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Swing Trading Plan Template

This page poses a series of 30 questions with model answers, organized into 7 categories.

It can serve as a template for your own swing trading plan.


The Sonny Burnett Trading Company

                           Short-term goals: to develop and implement a swing trading system by month 20xx
Intermediate-term goals: to become profitable via swing trading by month 20xx
                 Long-term goals: to generate a consistent yearly income via swing trading

I. Self-assessment: Professional and Personal Goals

Why do I want to be a trader?

    I want to be a trader because I cherish the independence of working on my own. While my current job provides some independence, I will never achieve the level of independence I desire at my company. I also question whether I truly want to surround myself with so many people. Trading would permit a solitude I have come to enjoy. Trading is also detailed-oriented without overlooking the need to attend to the big picture. It takes discipline and a well-planned and well-executed system to make it succeed. It thus suits my personality. If successful, I will be able to pursue my other life interests on my own terms. If successful, I will be able to meet the short-, intermediate-, and long-term goals listed above. There will also be the satisfaction that I have succeeded in an endeavor where so many others have not, and the satisfaction I will have from knowing others know I have done so.

    I also want to be a trader in order to supplement the income from my current job.

What type of trader will I be?   

    I will be a technical trader. Moreover, I will be a discretionary trader. This is because I want to make the final decision of how and what I will trade. In other words, I will not turn things over completely to a fully automated, rule-based computer program. This will remind me how I am the one ultimately responsible for my trades. I will be a swing trader, holding trades over a period of days to weeks, with an average of 1-4 days. Day trading and scalping are not for me, as I am not aggressive but financially conservative and relatively risk-averse.

    In general, I will always strive to be disciplined trader. I will adhere to and faithfully execute my trading system which I have planned in detail and thoroughly tested to be profitable.

What are my strengths and weaknesses, and how can they be leveraged?

    One strength I have is that I am detailed and strive to be exact. But this can also be a weakness since it often leads to obsessive, repetitive behavior and prevents me from making a final move. This final move I even dangerously rush at times because I get frustrated with my inability to act. Another strength I have is that I am a logical planner and always do thorough research. But a weakness is that I cannot stand to lose my hard-earned money. This has its costs. While trading, I sometimes want to remain in a losing trade longer than I should, irrationally hoping against hope that the losses will magically turn into profits.

    I can leverage my strengthens by recognizing how these attributes contribute to my confidence that I am on the right path of becoming consistently profitable. I can minimize the damage of my weaknesses by taking a final moment to calmly review my order one last time, ignoring which way the stock price is currently heading. Once assured that my order has been
entered correctly, I will count to three and then confidently hit the buy/sell button. I will also always trade with a stop-loss order in place. Since this automates my exit, it relieves me from actually having to hit the sell button. But it still satisfies my desire to be a discretionary trader since I was the one who originally calculated where the stop-loss should go.

Am I emotionally stable enough to handle the stress of trading?

    I will remain calm, cool, and collected at all times while trading. I will only trade when distractions are at a minimum, and when I am not overly tired or upset. I will either maintain a proper level of professionalism and rigorously adhere to my trading system, or I will forgo trading until I achieve a state of mind free from the danger of making reckless, emotionally-driven trades.

II. Trading Goals

What are my financial targets?

    In the short-term, I am targeting a return of 20% in the first 6 months. Assuming an initial trading account of $10,000, this is a return of $2,000. Roughly, this equates to $333/mth, $77/wk and $16/day (assuming 21 trading days per month). During this same period, the drawdown on my account shall not exceed 10% or $1,000.

    In the long-term, the targets are the same, but on a larger amount than the $10,000 initially used to confirm my trading system is truly profitable.

What are my yearly trading goals?

    By this time next year, I will have become proficient in reading charts for trading opportunities and be able to easily apply my strategy to them. I will know my trading system inside and out. I will also develop at least two additional winning strategies.

What are my monthly trading goals?

    To be consistently profitable. This will be possible because I will review my performance against my financial targets on a weekly and monthly basis. I will also study the trading strategies of successful traders in order to develop my own unique strategies. I will then thoroughly backtest and paper trade these strategies before committing real money. I will also study classic stock market theory for eight hours or more. I will also look for patterns in the daily entries of my trading journal.

What are my weekly trading goals?

