In this lesson, we go over how to set up your day trading business plan.
Day trading can be a lucrative business, but it takes a lot of hard work and dedication to make it profitable and sustainable. There are a few key things you need to keep in mind if you want to be a successful day trader:
6 Keys for Day Trading Success
- You need to have a solid trading strategy. This includes knowing when to buy and sell, as well as how to make money, manage your risks and not lose money.
- You need to be disciplined. Day trading can be stressful, so you need to be able to stick to your plan and not let emotions get in the way.
- You need to be patient. Making quick decisions is often necessary for day trading, but you also need to be able to wait for the right opportunity.
- You need to have a good understanding of technical analysis, particularly the supply and demand zones. This will help you identify trends and make better-informed decisions about when to buy and sell.
- You need to be prepared to put in long hours. Day trading is a full-time job, so you need to be prepared to work during traditional market hours.
- And last but not least, you need to have capital. Starting a day trading business without enough capital is a recipe for disaster.
If you can keep these things in mind, you’ll be well on your way to being a successful day trader. At the same time, with every good trading plan, there needs to be a rock-solid business plan.
The Importance of Having a Plan
With any goal, you first need a plan. That’s why a business plan is essential for anyone thinking about starting a day trading business. The objectivity and clarity that a solid plan provides are essential in a market that requires split-second decision-making to take advantage of opportunities. It will empower you to grow your business with confidence and less emotional involvement.
A business plan will help you to think through all the details of starting your business, from your initial start-up costs, trading platforms, and profit targets to your long-term goals and strategies. It’s important to remember that a business plan is a living document; it should be updated as your business grows and changes.
Creating a business plan can seem daunting, but there are plenty of resources to help you get started, including templates and software programs specifically designed for creating business plans. If you’re serious about starting a day trading business, taking the time to create a comprehensive business plan is an absolute must.
Trading Plan vs Business Strategy
It is important to note, however, that the steps mentioned above apply to your trading system. To move forward, you should be clear on the difference between a trading plan and a business plan.
There are a few key differences between a winning trading plan and a winning business plan. A business plan is focused on long-term goals and growth, while a trading plan is more concerned with short-term profits. A business plan will also typically include elements like marketing strategies and product development, while a trading plan will focus more on things like risk management and position sizing.
That being said, there are some similarities between a trading plan and a business plan. Both should include things like your goals, strategies, and risk management plans. And both should be updated regularly as your business grows and changes.
- Market Open to Close
- Money and Risk Management
- Entry and Exit Strategies
- Trade Management
- 24 hours (i.e., not just six hours of trading)
- Vision & Mission Statement
- Tools & Services
- Trading Rules
- Action Plan
Now that you know the difference between a trading plan and a business plan, let’s get started on your trading business plan.
Your Business Plan
Trading business plans should be used by all types of traders including intraday, swing, and long-term traders. Whether you trade stocks, futures, forex, options, or crypto…YOU NEED A TRADING BUSINESS PLAN.
Here are a few things to keep in mind as you create your plan:
Goals, Vision & Mission
What do you want to achieve as a day trader? Do you want to make a certain amount of money? Do you want to trade full-time or part-time? Do you want to be successful in the short term or the long term?
You need a vision statement for your business. This will be your long-term goal. For example, your vision statement could be something like, “To become the best day trader in the world.”
Your mission statement will be your shorter-term goal. For example, your mission statement could be something like, “To make a profit of $500 per day.”
Milestones & Benchmarks
Milestones and benchmarks help businesses measure progress and ensure that they are on track to meet their goals. By setting milestone and benchmark goals, businesses can track their performance over time and make necessary adjustments to stay on course.
There are several milestones you’ll use to measure your progress. For example, your benchmarks could be things like, “Make a profit of $500 in one month,” or “Achieve a win rate of 70%.”
Your financial plan should include:
Income and Expenses
What are your projected income and expenses? This could include things like, “I will make $500 per day,” or “I will spend $200 per month on trading education.”
What are the tax implications of your trading business? This could include things like, “I will owe taxes on my profits,” or “I will be eligible for certain tax deductions.”
Tools and Services
What do you need to trade? What kind of tools and resources do you need to be successful? This could include things like a good trading platform, a good broker, market data, and educational resources.
One of the most important decisions you’ll make as a day trader is what software to use. There are dozens of different trading platforms out there, and it’s important to choose one that’s right for you. I suggest TDAmeritrade’s ThinkOrSwim Platform. Consider your needs and goals, and then do some research to find a platform that meets those needs.
