Many people trade in futures in a trading market without any specific plan. Their wins or losses are purely coincidental, which is not a desirable situation. It is, therefore, essential for all those who wish to trade to have a robust trading plan. A good trading plan is one which suits the concerned individual’s requirement.

Need For a Trading Plan

In this connection, the story of an American by the name, Edward Thorp comes to mind. On entering a casino, can anybody predict that he would win definitely that day? The general answer is a firm ‘no’.

But in the late 1950s, professor Thorp could say boldly ‘yes’. He asserted that he had invented a technique to beat in a game of Blackjack. Obviously, no one paid any attention to his tall claims.

He visited a casino in Nevada with $10,000. By the end of the week, he had won over $11,000, more than twice the amount he put in. Buoyed by the success of his theory, he went on to play at other casinos, until he was altogether prohibited from entering casinos.

Edward Thorp was able to ‘beat the odds’ and went on winning because of his keen observations of the Blackjack game and being a mathematics professor, his ingenuity in applying the theory of probability.

He developed a method to increase his chances of winning the game. He segregated a pack of cards into three sets and assigned values of +1,-1 and 0. For example, cards 2,3,4,5 and 6 were given a value of +1; the set of 10, J, Q, K and A was assigned -1 value and the value of 7, 8, and 9 was placed at 0.

He kept a running count as each card was being dealt by the dealer. As the pack of cards reduced, with the help of his running count, he could calculate from his memory, the odds of his winning. If he felt that he had a bright chance of winning, he used to bet bigger than his average bet.

Thorp’s winning streak was due to his well-designed trading plan and his personality traits. Some of the important personality traits, such as patience, self-confidence, ability to take quick decisions, mentally prepared to take risks, emotional stability, mental agility and attitude play a vital role in formulating not only a good trading plan but also implementing it successfully in the trading market.

Without a good trading plan, trading can swing between winning and losing at random and consequently, emotions also oscillate between elation and depression. If someone wants to increase his chances of success in a trading market, he should have a well thought out plan just as Edward Thorp did.

Creating Your Own Trading Plan

One need not be a mathematician to devise a good trading plan. Some of the aspects that need to be considered while implementing a trading plan are the timing of his entry into the market, how much money should be committed for trading and at what stage one should close the trade.

A trading system has a well-defined entry point into the market with a clear exit point if one loses and also definite exit point even when one wins. A person entering the market with well developed trading plan will be well ahead of others.

Robots Trading Systems

Robots trading system has become very popular as it diminishes the chances of human errors due to fatigue and stress and eliminates emotional aspects in working. However, those who hear about this system for the first time will put up stiff resistance dubbing it as ‘robotic trading’.

If large amounts of ‘hedge funds’ are methodically traded in the markets, there will not be any need for manual trading. However, one must still use his judgment in a trading system, when the person trading in the market has gained adequate expertise with the system.

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