    To trade every day the markets are open. Because my trade exits will be automatic, most of my time will be spent seeking out new trading opportunities. I will only trade those stocks which best meet my selection criteria.

What are my daily trading goals?

    To make sure I am up at least one hour before markets open. To monitor and reassess my open positions. To review and update my watch list with new potentials. To get a sense for the general direction of the stock market as a whole. To seek out new trading opportunities. To execute trades according to my trading strategy because I know it is detailed and tested to be profitable. By strictly adhering to it each and every day, I will ensure my weekly, monthly and annual goals are met. This can only be done if I dampen my emotions and trade objectively and with the utmost professionalism. To work no longer than three hours after markets close. To update my trading logs, to make a trading journal entry, and to generally prepare for the following trading day.

III. Financial Instruments and Resources

Which markets will I trade?

    I will trade the US stock markets (NYSE, NASDAQ) during the day session (M-F, 9:30-4:00 EST) because I enjoy my evenings and weekends off.

Which financial instruments will I trade?

    I will not trade the shares of just any stock, but only those with a price greater than $10 and with good liquidity (ie, those with an average daily trading volume greater than 10 million shares), and having a market cap greater than $10 billion.

Which timeframes will I trade?

        Generally speaking, I will let the longer range charts determine the trend, then use shorter term charts for timing entry and exit points. My chart analysis will ideally begin with the monthly chart (roughly spanning 20-years), and then turn to the weekly (5-year), daily (5-7mth) and intra-day charts.
More specifically, most of my time will be spent on the daily charts. Weekly charts will then be briefly examined to gain a broader perspective. Finally, hourly (15-20day) and five minute charts (1-2days ) will be occasionally consulted to time entry and exit points. The daily (and hourly charts) will be used to monitor my open positions.

Who will be my broker?

    TradeKing.com will be my broker. Their trading platform is web-based and comes in two versions, an older version and the newer TradeKing LIVE . While the latter is fully functional, it is still in development. For now, I will use the older version to mitigate the risk that any functionality rolled-out in the future for the newer version could adversely effect its order entry procedure.

Where will I get market data?

    I will primarily use my broker to execute trades. Most of my research and market data collection will be done elsewhere.
    I will use finviz.com as my stock screener and TradingView.com for their graphing utilities. For backtesting, I will use sites such as PastStat.com, StockBackTest.com, MarketInOut.com, or develop an alternative methodology. For general market data, I will use CNBC.com. For pre-market and after hours quotes for specific stocks, I will use Nasdaq.com.

    For intra-day stock price quotes, I will rely on TradingView for their streaming real-time data from BATS (using FreeStockCharts.com as a backup), as well as TradeKing's Streaming Quotes. Once I qualify (by meeting a minimum account balance and frequency of trades), I will use official stock market data provided by TradeKing's Quotestream, which includes access to level 2 quotes.

What other resources will I use?

    I will continually refer back to my own testing documentation, looking for ways to improve my trading.
    I will use two laptop computers, both connected to the internet. One will be dedicated to placing orders with my broker, and one will be used for research. Using two computers ensures a backup in case one goes down. If my broker's trading platform or my internet connection goes down, I can phone in orders.

    I will also use sites such as Investopedia.com for my ongoing trading education, as well as read classic works on stock market theory by author-traders such as John J. Murphy and Victor Sperandeo.

    I will also watch up to a half-hour of TV-cable business news during the weekday evenings.

IV. Risk and Money Management

Am I risk-averse or a risk taker?

    I am generally risk-averse, as it is my nature to preserve my money. Although in the heat of the moment I sometimes throw caution to the wind. To minimize this risk, I will strictly adhere to my risk management strategies on all trades, and will attempt to diversify my stock holdings across different sectors and industries whenever possible.

What risk thresholds will I maintain?

    I will not risk more than 2% on any one trade, with a maximum exposure on all open positions of 6% in total.
    I will also have a monthly loss limit of 6%. If hit, any remaining open positions will be closed and I will cease trading for the rest of the month. During the time, I will regroup and reassess my trading system.   

    My maximum exposure to any one sector will not exceed 3 times my maximum exposure to any one stock, or 6%.   
    Total exposure to the market will be kept below 70% of my trading account (ie, my risk capital). I will commit no more than 20% of my risk capital to any one stock.

