do. I’m a finance nerd at heart (I work in technology) and have decided this is the year I take this hobby to the next level. So my goal for 2013 was to buy some back testing software and just back test for a year some simple price action setups. To see what I can learn. I wasn’t even sure where to start and then I started getting your emails. Talk about great timing! I’ve only gone through the first 3 lessons but I already like what I’m reading. Thanks for the site, the email lessons and the interviews. The best to you in 2013!
Hi Andy,
I appreciate you following the blog and I’m glad to hear that you decided to get started in backtesting. If there is anything I can do to help, feel free to let me know.
Let’s make 2013 the best year yet!!
Cheers,
Hugh
Hi Hugh,
Happy new year to you and your loved ones! Glad to have you back on the blog, which means the next podcast is not far away, haha. I really enjoyed your posts and podcasts.
Thanks for sharing the method. Looks like it is very clearly structured and straight forward. However, I believe , just like you, that this method is the most important step in order to achieve the great success not only in trading but also in other things too.
Awesome work, man! Can’t wait for the next great interviews! GO TRADING HEROES!
Hi Dong,
Happy New Year! I appreciate the kind words and I’m looking forward to doing new interviews.
Cheers,
Hugh
Hi,
Happy new year!
After reading this post, and because I don’t trade, I would like to know how much could a trader earn, if he could have, say, 10 hours a day to consistently (after learning and developing his method) track the market and do his this.
You mention 3% of the account, but is this number realistic, or is it underestimated?
Thanks for your reply, and for your great work @ tradingheroes!
Hi,
Happy New Year to you too!
Well, it is impossible to say how much you could earn exactly. It is not like a regular job where you can equate the number of hours you work to how much money you make.
You will need to find a method that works with your personality. The more you risk, the more you can potentially make, but the more you can lose also. So if you are very risk adverse, you might make less or need a bigger account. If you are willing to risk more, you might make more.
I know that this isn’t a solid answer, but like any business, there are ups and downs. It comes down to what you can prove you can do…no guarantees.
Hugh