Just like a business plan outlines in detail the establishment and development of a proposed business, a trading plan outlines in detail a structure for trading. Trading plans are fluid in the sense that they are constantly being tested and amended so as to improve overall performance and profitability. Price Prediction Profit on a futures trade is earned if you buy low and sell high, or sell high and buy back low. While simple in concept, this requires you, the trader, to have some idea of where prices will be several weeks or months from now. That is, it requires some sort of price prediction methodology.
Most traders tend to rely on some variation of fundamental or technical analysis to predict prices.
Many traders also spend considerable time and energy attempting to identify new measurements or signals that provide the edge in predicting prices. Stories abound of traders who claim to have discovered proof-positive techniques for predicting prices, and then offer to sell the information to you for a price. In my experience, genuine fool-proof techniques are very hard to come by, and I would advise you to be very careful and skeptical of such grand claims. By Chuck Hackett My mission here is to lay out a working example of how money management fits into the trading plan. You don't have to follow this exact example in your trading, but I believe that even if you apply only part of it, you will greatly improve your chances of survival and of ultimately becoming a member of that magical ten percent winner's club.