In this final episode of The Trader’s Handbook, Shaun Murison joined me to wrap up an insightful season by exploring the cornerstone of trading success: crafting a solid trading plan.
From setting realistic goals and managing risks to refining strategies and maintaining discipline, we covered the essentials that help traders stay on course in a chaotic market.
Whether you’re just starting or looking to fine-tune your approach, this episode provides actionable advice and reflections from a season packed with trading wisdom. Don’t miss this culmination of key lessons and practical tips designed to elevate your trading game.
Whether you’re new to trading or looking to refine your approach, this episode provides practical insights into leveraging technology to stay ahead in the markets. To open a demo account, visit this link.
Listen to the episode below and enjoy the full transcript for reference purposes:
Transcript
The Finance Ghost: Welcome to this episode of The Trader’s Handbook. We’ve made it – this is the very last one. You’ve also made it if you’ve joined us throughout the season. Thank you so much for that. If you are only listening to this as the first one, then kudos to you. I always have respect for anyone who starts backwards. Maybe go and listen to some of the other stuff as well because there’s some pretty good stuff in there.
This is episode 13 and it’s the last one of The Trader’s Handbook. We’ve covered a lot. With Shaun Murison from IG Markets South Africa, we’ve covered everything from the absolute basics of trading – what does it mean to be long? What does it mean to be short? We’ve dealt with the impact of leverage and how CFDs actually work. We’ve done key risk management strategies like stop losses and all the different types that you can use.
We’ve talked about some of the trades that I tried throughout the season with varying levels of success, as you would expect in the market. Some worked out pretty well, others did not at all. And I’ve learned some really good lessons along the way through that process and it really just proves how important it is to open a demo account, something that we’ve talked about a lot on this podcast season.
You can go and open up a demo account with IG. You can go and try this stuff out before you put real money in. Rather go and make the mistakes with the play-play money and learn from that.
We’ve also talked about trading indicators and we’ve talked about technical analysis tools. We’ve talked about the IG Markets Academy, which I’ve got to say really is a great source of information in that regard and I would highly recommend that budding traders go and check it out – and also just anyone really, because there’s always something to learn. No one knows everything and I think the Academy is a wealth of information. It’s free to read. Go and check it out. There’s so much in there.
We’ve discussed different asset classes as well. We’ve discussed the different instruments you can trade. We had a show on index trading. We had one on forex. We had a very popular one on commodities. It seems like people definitely want to be out there trading gold and oil. Maybe it’s just a reflection of where the gold price has been this year? It’s been a very strong year for gold, but still. That was particularly interesting for me given my background in single stocks. I came into this podcast series understanding single stocks investing, I like to think reasonably well. I have very much an equities background. Trading single stocks is something completely different. I think when you start to see what the benefits are of trading stuff like an index or forex or commodities, that really comes through.
In the last show, we talked about the tech of trading, so concepts like scanning for opportunities and doing back testing and all of the stuff you can do on the IG Markets platform.
It has been a pretty great season. It’s quite fun to look back on all the shows and realise just how much we’ve covered. To bring it home and to bring the season to a close, we are doing a podcast on trading plans now. I think we’ve made it pretty clear on this podcast season throughout the podcasts, actually, that trading is very exciting, yes, but it is also complicated. If you think it’s easy and you follow people on Instagram with their fancy cars that they stood in front of for a millisecond to take a photo in front of – someone else’s car – to show you how easy trading is and how much money they make, that’s not how it works in the real world. Yes, you can make a lot of money trading, but it is difficult and I think the trading plans really help to just maintain your sanity and tie it all together. So that is where we will be finishing off as we tie this whole season together.
Shaun, that was a long intro, but I wanted to give people a flavour of what else they can go and find in case for some reason they’ve joined us here for the first time. Thank you for doing this with me. The last one, Shaun, you’ve made it!
Shaun Murison: We made it. It’s always a pleasure, though. I’ve enjoyed the season very much.
