Trader Training - Free Educational Trading
Articles:
The Trading Plan
Pages >> 1 | 2| 3
Phase 1:
Let’s say you are a Piker that has a 5 thousand dollar futures
account. How can a Piker turn his 5 grand in to 500 grand? And how long
is it going to take?
The rule we are going to start with is: account balance divided by margin
+ stop loss = trading plan. So let’s assume the following in getting
started:
• We will trade the NQ E-mini only. Why? Because that instrument
alone gives you the greatest amount of leverage for your piker 5 grand.
• Assume for now that intraday margin on NQ is $1200 – on
IB it varies and with other brokers one can actually negotiate the margin
rate, but lets stay with $1200 for now.
• Maximum stop loss allowed on any trade is 5 NQ points, or $100.00
per contract.
• Assuming the opening balance of 5 grand, and margin + stop loss
(1200 +100) we can initially trade 3 contracts. 3 x 1300 = 3900.00
• We have then $300 maximum risk on any one trade.
The GOAL is for the Piker to grow his trading account geometrically. This
is done by asymmetrical leverage. In other words as we build the Pikers
account we will increase contract size. In order to increase contract
size we need another $1200 in profit for the additional margin.
But remember here, the goal is to grow the account geometrically. Since
we are using here 3 contracts our rule becomes 3 x 1200 = $3600 in profits
before we begin phase 2.
And this is where we focus. The goal for now is to only make $3600.00
in profits. How do we start? We start by dividing our goal in to manageable
targets. The best way to solve any problem is to break the problem in
to individual components.
So let’s make this reasonable:
1. Let’s take our goal of $3600.00 and try to achieve this over
10 trading sessions. The goal for today becomes $360.
2. NQ pays $20 per point. What is the easiest way to make goal? We have
3 contracts so we are generating then $60 per NQ point. Why not consider:
• Taking profits on 3 points: 3 x 60 = $180.00 – twice in
one session.
• Taking fast profits on 2 points: 2 x 60 = $120.00 – three
times in one session.
Either way we choose we hit goal and are done for the day after only two
or at most three trades.
Not every trade will be a winner, not every day will be a winner. But
the LESS you attempt new trades the LESS risk you expose yourself to.
And we know also that we have a max risk on any trade of $300.00
Ok, so 10 or maybe 12 sessions go by and assuming we have followed these
simple rules we now are ready for phase two.
Phase 2:
We Pikers have now increased our account balances from 5 grand to $8,600.00
in about two weeks. We did this by taking small, consistent, easy to get
scores. We have built our accounts by accretion.
We now are moving up to 4 contracts. This increases our risk on any given
trade to $400.00. Seems low risk in light of the 3600 we just racked up.
And using the same rules as above we no determine our next goal to be
$4800.00. That is the 1200.00 margin x the 4 contracts we are trading.
• Using a 10 day window again we say that our goal for today is
$480.00
• Trading 4 contracts we are now generating $80 per NQ point.
• We need then only 6 NQ points in any given day to make goal
• 3 NQ points x 4 contracts = $240 – twice in one session
• 2 NQ points x 4 contracts = $160 – three times in one session
Either way you skin the cat it equals $480.00. Your risk is minimal, and
your commissions are less because you are trading far less. What you are
actually doing now whether you realize it or not – is you are waiting
for the trade to come to you.
10 sessions later, or a few days here or there to account for slippage
and bad trades, we are ready for phase three.
Phase 3
Our piker accounts that began with a paltry $5000.00 are now worth $13,400.00
in about the first month. Can your broker do that?
The methodology should now be sinking in for you. We are now moving up
to 5 contracts. 5 x 1200 margin = $6000.00 for phase three. And during
this phase any trade we take is going to cost us $500.00 if we got cocky
and screw up. So we are less eager to trade at this point. We are lying
in wait like vultures waiting for fresh road kill.
