A stock trading plan precisely defines your trading and identifies your goals. A good trading plan helps you allocate resources properly, handle unforeseen complications, and make good business decisions.

The importance of a comprehensive, thoughtful trading plan cannot be overemphasized. Much hinges on it: especially the achievement of your goals and objectives.

Despite the critical importance of a trading plan, many traders drag their feet when it comes to preparing a written document. They argue that the market changes too fast for a trading plan to be useful or that they just don’t have enough time. But just as a builder won’t begin construction without a blueprint, eager traders shouldn’t rush into trading without a trading plan.

I’m not saying that you have to write a 500 page literary masterpiece for your stock trading plan. What I am saying is that you should a the very least have a written trading plan. My personal feeling is that if you can’t write down any reasons why you should trade and how you plan to go about it then you shouldn’t trade. This goes for any business at any time.

If you have a hard time putting anything on paper then here is an exercise that I think will help. Let’s say you have a friend and let’s call this friend Joe. If Joe came to you one day and said “I would like for you to invest $30,000 so that I can make you some money trading”.

Would you just give Joe the $30,000 and not ask any questions about how he plans to grow your money? I think not. In this exercise just jot down a list of questions that you would ask Joe so that you could make up your mind about whether or not to give him your $30,000.

A few examples might be:
What is your plan for growing my $30,000?
What kind of return can I expect?
How long will my money be invested?
What are all of the expenses involved?
What are the risks involved?

You get the idea. Now that you have jotted down those questions you would ask Joe, jot down your own personal answers to these questions. Below is a brief example of what you might have jotted down:

What is your plan for growing my $30,000?
I plan to use the XYZ day trading system to trade ABC stock.
I will start out trading X shares per $30,000.
What kind of return can I expect?
I expect to average at least twice the average annual return of the S&P 500.
How long will my money be invested?
I will trade the system for a minimum of 2 years. I will review the system performance and my personal goals at the end of each quarter.

What are all of the expenses involved?
My initial expense will be my starting account capital of $10,000.
Computer Equipment = $X,XXX
Real-time Data Service = $XXX per month.
Commercially Available Stock Trading System = $XXX per month
What are the risks involved?

Make sure that you carefully evaluate the risks versus the reward for your trading method.

Nice start. Now you have the beginnings of a basic trading plan. Add to your trading plan and make it as complete as you can. Refer to your trading plan often to review your goals and objectives

While having a temporary bias can be understandable, it can still have a negative affect on your bottom line. For instance, the multi-year decline in the DOW had turned many otherwise objective traders into hard core bears. Naturally those who were short stocks from early October 2007 were right on track, especially when we saw the market nosedive below 7,000!

Now if those same bears stayed short they have had their profits eaten into quite substantially, but even that is not the point. The big quesiton is what do we do when we see the market change direction, which it started to do in March and April of 2009? Do we remain bears and stay short waiting to reclaim our profits eroded by the current uptrend? Some would say yes.

One important thing that we have to remember is that the best indicator of market direction is the direction of the current trend. There is no real reason to stick with a stock trade that is moving continously against you in hopes that the market will eventually go in your direction.

The entire point here is that effective stock trading requires flexibility. Sometimes that flexibility invloves admiting that your original trading signal was wrong. After that you may have to trade in the opposite direction…and that’s OK. Our objective is to trade stocks profitably and not necessarily to feed our pride or our egos. If you maintain your objectivity and flexibility your opportunies for profit will continually multiply and you will�trade more successfully than you ever imagined!

Naturally,  all this remains to be seen as we all find ourselves getting ready to feast for the Thanksgiving holiday. It will be interesting to see if Black Friday is as big a shopping day as has been anticipated by some analysts.

It remains to be seen if investors will lighten their load and sell off some of their holdings in an attempt too calm their nerves as we approach the end of the year.

Have a Happy Thanksgiving!

Firstly, accurate is being used in a subjective sense in the question. If stock market timing were completely accurate and we all had access to this information then we’d all be retiring very, very rich. In fact, if stock market timing was completely accurate there would be no need for the thousands of types of mutual funds because there would be no need for diversification.

No person or persons have any magical crystal ball into the workings of the stock market and can predict with pinpoint accuracy were the markets will go next. Many would-be market timers paint very broad strokes with their stock research brushes. So broad in fact that even though the market may eventually go in the direction they predicted it would still prove difficult to profit based upon that prediction.  For instance, if some stock market guru predicts that the Dow is going to go up 4000 points then many investors may purchase stocks.  If, however, the market plunges 5000 points before that time many investors will have abandoned their positions at a tremendous loss.

So in the above example of someone asks if stock market timing accurate, then the answer would be in this case “eventually”. In the stock market there is a tremendous difference between being able to time the market accurately and being able to profit from timing the market.

These online stock trading tips are used by the most successful traders in the world. Successful traders understand that there are a set of basic rules which must be followed day in and day out in order to be a profitable trader. Here are the things you must do.

You must have sufficient working capital. If you don’t have enough working capital you won’t have the staying power to weather the many market fluctuations. With market volatility comes equity swings. You want to survive these periods and have the capital available to take advantage of trading opportunities in the future.

You must have a plan. Without a trading plan you are flying blind and banking on hope. Hoping that you make money in the stock market is not the same as having and executing a plan to make money in the stock market. Successful businesses have business plans and your stock trading business should be no exception.

Stay focused and disciplined. Stock trading requires focus. Everywhere you look and listen there’s news and opinions about where the market is going and what the economy is going to do next. You will have to be disciplined to follow your trading plan. Work to weed out unnecessary distractions and so that you can stay on track.

Learn to control your risk. Although risk control should be an integral part of any trading plan or system it’s importance cannot be stressed enough. Poor risk control is the number one reason inexperienced traders fail.

No list of online stock trading tips would be complete without including the following: You must have a profitable trading system or method. I know it sound completely elementary, but you would be surprised to know the number of traders who randomly place a trade and hope for the best.

One thing is for certain….it has been anything but a boring year in the stock market. We had an opportunity to chat with Tony Spann about some of his picks. Here is what he had to say…”Well, I can’t tell you the number of people who laughed in my face when I told them I was buying Ford Motor company when it dropped below 1.25. Some people I talked to even asked me, “What are you going to do next…buy AIG?” I laughed along with them and said that “AIG looks too good to pass up at 35 cents a share.”

Well it doesn’t look like they’re laughing at Mr. Spann now!

As an example of “getting it right” this system went short on September 4, 2008 and rode the QQQQ�from 44.85 all the way down to 28.49.

We are going to keep you posted share our sneak peek at this system that is doing way more than holding it’s on in these troubled economic times.

The current state of the stock market is a time when many smart investors are actively seeking and taking advantage�of the many opportunities that they see before them. Those who trade based upon�volatility will�have all the trades they can handle.

So what is your approach? Are�busy limiting your losses or looking for ways to extend your gains? Your attitude and actions during these trying times can put you well ahead of the game in the coming months and years.

We closed out our long trade in BAC – Bank of America at a profit today.

We closed out our short BAC trade today at a profit.