Other Things to Keep in Mind …
How easy is the platform to use? What kind of features does it offer? Can you customize the platform to suit your trading style? Is the platform reliable? What are the costs associated with using the platform?
These are just a few of the things you should consider when choosing a trading platform. Don’t forget to test out the platform before you commit to using it. Most platforms offer demo accounts that allow you to trade with virtual money so you can get a feel for how the platform works.
Risk management requires that we circle back to your solid trading plan.
Because you’re buying and selling stocks, options, or futures very quickly, there’s a higher risk of loss in day trading than there is in other types of investing. That’s why it’s so important to have a solid strategy to manage risk in place.
There are a few things you can do to manage your risks:
Determine Your Risk Tolerance
How much risk are you willing to take? This could include things like, “I am willing to lose up to $100 per day,” or “I am willing to risk 2% of my account per trade.”
Determine Your Exit Strategy
How will you exit your trades? For example, you could say, “I will sell my shares when they reach $10,” or “I will sell my options when they are at-the-money.”
Set Stop-Loss Orders
A stop-loss order is an order to sell a security when it reaches a certain price. This can help you limit your losses if the stock market starts to decline.
Determine Your Stop-Loss and Take-Profit Levels
What are your stop-loss and take-profit levels? For example, your could say, “My stop-loss level will be $100 per option,” or “My take-profit level will be $2.00 per share.”
Use Limit Orders
A limit order is an order to buy or sell a security at a certain price. This can help you control your losses and protect your profits.
Monitor Your Positions Closely
Keep an eye on your positions so you can sell quickly if the stock market starts to turn against you.
Determine Your Position Size
How many shares will you trade per day? For example, you could say, “I will trade 100 shares per day,” or “I will trade 10 options contracts per day.” This demands that you also keep track of your overall trading account.
By following these risk management tips, you can help minimize your risks and maximize your chances of success as a day trader.
These are the rules you’ll use to guide your trading decisions. For example, your rules could be things like, “I will only trade with an account size of $10,000,” or “I will start by trading with an account size of $1000. I will then increase my account size to $10,000 within six months” or “I will only trade stocks that are above $5 per share.”
Or, “I will not begin trading until 1 hour after opening bell,” or “I will not trade during power hour.”
Additional examples to consider:
- Never risk more than 1% on a trade
- Three losses in a row I’m done trading for the day
- If two consecutive trading days are negative in a row, then I’m cutting the trading size in half
- If three negative days in a row, then I’m taking the remainder of the week off
Now that you know what should be included in your business plan, let’s take a look at how to create one.
This is your plan of action. What are you going to do each day, week, or month to achieve your goals? This could include things like, “I will save up $2,000 to start trading,” or “I will read 10 trading books.”
Your Plan for Managing Emotions
How will you manage your emotions? This could include things like, “I will take a break if I am feeling emotional,” or “I will journal my trades to stay disciplined.”
Your trading business plan is a living document. By creating a trading plan, you can set goals, strategies, and risk management plans. You can also track your progress and make necessary adjustments as your business grows and changes.
If you’re serious about day trading, then you need to have a business plan. By following these tips, you can create a trading business plan that will help you achieve your goals and maximize your chances of success.
Summary: Day Trading Business Plan
So there you have it: the key things you need to keep in mind if you want to start a successful day trading business and trading career.
First, be sure to create a comprehensive day trading business plan, this should include your investment goals, your risk tolerance, and your overall strategy. Many traders write their own vision and mission statements, and approach trading with a solid action plan.
Second, you need to open a brokerage account with a firm that provides good customer service and has low fees. We suggest TD Ameritrade.
Finally, you need to develop a disciplined approach to your trading. For long-term traders, this means sticking to your strategy and not letting emotions get in the way of your decisions.
Keep these things in mind, and you’ll be well on your way to success.
I’ve attempted to show you how to set up your day trading business, which can be a great way to achieve financial independence. But it’s not for everybody. Successful traders know that day trading is a risky business, and it takes a lot of time, effort, and capital. I also suggest that you incorporate a trading journal into your strategy and business, stay focused, and start with less money or at a level that suits your risk tolerance and money management style.
If you’re up for the challenge, though, a day trading business can be a great way to achieve your financial goals. Options trading is an avenue for day traders to start building their day trading business.
If you’re looking to get into the options trading business, there are a few things you need to know. First, you need to have a solid understanding of what options are and how they work. Second, you need to have a firm grasp of the different types of strategies that can be used when trading options.
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a ( FREE E-BOOK ) by Maurice Kenny DAY TRADE LIKE A MILLIONAIRE.
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