• The goal per session now is $600.00
• At 5 contracts we are generating $100.00 per point
• 3 NQ points x 5 contracts = $300 – twice in one session
• 2 NQ points x 5 contracts = $200 – three times in one session
Two potatoes, three potatoes and the day is done. The skeptics, unbelievers,
slanderers and cretins amongst us, are probably a this point now typing
me an email accusing me of assuming every trade was a winner, etc…
Those of you who are- stop reading this article right now. I’ve
posted the max risk on every phase, and also stressed only taking a few
trades in any given day. If you ignored that and still have the energy
to send me your spam – just go back to what you were doing –
which is probably ending each year with a net loss. Serious student’s
who want to convert a piker account in to a real account, read on! We
are ready for phase four.
Phase 4:
Our account balance has now reached $19,400.00 and this is beginning
to be FUN. Our goal for this phase is 6 contracts x $1200 = $7200.00.
• Daily goal has gone from $360 in phase one to $720 for this phase.
• At 6 contracts we are generating $120 per point
• 3 NQ points x 6 contracts = $360 and twice a day this makes goal.
• 2 NQ points x 6 contracts = $240 and three times in one day makes
goal
By now you should be seeing what I meant by “geometric growth”.
Phase 5:
What was once a joker account of $5000.00 has now reached $26,600.00.
And the stakes are getting higher now. Our goal for this phase is 7 x
1200.00 = $8400.00. Our max risk on any entry is up to $700.00 now, so
we are becoming much more judicious on our entries.
• Daily goal has risen to $840
• NQ is now paying us $140 per point
• 3 NQ points x 7 contracts = $420 and twice a day makes goal
• 2 NQ points x 7 contracts = $280 and three times a day makes goal
Bada bing! Bada boom! Time for phase six.
Phase 6:
At this point we are not so much focused on the end game, as we are on
the phase at hand. We aren’t focused on being fabulously rich –
what we are focused on is clearing out the goal of this phase, which is
8 x 1200 = $9,600.00. Max risk per trade has risen to $800.
Our account has grown from the original piker $5000.00 to $36,000.00.
And we are only a few months in to this.
• Daily goal is now $960
• NQ is paying $160 per contract
• 3 NQ points x 8 contracts = $480 and twice a day makes goal
• 2 NQ points x 8 contracts = $ 320 and three times a day makes
goal
We are growing now exponentially and continuing to be even more cautious
about each entry, as we move in to phase seven.
Phase 7:
What was once a $5ooo.oo piker account is now worth $45,600.00 big ones.
Go figure. And we are moving the bet up now to 9 contracts, which means
we are risking $900 on every entry. Our willingness to take knee-jerk
entries has diminished, and Joe Piker the trader has become Piker Inc.
How do our rules work out now?
The goal for phase seven is now $10,800.00 and we are allowing a max loss
per trade of $900. How do we carve up the elephant?
• Daily goal becomes $1,080.00
• NQ is paying now $180 per point
• 3NQ points x 9 contracts = $540 and twice a day that makes goal
• 2 NQ points x 9 contracts = $360 and three times a day that makes
goal
• Starting to get it yet?
Phase 8:
This is where the game becomes REAL. At this point the piker account
starts making quantum leaps. The bet now is 10 contracts. That means using
our rules we are looking at an initial risk of $1ooo.oo per entry. We
are definitely at the look before leaping stage. And the piker account
is now worth $56,400.00. Amazing…
• Because we have moved to 10 contracts the goal for this phase
is $12,000.00
• Daily goal then is $12oo.00
• NQ is now paying $200 per point
• 3 NQ points x 10 contracts = $600 and two winning trades in a
day makes goal
• 2 NQ points x 10 contracts = $400 and three winning trades in
a day makes goal
At the end of phase eight our $5000.00 piker account is now worth $68,400.00.
Good living! Time for phase nine.
Phase 9:
We have reached the stage now where this is a real business and we are
playing for keeps. 11 contracts. The risk per trade now is $1100.00. Goal
for this phase is 11 x 1200.00 = $13, 200.00.
• Daily goal is now $1,320.00
• NQ is paying $220.00 per point
• 3 NQ points x 11 contracts = $660 and two winning trades in a
day makes goal.
• 2 NQ x 11 contracts = $440 and three winning trades in a day makes
goal.