The Finance Ghost: No, it’s been great, I must say. Let’s dive into trading plans and I think let’s just start with the basics, right? In the simplest terms possible, what is a trading plan?
Shaun Murison: Okay, so a trading plan, very simply, is like a business plan, especially if you view trading as a business. How are you going to go about your business? How are you going to manage your risk? How are you going to manage your expenses? Your income? How are you going to allocate time? It’s really just creating an all-encompassing system around how you’re going to approach getting involved in the markets, trading the markets, and how you’re going to improve as you go along, growing that business.
The Finance Ghost: I think previously in the season when we actually talked about how you manage trading losses and your mindset around that, you made that analogy that trading is a little bit like running a business. So rather than beating yourself up about, oh, I lost money like this, why am I here? It’s more like, okay, these are the expenses, and as long as I’m coming out with a profit, I’m kind of doing okay.
I think the business plan analogy ties in quite well with that actually. And this is important stuff. Look, I’m not a great poster child for business plans. I never actually did one for The Finance Ghost on paper, but I certainly had one in my head. I think a lot of people do that. You’ve got to have a plan, you’ve got to have a strategy, otherwise what are you doing? You’re just going to wake up every day and just see what you feel like that day. That’s not going to end well for you or anyone around you, so this is important stuff.
I think with trading, it’s even worse because there’s just so much noise out there every week, right? You get absolutely bombarded with news and headlines and data that you can trade. There are a gazillion instruments out there. You can randomly wake up one Tuesday and say, oh, today I feel like trading forex and the next day you’re trading equities. You can really hurt yourself. I think it’s much worse in some respects than a business. You can’t wake up in your business one day and say, hey, today I’m a restaurant and tomorrow I’m a hardware store and next week I’m a dry cleaner. I don’t know, those were the silly examples that came to mind! But in trading you can do that stuff and that’s very, very dangerous. So how do trading plans help you with this? How do they bring discipline?
Shaun Murison: Yeah, I think a lot of people, when they talk about trading and a trading plan, the focus is always on when to buy and when to sell. But it’s a lot more to that. It’s how much money are you going to risk when you’re wrong? How are you going to formulate your strategies? How much time do you have to allocate to the markets? How are you going to learn from your mistakes? You talk about markets being chaotic and it can be quite overwhelming. That’s why we always push the idea of trading in a risk-free environment. Start off with that demo account, go make the mistakes and see where your skill set lies or what instruments might be better for you to trade, and that can start forming part of your plan. A demo account actually could be part of a trading plan, the sort of initial stages of practising, getting your business ready before you actually go to market.
The Finance Ghost: Yeah, so it’s not to say that a trading plan is, hey, I’ve looked at these five charts and these are the exact five companies that I’m going to trade this week, or these are the five setups. That might be part of a trading plan and we’ll get into the components just now. But I think the point is that it’s way more high level than that and it’s kind of this overarching – just to use your business plan example, those, oh, I’m going to do these five companies this week or these five indices or whatever else – that can be something like, oh, I’m going to sell to these five customers. But that’s not your business plan. That’s this week’s tactic. That’s not the same thing. That’s your immediate thing you’re going to focus on. That’s not the same as your business plan.
I think we’ll make this clearer by going into some of the key components of a trading plan. Maybe you can just cover those components off and just comment on whether or not this is something you’re doing weekly, daily, monthly – how often are you really updating these different components?
Shaun Murison: Look, I think starting off with the key components, for me you obviously have got to have a goal and ambition. You have to recognise time and strategy, the time you have to allocate to markets that might determine the type of strategy that you would use. How much money you’re going to risk within that market on any one trade or of your portfolio at once. And then in terms of how often you could plan, I think you have to look to continually improve your plan. You need to diarise what you’re doing. You’ll have an initial plan and you’ll diarise what you’re doing and then you’ll do some self-assessment and work towards continuous improvement.