    This means that with a $10,000 trading account, no more than $200 (2%) could be risked on any one trade. For example, 100 shares at $20 = $2000 (20%); stop is at most $2 out, at $18; at maximum, I could simultaneously hold 3 similar trades: 6%, $600, $6000 (60%).

    Once I have proven, consistent profitability and increase my trading account, I will lower these % rules (eg, instead of 2%, it will be 1% or 0.25%).

What should the reward-risk ratio be?

    In order for a trade to be attractive, I will require the reward-risk ratio to be at least 2:1 (eg, risk $200 in order to gain $400).

What is my trading expectancy?

    Since this measure multiplies my average win by the probability of winning (less my average loss multiplied by the probability of losing), I need not strictly concern myself with how often my trades win, or with how large those wins are. While these statistics are interesting and I will certainly make note of them, taken alone they reveal little of the overall viability of my trading system. Why? Because it is their combination that is of crucial importance.

    Therefore, I will only trade if the expectancy – the average amount I can expect to win (or lose) per trade – of my trading system is greater than zero.

When will I stop using my trading system, and what happens if I do?

    I will not trade at all if I do not see any tradable stocks exactly as specified in my trading system.

    I will stop trading for the remainder of the day if I lose 2% of my trading account. I will resume trading the following day.

    I will stop trading and close any remaining open positions for the rest of the month if I sustain a 6% loss in any one month. I will resume trading the following month. But if the second month is like the first, I will abandon my system entirely and start anew. I will also abandon my system and start anew if my trading account is drawn down by 6% or more from its most recent closing high.

    In the unhappy event of a large drawdown on my initial trading account of $10,000, I will credit it with additional funds. While this is money that, if lost, my standard of living would remain unaffected, it is NOT money I 'can afford to lose.' If it was, I would take more risks than I am comfortable with and treat my money as a plaything. It is not a plaything. It was hard-earned and represents much effort on my part. It should therefore be treated with respect and utilized with utmost caution. For if I did lose it all, the psychological aftermath would be devastating. However, I would need to seriously consider whether to credit my account after a second drawdown. In any case, I will not begin trading again until I identify the cause of the drawdown, and reassess and retest my trading system to ensure that it meets my goals.

    In the happy event that my trading account exceeds the amount needed to trade my system (ie, I have profits), I will leave the surplus in the account. If this surplus is large, I will initially withdraw it until I have a proven record of being a well disciplined trader with sound risk and money management skills. Once this is the case, I will use the surplus to increase my position sizes, thereby compounding my trading account.

What happens in the event I am cut-off from my broker?

    In the event that my broker's trading platform or entire site goes down, I will contact their trade desk by phone. Since I will use stop-losses, it is unlikely I will need to close out a position. But I may still want to enter a new position.

    If my broker becomes unreachable by phone as well, I will begin looking for a new broker immediately.

    Because I will use two laptops, if one malfunctions the other can be used to enter trades. Since my internet connection becomes sporadic when my laptops return from sleep mode, the solution is to never put them to sleep during trading hours.

    In the unlikely event that cell phone reception is lost on top of the internet connection, I will use the pay phone down the street.

V. Trading Strategy

What is my tradable universe?

    My tradable universe is defined as all companies on the NYSE and NASDAQ  whose outstanding shares have a total market value of $10 billion or more, and trade with an average daily volume greater than 10 million and at a price greater than $10.

    I intend for all my trading strategies to trade this universe. This is because I am predominately risk-averse and trading large caps with good liquidity is, all else equal, safer than trading micro-cap penny stocks.

What trading strategies will I use?

    I will trade only one strategy until I am comfortable and successful with it. After which I will develop another, completely different, strategy and trade them both. But I will never trade with more than two strategies during the same period of time.

    The initial strategy I will use is a reversal strategy to the upside (going long). While this same strategy can be used to the downside (going short), because shorting stocks is inherently more risky, I will reserve the full implementation of this strategy (going long and short) until a later date.

    The initial strategy I will use is what I call '1-2-3 (long only).' It involves purchasing a stock at the first swing point low after prices break a downward trend.

What are the details of my trading strategies?