Accomplishing phase nine brings our piker account to $81,600.00
Phase 10:
We are up to a bakers dozen now and really waiting on good trades. Risk
per trade is $1200.00 a shot. Stupid entries are getting costly. Goal
for phase is 12 x 1200.00 = $14,400.00
• Daily goal for this phase is $1,440.00
• NQ is now paying $240.00 per point
• 3 NQ points x 12 contracts = $720 and twice a day meets goal.
• 2 NQ points x 12 contracts = $480 and three trades in one day
makes goal.
It really isn’t as hard as it seems is it. Account balance at the
end of phase ten is $92,000.00.
Phase 11:
When we complete this phase we will no longer be pikers. Our account
of $5000.00 will have grown to over six figures. The goal for this phase
is 13 x $1200.00 = $15,600.00. Maximum risk per trade is now up to $1300
per trade.
• Daily goal is now up to $1,560.00
• NQ is now paying $260 per point
• 3 NQ points x 13 contracts = $780 and 2 winning trades a day makes
goal.
• 2 NQ points x 13 contracts = $520 and 3 winning trades a day makes
goal
When we have finished phase 11 the account balance has reached $107,600.
Phase 12:
The account is now a six figure account and this is where things will
really grow. We are beefing up to 14 contracts here which raises the risk
to $1400.00 per trade. Goal for this phase is $16,800.00.
• Daily goal now $1,680.00
• NQ now pays $280 per point
• 3 NQ points x 14 contracts = $840 and two winning trades makes
goal.
• 2 NQ points x 14 contracts = $560 and three winning trades makes
goal
At the end of phase twelve we have an account worth $124,400.00
Phase 13:
Time for 15 contracts. This is getting more fun with each step. Maximum
risk per trade is now at $1500.00 per contract. Goal for this phase is
15 x 1200.00 = $18,000.00.
• Daily goal now up to $1,800.00
• NQ now pays $300 per point
• 3 NQ points x 15 contracts = $900 and two winning trades a day
makes goal.
• 2 NQ points x 15 contracts = $600 and three winning trades a day
makes goal.
As this phase comes to a close your account will have grown to $142,400.00
Phase 14:
Moving up to 16 contracts, goal for this phase is 16 x 1200.00 = $19,200.00.
Maximum risk per trade is now $1600.00
• Daily goal for this phase is $1,920.00
• NQ now pays $320 per point
• 3 NQ points x 16 contracts = $960 and two wining trades a day
makes goal.
• 2 NQ points x 16 contracts = $640 and three winning trades a day
makes goal.
Successful completion of this phase brings your account to $161,600.00
Phase 15:
Seventeen contracts or bust. Goal for this phase is 17 x 1200.00 = $20,400.00.
Maximum risk per trade has grown to $1700.00 per trade.
• Daily goal for this phase is $2,040.00
• NQ now pays $340 per point
• 3 NQ points x 17 contracts = $1,020.00 and two winning trades
a day makes goal.
• 2 NQ points x 17 contracts = $680 and three winning trades per
day makes goal.
Completion of phase fifteen brings your account balance to $182,000.00.
Phase 16:
We are now increasing our original position size by a factor of 6, we
are up to 18 contracts. That makes our risk per trade now $1800.00. Goal
for this phase is 18 x 1200.00 = $21,600.00
• Daily goal has grown to $2,160.00
• NQ is now paying $360 per point
• 3 NQ points x 18 contracts = $1,080.00 and two winning trades
a day makes goal.
• 2 NQ points x 18 contracts = $720 and three winning trades per
day makes goal
Our accounts upon successful completion of phase 16 will have reached
$203,600.00. This from an initial base of $5,000.00. That’s a lousy
increase of 4072%!
Phase 17:
By now we have reached a level of confidence and determination heretofore
unknown to us. 19 contracts x 1200.00 and our goal for this phase has
reached $22,800.00. Maximum risk on each trade has grown to $1900.
• Daily goal is now $2,280.00
• NQ is now paying $380 per point
• 3 NQ points x 19 contracts = $1,180.00 and two winning trades
in a day makes goal.