The Finance Ghost: Yeah, that makes sense. And then in terms of how often you’re actually updating this thing…
Shaun Murison: No, it’s continuous. I think that’s where the self-assessment of it comes into play. If you have a diary, you can write down the things like how you felt when you placed a trade, see how you reacted emotionally, did it inhibit your decision making? If now your plan says, oh well, I struggle to get out of a trade that moved against me, I struggled to implement a stop loss, then you realise that’s a weakness and something that you could be improving within your trading plan. And how would you improve that? Well, if that’s a weakness of yours, automate that. Use stop losses in the system so that you don’t have to think about getting out of a trade or second guessing yourself if it’s moving against you. You’ve already made that decision. The important part about trading is making all the decisions for the trade before you get into the trade. Because once you’re inside of a trade and you’re looking at your bank balance either going up or down, what you’re going to see is that emotion is going to be a factor. We can remove that emotion with something like a stop loss or an automated system and utilise that. But that might not be where you start, that might just be an example of improving your plan.
It’s all about continuous improvement. You create your initial plan. You work to your plan, assess your plan, see where it’s, where it’s working, where it’s failing and then review. And so that could be on a weekly or a monthly basis, which all depends on how active you are in the market.
The Finance Ghost: Yeah, it’s a very iterative thing and I think that’s exactly how a business works as well, so that analogy just keeps working so well. You might have this plan, but you’ve got to then adapt the plan to what’s going on out there. You’ve got to update it based on what’s happening. You’ve got to remember good old, I think it was Mike Tyson who said “everyone has a plan until they get punched in the face” – I think the market will probably punch you in the face a few times. But I think you still need to have your trading plan. I think his view is actually extremely applicable to running a business because there you have to react quickly. You can’t just sit there and say, oh, you know, I’m going to carry on with this business plan even when it’s clearly not working. You’ve got to adapt quickly.
I guess with a trading plan, trades are going to go against you even when you didn’t do anything wrong because you just got unlucky. That’s the nature of the markets, I guess. You’ve got to be careful not to say, oh, my trading plan is terrible because I had an unfortunate trade, right? It’s gonna happen. It’s part of the game.
Shaun Murison: Yeah. I think without going through all the cliches, but failing to plan is planning to fail. If you’ve got a strategy and you’ve got a trading plan and you’re getting involved in the market, two things can happen. One is you’re making money, or two, you’re losing money. If you’re losing money, why are you losing money? Are you losing money because your plan is failing? Or are you losing money because you’re not following your plan strictly? But you don’t know that unless you’ve actually documented what you want to do and how you want to go about this business of trading and actually just measured your success and measured those failures and look to tweak that plan as you go forward.
The Finance Ghost: I think let’s look at some of these components in a little bit more detail. The first one you raised was this concept of goals and ambitions. All sounds lovely. The ambition, surely, is just to make money? No, I’m kidding. I think it’s a little bit more nuanced than that. What would these goals be? Would they typically be financially based? I want to make R1,000 this week, I want to make R10,000 this week. Or is it other stuff like I want to try out a specific strategy this week?
Shaun Murison: Well, I mean, it’s different for each person, but it just needs to be clearly defined. The overarching factor is we are all in the business to try and make some money, aren’t we? So your goal is to make a profit, but what is a feasible return? Can you make 20% a year or 100% a year? What is a feasible return and what can you achieve?
I think monetary could be one of the goals. The other goal might be to be disciplined in your approach to trading, being able to execute your strategy. It’s multi-faceted. But as in life, you’ve got to have goals and got to have targets. You know, you can see whether you can achieve those targets or not.
The Finance Ghost: Yep, that makes perfect sense. Of course, you’ve got to be realistic in terms of how much time you actually have to achieve these goals. If you’re working a full-time job and you have two kids and everything else, you’re not going to be doing a huge amount of day trading, I don’t think, or if you are, you are going to just have a bad outcome from all of this. So how do you find a way to make it all work? Is that part of your trading plan? Would you basically say, look, this is how many hours I have a week and this is when I’m going to trade? Or something we’ve talked about on previous shows which is just set the trades up and let them run in the background and put in place your stop losses and keep an eye on them? We actually have talked about some of that stuff of how to fit trading into your lifestyle.
