I'm a big proponent of having a written trading plan. I'm in the process of reviewing and rewriting the plan I have in place. I'm making it easier to answer the question "Did I follow my plan?" by using the"SMART" plan framework.
The acronym SMART stands for
Specific: well-defined and clear
Measurable: sets clear criteria that you can use to evaluate your performance
Achievable: it should be realistic, taking into account your resources and constraints.
Realistic: you have the resources to achieve your goal.
Time-bound: has a clear timeline.
For example in my original trading plan I had a sub heading of Objectives.
Objectives
To protect my Capital.
To out perform a dividend portfolio
To make a minimum return of 20% per year.
To keep losses to a minimum
Looking back the objectives , while they seemed like reasonable objectives were pretty vague.
The new "smart" objective will make it easier to answer the question, "Did I follow my plan?".
Objectives
I will protect my capital by limiting my risk per trade to 1% of capital or less.
I will limit drawdown to 10% of capital by reducing risk if I have 5 losses in a row.
If I have a drawdown of 10% I will stop trading until I have reviewed my strategy to determine if the reason is the strategy or the trader.
My benchmark to outperform will be the ProShares S&P 500 Dividend Aristocrats ETF (NOBL)