The Business Plan
How would I restart my trading journey from 0 with the knowledge I acquired over the last decade. Let us dive into a building a trading framework from 0 to 100.
I get dozens of new messages per day, asking me to help with intricate issues. These messages are primarily from newer traders and the truth is, they have not even been trading for 1 year in most cases.
It often looks like they are trying to land a rocket on the moon despite not knowing how a rocket works… Good thing trading is not rocket science.
What do they lack?
99% of the time they have no:
edge
data
routine
scanners
execution plan
morning prep
review
pod
Wow Shortbear slow down! I know, I know, let me tell you how I picture trading to make it more understandable.
In this world, to make money you either do it in a creative field or you are a true business. In trading, in order to even make money, you have to have a fully functioning business as if you wanted to list on the Nasdaq, Nyse…
Creating a business plan type explanation for your path forward allows you to be objective. Think about it, would you invest in yourself? If this business plan came from someone else, would you invest?
In short, you need to build your approach to trading as a full fledge business plan.
What constitute a business plan?
Executive Summary
A short, concise explanation of your business plan including:
Your business and location(here at home, office perhaps?)
The product/service you offer
Your Mission and vision statement(what is the goal and what you stand for)
The specific purpose of the plan (Here to provide value or find investors)
Company Description
This is a high-level view of your business that should explain who you are, how you operate and what your goals are with this enterprise including:
legal structure of your business (llc, partnership, individual…)
A brief history, the nature of your business, what do you supply/offer
An overview of your products/services (strategies)
A summary of company growth(track record) , including financial or market highlights (examples, specific drawdown explained…)
A summary of your short- and long-term business goals, and how you plan to make a profit
Products and Services
Show what you offer, what is your money making product/service including:
A detailed explanation about your edge, strategy
An explanation of the market role of your business and advantages it has over competitors→ what makes you special when 99% fail?
Information about the life cycle of your edge→ How can you stay on top?
Risk management→ normal distribution and black swan
Relevant copyright, patent, or trade secret data
Research and development activities that may lead to new edges
Special data, app, database, systems and automation
Market analysis
This should show you understand the playing field, your strength and weaknesses including:
An industry description and outlook, including statistics→ What does trading look like behind the curtain?
Historical, current and projected returns data from similar traders→ What is realistic?
A detailed evaluation of your competitors, highlighting their strengths and weaknesses
Strategy and Implementation
Explain exactly how you want to go from 0 to 100. What are the processes, the routine, the tools, the partners, the environment and so on that will put you at the top of the pack.
Details about costs, platforms, furniture, locates, commissions, promotions, logistics and more.
An explanation of how the company will function, including the operations cycle (from waking up, to clicking the first key to going back to sleep+ weekly, monthly and yearly work)→ What is your process/routine?
Risk management processes
Information on sources of labor and number of employees→ Partners, outsourcing and more? Who is on your payroll?
Data on operating hours and facilities
Organization and Management Team
If going into the hedge fund world or partnership structure and employees play a key role in as you become the sum of your work product. This is aimed to explain just that as well as who invested in your vision:
An organizational chart with descriptions of departments and key employees
Structure of ownership: names, percentage of ownership, extent of involvement within the company and a biography listing their background and skills
management team profiling including: names, positions, main responsibilities and experience
List of any advisors, such as board members, accountants, and attorneys
Financial plan and projections
By now you should have all the tools to project your cash flow via past collected data. This section projects what you see as realistic returns based on that data including:
Historical Statement: (if available), including trade statements, balance sheets and cash flow statements for the past x years(the more the better).
Realistic forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets for the next five years. (use past data and extrapolate and ask around if unknown)
An analysis of your financial data
→ Sharpe ratio
→Profit ratio
→Max drawdown
→ Risk metrics
→Volatility metrics
→beta, alpha
I think you understand how serious you need to be in order to become a successful trader. I know about 30 7-figure traders and all of them have done a business plan for themselves. Having a clear structure is what separates complete beginners from professionals and believe or not, also separate 6 figure to 7 figure traders.
7fig traders work just like a well run business.
Next up we will go more in depth about the processes I would use if I had to restart from 0 knowing what I learned from the last decade.
Spread the word by subscribing and sharing this post! See you all next week.
Great article. Executive Summary and Mission are such vital parts for a successful operation. Yet so often overlooked or ignored.
Thanks for the detailed post! Working on the data part right now. Do you have very specific entry triggers or overall big picture set up odds and you enter based on discretion?