Shaun Murison: Yeah, I think that’s a very important component in terms of how much time you have to allocate to the market. It’s funny when you start looking at the people that are trading very short-term. We talk about the day trading, the scalping and that type of stuff that generally requires a lot more time. I know most of the people listening to the podcast have day jobs and so they don’t have all day to sit and watch markets. That time allocation, when do you have time to look at markets and which markets are open when you have time to trade?
If you’re busy during the day, maybe something like a trend following approach or swing trading approach might be more appropriate. Where you’re holding a position for a couple of days to a couple of weeks, that’s really just assessing your surroundings and what you can allocate to the market. For example we mentioned the US indices, we recently introduced a rand-based account with IG. So if you were trading, you don’t have time to trade the South Africa 40 index or if you’re an index trader during the course of the day and maybe you have some time in the evening, maybe that’s the type of market that you’d be trading. Maybe you’re looking at a 24-hour market like a forex market, that might be more suitable to you. Or if you have a little bit less time, you’re doing a little bit of analysis in the evenings, you want to set your orders in there, into the market and let it trade for you. Hold your positions for a couple of days to a couple of weeks. You might be more suited to trading shares and equities in a derivative format.
It really is just knowing your own limitations in terms of time when you can actually trade and that will just dictate the frequency with which you are trading within the market.
The Finance Ghost: Yeah, it really comes down to just playing to your strengths, right? It’s that business plan point again. What can you realistically do? It doesn’t help to set yourself an unrealistic plan. Pick markets you can trade that suit your lifestyle, suit your abilities, suit the amount of research you can or can’t do. It really does make a lot of sense.
And of course the other thing you have to think about is how you will manage your risk. This is something that we’ve just kept on driving home this whole podcast season, is how important risk is. And it’s not just whether or not we use stop losses, right? It’s also the maximum that you might be willing to risk per position. Overall, I imagine it’s very easy to get drawn into a situation where, I don’t want to use the word gambling lightly, but I think that if you don’t have self-control in the world of trading, it can very quickly go down that road to say you just keep throwing money at it. Oh, I know that was a bad outcome, but you know, the next one’s going to work! Or you get greedy and you think, well, I’m on a purple patch here, I’ve had a really great few days, let me now dig into the savings account.
You’ve got to be super disciplined with this stuff, right?
Shaun Murison: Yes. Risk management is key. I think it’s probably the most important thing. High risk, high reward, that is the environment. The first part of your game is a defensive one. General guidelines on the short-term trading there – don’t risk more than 1% of your portfolio in any one trade, maybe up to a maximum of 5% if you are a bit more risk tolerant.
In terms of managing your risk, there are other risks to the market and we do find, especially new traders, they tend to – you know, there’s emotion. We’ve always talked about the emotion and that’s something that you obviously need to be aware of. You can’t stop emotion, but be aware of. Common mistakes when we’re talking about risk, we find that traders might have a win or two and then get a bit overexcited and over-trade. They trade too frequently through that euphoria. And also trading too big, taking position sizes that are too big relative to the money in the account. Those are two of the most common mistakes that we see traders make.
In terms of managing risk, there needs to be a bit of a discipline there. It needs to be a self-awareness of your emotions, of are you trading through euphoria? Are you trading through depression? There’s a friend of mine who always used to say he had one rule about trading, he says, and he put it in his trading plan: don’t trade when you’re sick. He said when he’s not feeling well, he doesn’t think. His ability for rational thinking isn’t there.
To each their own. But managing risk is the most important part of trading, in my opinion.