    The full details of what my 1-2-3 (long only) strategy involves can be found in my trading strategy document. In brief:
  1. I will use Finviz to screen potentials using the three criteria above (market cap, average volume, price) and select stocks in a downward trend
  2. these potentials will be put in my TradingView account where I will annotate their charts with trend lines and moving average lines
  3. these potentials will also be put into my excel spreadsheet watch list
  4. once prices break up through the trend line and form a swing point low, I will enter a buy order with TradeKing
  5. a sell stop order will be immediately entered as well
  6. I will ensure my position size does not exceed the parameters specified above (ie, 2% upper limit on any one trade, 6% on all open positions, etc)
  7. the buy and sell orders will be documented graphically in my TradingView account, as well as in my trading log and calculator (an excel worksheet)
  8. the position will then be monitored:
  9. if the price drops, the stock is automatically sold and the position is closed
  10. if the price rises, I will replace the initial stop with new stops at higher levels in order to further minimize losses and/or lock in profits

VI. The Daily Routine

What will I do before the markets open?

    I will wake up at least one hour before markets open to set up my workspace and to review the work I prepared the previous evening. I will turn on my laptops, log into my TradeKing and TradingView accounts, open four computer files (my watch list, my trading log and calculator, my trading plan, and my trading strategy) and unfile my hardcopy versions. My open positions will be reassessed and my watch list will be reviewed for potential trades that day. I will look at stock market index futures for indications on how the markets will open. I will note how the overseas markets performed overnight. I will check to see if any major news events occurred since yesterday and if any key economic reports will be released or if any other major events are scheduled that day. If any of these appear significant, I will be especially sure not to trade in the opening minutes in order to gauge market reaction. This will help ensure I trade what I see on the charts and not according to what I think should happen.

What will I do during market hours?

    I will primarily seek out new trading opportunities while intermittently checking my open positions. Stops will be adjusted if need be. As positions close out, I will update my trading log with the details. A snapshot
(.png) of the chart will be created at TradingView and filed away for my records. In this way it can be further reviewed at a future date. If new positions are to be entered, all calculations (including how many shares to purchase and where to set stops) will be made well before it is time to hit the buy button.

What will I do after the markets close?

     After the markets close I will primarily maintain and update my watch list where I rank potential trades according to how likely they are to meet my trading strategy selection criteria. If any stocks have a high probability of being traded the following day, they are placed on a special list within the watch list. I will also update my journal, where I will record my thoughts and vent my feelings about each trade, and draw conclusions about the trading day as a whole.

    During the weekend I will study stock market theory and play catch-up if I fall behind on any of my tasks during the week.

VII. Trading (re-)Assessments

Will I backtest and paper trade my trading strategy?

    I will thoroughly backtest and paper trade my trading strategy to ensure it is inline with my financial targets and is within my risk and money management parameters. Properly documented, the record of my testing becomes a potentially valuable resource through which I can improve my trading.

Will I regularly reflect on my trading and record these reflections in a trading journal?

    I will strive to use my trading journal each day. I will review it monthly to identify potential problem areas and use it as a source of feedback on my trading system. For example:

    If I find I am too exuberant after profitable trades, I will remind myself of the dangers of extreme emotions and how trading must be conducted in a calm and relaxed manner. After the next win, I will force myself to take a brief break to ensure I understand how successful traders need an objective, professional attitude while trading.

    If I find I am dismayed after each loss, I will ask myself if I faithfully executed my trading system. If I did, then everything is going according to plan and I will take solace in the fact that losses can never be completely eliminated. They are the costs of doing the business of trading.

    If I find I am lax in executing a particular aspect of my trading strategy, I will remind myself of the importance of remaining disciplined.

    But if I find I am seriously and consistently deviating from my trading system, I will suspend my trading and investigate. If it is a problem of self-discipline, I will suspend my trading until I am confident I can strictly adhere to my trading rules. If the issue is found to lie with my trading strategy, I will only resume trading once corrective measures are taken. This would include conducting a new round of backtesting and paper trading.

Will I regularly seek to educate myself about trading?

    When it comes to trading, I will be the perpetual student. I will never be satisfied with the trading results I have, but always seek instead to improve my trading system. I will do this at the technical level, by studying classic stock market theory and the trading strategies of professional traders past and present. But I will also do this at the psychological level by studying the personality traits of successful traders. My goal will be to fundamentally change my own trading style. What I learn will then be fed back into future iterations of my trading system, with the hopes that this will improve not only my bottom line, but also the enjoyment I get from trading.


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