• 2 NQ points x 19 contracts = $760.00 and three winning trades
in a day makes goal.
Having completed phase seventeen our accounts will have grown to $226,400.00.
We began this project as five thousand dollar pikers and we are now about
to become quarter million dollar non-pikers.
Phase 18:
Twenty contracts there, Tuff GUY! 20. Now we are talking some action.
Our risk on every trade now is up to $2,000.00 – so, we are being
damn picky and choosey about our entries. Goal for this phase is 20 x
1200 = $24,000.00
• Daily goal is $2400.00
• NQ is now paying $400 per point.
• 3 NQ points x 20 contracts = $1200.00 and two winning trades in
a day makes goal.
• 2 NQ points x 20 contracts = $800.00 and three winning trades
in a day makes goal.
The completion of phase eighteen will have brought the account to $250,400.00
Phase 19:
Moving up to 21 contracts. As we are at the half way point now, to our
initial quest. Each trade will carry a risk of $2100 bucks. 21 x $1200
= $25,200 and this is our goal for this phase.
• Daily goal for this phase is $2,520
• NQ is now paying $420 per point.
• 3 NQ points x 21 contracts = $1260.00 and two winning trades a
day makes goal
• 2 NQ points x 21 contracts = $840.00 and three winning trades
makes goal.
Are we having fun yet King? Completion of this phase will bring our accounts
to $275,600.00.
Phase 20:
Life is getting good here and we are going after 22 contracts now. The
risk per trade moves up to $2200.00 and the our goal for this phase then
is 22 x 1200.00 = $26,400.00
• Daily goal for this phase will climb to $2,640
• NQ is now paying $440 per point
• 3 NQ points x 22 contracts = $1,320 and two winning trades in
a day makes goal
• 2 NQ points x 22 contracts = $880 and three winning trades in
a day makes goal.
Having completed phase twenty our accounts will have grown to $302,000.00
Phase 21:
Onward and upward to 23 contracts. Risk per trade now grows to $2300.00.
Our goal for this phase becomes 23 x 1200.00 = $27,600.00
• Daily goal now is $2,760
• NQ now pays $460 per point
• 3 NQ points x 23 contracts = $1,380 and two winning trades a day
makes goal.
• 2 NQ points x 23 contracts = $920 and three winning trades in
a day makes goal.
When phase 21 is completed our account balance will have reached $329,600.00.
Phase 22:
We are now reaching a point where our main target is in sight. Your boat
is not in yet but its rounding the cape and heading for the harbor. 24
x 1200.00 = $28,800.00 goal for this phase. Risk per trade has increased
to $2400.00. Needless to say we are only taking trades that come to us.
We are fat and green enough to be patient.
• Daily goal for this phase is $2,880
• NQ is now paying $480 per point
• 3 NQ points x 24 contracts = $1,440 and two winning trades in
a day makes goal.
• 2 NQ points x 24 contracts = $960 and three winning trades in
a day makes goal.
The completion of this phase of our trading plan brings the account balance
to $358,400.00.
Phase 23:
Just find me a winner damnit! We are up to 25 contracts now which will
increase our risk to $2500.00 per trade. Stupid entries are going to make
us wince. Wild swings and we will need the puke bucket. The goal for this
phase is going to be 25 x 1200.00 = $30,000.00
• Daily goal is now $3,000
• NQ is now paying us $500 per point!
• 3 NQ points x 25 contracts = $1,500 and two winning trades a day
makes goal.
• 2 NQ points x 25 contracts = $1,000 and three winning trades a
day makes goal.
Our account balance has now reached the level of $388,400.00.
Phase 24:
26 contracts on deck. The goal for this phase then is 26 x 1200.00 =
$31,200.00. Maximum risk per trade now has grown to $2600.00
• Daily goal is now $3,120
• NQ is now paying $520 per point
• 3 NQ points x 26 contracts = $1,560.00 and two winning trades
a day makes goal.
• 2 NQ points x 26 contracts = $1,040 and three winning trades a
day makes goal.
Finishing up this phase will bring the account to $419, 600.00. We are
almost there.