The Finance Ghost: Yeah, it certainly makes sense. And you’ve got to figure out what works for you. That’s the point of a trading plan. It’s specific to you. There’s no one-size-fits-all where you need to then follow someone else’s plan. That’s not going to work. This also talks directly to routines. Your routine is going to be very specific to you and it’s something that you raised as well when we were thinking about doing the show. This concept of a trading diary sounds very old school, it’s kind of a nightly “Dear Diary” moment with pen in hand, writing about your trading day. Would you say that most trading plans genuinely are that kind of handwritten notepad next to your computer while you’re trading? Does that drive better discipline? Or do you find that people type it? It’s obviously specific to people and their preferences again, but I’m just curious what your experiences have been and what you find most traders have done.
Shaun Murison: I think you’ll end up with a whole loads of different spreadsheets. If you’re trying different types of strategies, you might have these Excel spreadsheets just tracking your progress and your reports and obviously there’s a lot of reporting from your trading account that you can get as well. But I think keeping a diary is a very, very important tool and the discipline to keep following it. I’m not always the most disciplined with it, but I try to be. I find that my ability to improve my own work is much better if I can actually just track what I do, just simple things like, why did you get into the trade? Why did you exit the trade? Were your assumptions correct? Did you use a stop loss? Did that stop loss hinder the trade? Did it keep you out of trouble or was it too close, maybe if you had a different level stop loss?
But the point is that the trading diary just helps with understanding what you’re doing and you can reflect and just see where you’ve gone wrong and gone right. At the end of the day, you need to see if your plan is working or not. A diary is going to really help you with that. It’s going to help you identify the strengths and weaknesses of that plan.
I suppose it’s like “buy the rumour, sell the fact” – this is what we think is going to happen in markets and this is how we’re going to be trading. And when we actually start to implement the strategy or this plan, this is what really happens. So continual self-assessment. Continual improvement and self-improvement.
The Finance Ghost: That almost answers the next question, which is how often should you really be doing the self-assessment? And like you say, it’s pretty much continuous. It’s striving for an iterative process where you are checking in on what you thought was going to happen. Here’s how it played out.
I think just being honest with yourself – it’s like when you go and play golf, you can always just cheat very easily. But what’s the point? It’s your score at the end of the day, and if you are getting better by cheating, then you’re only cheating yourself. What are you even doing? So rather go through the hard yards, go through the process. If you waiver from your trading plan, then you’ve got to make a note of that and you’ve got to be honest with yourself and really think deeply about this stuff because it can really swallow you up. I think the world of trading can be incredibly exciting, but it is something that you need to treat with immense respect. I think a trading plan goes a long way towards just keeping you on the straight and narrow.
It’s just a really good way to go about it. You’re not just going out there and hitting golf balls in every direction known to man. There are 18 holes you need to play. That’s the plan. You tee it up. Every time you look down the fairway, you figure out where you’re going to try and hit the ball. It’s not always going to go to plan. In fact, in my experience, it will rarely go to plan on a golf course! But that’s kind of how it is and then you adapt and you do the self-assessment and you try and grow and you try and keep your head in the game.
It’s not for everyone, but for those who get it right, it’s a really rewarding and lucrative way to do things. That’s probably a good place to leave the season, to be honest. I think we’ve got more than enough content for people to go and engage with, to go and just figure out if this is for them, to go and listen to again, make notes, use the episodes for what they are, which is an evergreen resource about trading.
You can go and listen to specific ones that might catch your eye. You can listen to the whole season from start to finish. If you go onto the Ghost Mail website, you’ll find all of the transcripts there as well if you prefer to read rather than listen. There’s a lot to engage in and there’s a lot to read. Shaun, thank you guess just for this whole season, really. It’s been a good few months of effort to produce this podcast season. I think it’s a lovely resource that will make a difference to people and I appreciate all the time you’ve put into it.
Shaun Murison: Great. It’s been a pleasure.
The Finance Ghost: And of course, for those who haven’t yet done it, go and open a demo account. By this stage of the season, if you have still not opened a demo account, then there’s nothing else to wait for. There are no more podcasts coming, so go and get it done. And all the best to you in the markets. Good luck!
