The overview, goals and targets

Perhaps I mentioned before that I like to do spreadsheets and I set up auto filling fields and various columns to... well ...let's just leave it that sometimes the more complicated the better. The first one that I set up to get an idea of the potential of my trading blew me away when I realized exactly what my initial, attainable and realistic small goal would produce. I still use it as a benchmark for all of my trials of trading strategies.

So instead of going on about those sheets I will cut the whole thing down to a few, or not so few, guidelines, goals and targets.

Rather than explain the premise behind, or the validity of each of these points, suffice it to say that I have proven the majority through a variety of trials both real and on paper but all with live data. Basically, no historical chart work. While I did some of that in the past I realized that it is not as valid as it seems as hindsight lifts the fog of the future just enough to make it not as uncertain as true real time testing. Everything that I have based my day trading plan on has been live.

Should anyone reading happen to find error, disagree or just want some further clarification let me know by commenting here or emailing.

Guidelines and rules:

I place $5,000 into a trading account and never add cash to it again
I use a tax free trading account to never have to pay taxes on the proceeds
I trade for 40 weeks of the year (three months of “buffer” in case I fall short of my targets)
I trade four days per week (160 days of a possible 260)
I trade only in the morning (my best time for alertness)
I trade a maximum of 6 trades per day (more have proven less profitable)
I trade one stock from a selection of only four (why make it complicated?)
Limit orders for entries, market orders for exits...so far
No margin use (starting in January)
Even lots of 100 shares traded
Trade size is capped at $45,000 per trade in year two, (I think I can use less and still meet the goals)

Performance:

1% per trading day on average. (I am currently at a 1.26% daily average return)
I am not trying for a quick large win here, just plugging away with a profitable strategy.

The time line:

January 2009, week one.
TFTA setup with Questrade, $5,000 deposited, may take a week or two to get going.
All gains return to the account for growth, even any over performance returns for the time being.

Week 26
Double my money the first time.

Week 40
Tripled my money (this could be as early as October)

January 2010
No additional contribution to the TFTA even though I could put $5K more in, at this point it will only make the difference of about a month or two before I can start drawing back out of the account.

Week 49
Quadrupled my money, I stop noting these marks at this point as I concentrate on cash flow.

Week 56
Returns are at $1000 per week

Week 72
Returns are $1800 per week

December 2010
Plan changes from growth to cash flow and investments
Account balance is $62,000
Investments for dividends are started, still within the TFTA umbrella
Income is $900 per week, investments are $900 per week

December 2011
Annual “wage” has been $36,000 tax free
Investment account deposits have been $36,000
Total account balance less any investment gains or dividends is $98,000
Should I remain working the balance would be $134,000, with $72,000 of that in investments for dividends

Alterations possible:

There are some circumstances that may have me trading more than the 40 weeks per year.

- should I fall short of my goals by the annual targets

- at the end of year two I could have the option of continuing to work a regular salary job or just concentrate on trading alone for my income and portfolio growth, I may trade more as a result

- should interest rates start to rise again I will probably step up mortgage and credit payments

- should my wife decide that she would like to settle out her current job and take on something that pays less but may be more enjoyable for her

- expenses like schooling for the kids kicks in after year three


All in all while this starts to sound like the ads that I see claiming huge returns for little effort, I must say that there has been lots of effort and time put into what looks like a rather simple plan. Countless hours of chart studying, research, trials and lots of emotional roller coaster rides to get to the point where I am now. My three year return on the original investment can be over 2000%. This has been a year in the making now. I have had some fun with this whole trading game but it is time for the games to end and the serious business of trading to begin.

I am looking forward to actually placing this plan into effect in the next few weeks. I consider this my biggest New Year's resolution ever, though I am not one to make resolutions as almost none ever get followed through, I think this will be an exception.

Jeff.