Trading Log #001: System and Plan

Today I will be explaining my trading plan in depth. First, I want to state the importance of the plan is to reduce the emotional decisions which cause mistakes.

Goals:

1. Follow the rules of the system.
2. Weekly gains > 0.5%, Monthly gains > 1%, Yearly gains > 20%. These goals may seem low but, I’m not trying to be a millionaire in a week. I want to be long term profitable so I’m okay with playing the patience game.
3. By 2025, be a consistently profitable trader and have enough capital saved (at least 1–2 years salary) so I can trade full time.

Rules:

The trading will use my version of Rob Booker’s Finch EA. Which he has many YouTube videos explaining the various inputs and variables. The Finch, uses an indicator called Knoxville Divergence’s 3 parts: price rising, momentum indicator falling, and RSI indicator overbought/oversold during the same time.

Knoxville Divergence Example

The Finch places the first trade with smallest possible trade size. It looks to capture small gains. If the first trade goes negative a certain distance, it will open a second slightly larger trade to attempt to work out of the negative first trade.

The Last Word:

I feel the need to explain the importance of compound interest. Compound interest is the reason that I don’t need to have massive gain % on a weekly basis. While the relationship between effort and returns isn’t necessarily directly linear (the more effort you put in, the higher returns). I’ve read multiple people’s stories about how as soon as they trade full time they overtrade and put too much effort in the wrong places.

Back to compound interest, I’ll use a calculator to display the amazing returns you can get from an initial deposit of $1,500, compounding weekly at 0.5% with a monthly deposit of $200 from my full time job, for 5 years. This comes out to a 29% Effective Annual return outlined below.

Now, lets just change one thing. Instead of 0.5% a week, let’s assume a 1% a week return. This results in a Yearly return of over 60%. Looks at that difference!

This compounding effect is the reason I’m okay with low initial targets. As I have a small <$2,000 account right now, I can’t capture the full returns. Once I build the account up to a good size then, I can try to stretch it for higher returns.

It’s currently the weekend, so we’ll see what the upcoming week holds. I’ll be running the Finch on my live account and testing my EA called “Floating” which relies on trendline breaks on a demo. I’ll be writing additional logs during the week.