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Investing / Trading
Plans and Strategies

Having an investing/trading plan is very important.
Likewise, having one (or more) strategies.

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Do I really need a plan, or a strategy?

Without going into the gory detail, it is very important to have some sort of
investing or trading plan to describe why you are about to make some investment or trading decisions. And it is more important to have a documented strategy.

By having a plan and strategy clearly documented, you are able to perform some testing on past information to gain a feel for how successful the intended strategy might be. It also means that when certain conditions arise, your actions are already described in the plan, and there will be no need to stop and dither and procrastinate about "should I do this? or shouldn't I do it?". The strategy ought to contain some risk analysis that describes what you will do when a certain high-risk condition occurs. Then a lot of the emotion is removed from the resulting actions.

This is explained in Robert's free eBook (PDF) Article ST-2400, "Trading Styles, Plans and Strategies" (freely available to Toolbox non-Members).

What is the difference between a plan and a strategy?

The industry professionals don't have a universally agreed standard definition, but the following simple definitions seem to be in broad acceptance:

  • Investing / trading plan - Regarding the field of investing or trading, the plan is a description of things like: what, how and why. It helps define the purpose, objectives, scope and boundaries for the activity.
  • Strategy - This is the detail regarding entry condition and exit criteria. That is, it clearly describes the criteria that you will use to select your investing position, as well as the conditions that will trigger a close of the position. For investing/trading in the share market, this is basically the criteria that will be satisfied to cause a share purchase (and which might be based on fundamentals, or on technical analysis).

So, the plan describes the sort of investing or trading you are thinking of doing, and
how you want to go about it, and what is the underlying reason why you want to do it, and where the funds will come from.

By considering these aspects you will clear some smog from your thoughts, and
start to crystallise your ideas.

More information

For more information on this topic, see Robert's eBook (PDF) Articles here in the Share Market Toolbox, some of which are restricted - for subscribing Toolbox Members.

Preparation

Strategy concepts and ideas

Sample strategies


This is one of the many tools in Brainy's Share Market Toolbox.


The information presented herein represents the opinions of the web page content owner, and
are not recommendations or endorsements of any product, method, strategy, etc.
For financial advice, a professional and licensed financial advisor should be engaged.


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Last revised: 22 September,  2016.