Phase 25:
Target is getting very close now. And as we move up to 27 contracts our
risk per trade is $2700. 27 x 1200.00 = $32,400.00 which is our goal for
this phase.
• Daily goal is now $3,240
• NQ now pays $540 per point
• 3 NQ points x 27 contracts = $1,620 and two winning trades a day
make goal.
• 2 NQ points x 27 contracts = $1,080 and three winning trades a
day makes goal.
Completion of this phase of our trading plan brings the account balances
to $452,000.
Phase 26:
Time for 28 contracts. The risk per trade then becomes $2800.00. 28 x
1200.00 = $33,600.00 which will be the goal for this phase of our plan.
• Daily goal is now $3,360
• NQ is now paying us $560 per point
• 3 NQ points x 28 contracts = $1,680 and two winning trades a day
makes goal.
• 2 NQ points x 28 contracts = $1,120 and three winning trades a
day makes goal.
Our accounts at the end of this phase now total $485,600.00
Phase 27:
Our ships have come in. The last phase is at hand. And since we are feeling
COCKY now let’s make the last phase a nice round number of 30 contracts.
30 x 1200.00 = $36,000.00 the final part of our goal. Maximum risk per
trade is $3,000.00.
• Daily goal is $3,600
• NQ is now paying $600 per point
• 3 NQ points x 30 contracts is $1,800 and two winning trades a
day makes goal.
• 2 NQ points x 30 contracts = $1,200 and three winning trades a
day makes goal.
Congratulations! Your five thousand dollar piker account is at $521,600.00
You can now go write your book “How I Made A Whole Bunch Of Money
In NQ Futures” by Irving A. Piker.
Final Phase:
Tell your broker to wire you $516,000.00 and put that money somewhere
safe. You now are a $5000 piker again and can start the whole process
over.
Conclusions:
As you can see, this was not a get rich quick scheme. I have mapped out
a very conservative low risk attack plan, that even if I could do each
phase in 10 sessions – which I doubt I could – would take
27 phases of 10 days, so a bit over a year. But I made this pretty conservative.
Only taking small gains 2 or 3 times a day and then stopping trading.
More aggressive traders, can probably reach each phase of the plan in
far under 10 days.
Where it is not a get rich quick plan, you could call it a get smart
quick plan. There was no magic entry signals, no triple lindy, no Finnegan
pins, zorch covers etc… It is a method about managing the equity
curve which is the one part of having a trading method that most traders
never even look at.
We started with a risk per tradeoff $300, and at its maximum becomes
$3,000. As you can see the rate of risk stayed constant, $100 per level.
What is the likelihood of pulling the plan off? Well, think about it.
Do some back testing. NQ on average will swing 15 points at least, each
day between the extreme low and the extreme high. In this plan we are
only trying to catch 6 points of it. And we are not even trying to catch
the 6 points all at once. We are taking 2 scalps or three scalps and calling
it a day.
The quantum leap in balances come not from the trading method, it comes
from the “managing the equity curve method”.
So this is my trading plan for 2003. I know of traders using this method
that are a lot more aggressive then the manner that I have laid out. In
those instances the plan can be completed in a matter of months as opposed
to a year.
Study this plan as I have laid it out. Most traders will scoff at it
because it’s too damn simple. I have adjusted my own account to
start again exactly fresh from Phase One.
I will be offering a six week hands on traders boot camp, probably later
in April or at latest in May on using this method with all of the trading
signals we have written about in the Trend Times Magazine archive.
If you're interested in the mentoring program send me an email at support@kingcambo.com
and I will send you the details when I decide on them.
I suggest you print this article out and memorize it. And get your own
piker plan together and then implement it.
Continue to page 2 ..
"It takes a man a long time to learn all the lessons of
all of his mistakes. They say there are two sides to everything.
But there is only one side to the stock market; and it is not the
bull side or the bear side, but the right side. It took me longer
to get that general principle fixed firmly in my mind than it did
most of the more technical phases of the game of stock speculation"
----from REMINISCENCES OF A STOCK OPERATOR |
 |
|
