Your Emergency Backup Plan

An important part of your Trading Plan is to have thought through, and have a plan for, every eventuality which could happen to you whilst you're trading. Of course you need to keep a physical backup of all your important documents such as your Trading Log and your Trading Plan, but your backup planning should cover so much more. Consider the list which Marcel Link, in his book 'High Probability Trading (see our Investment Books) claims to have had happen to him over the years:

- the Fed unexpectedly cuts interest rates

- the market gaps below your stop

- the markets experience extreme volatility, and the risks triple

- the market locks limit and you can't exit for three days, costing you $3,000 more per contract than you expected

- your computer system crashes right after you put on 20 long positions, and then the market crashes

- a rat bites through a cable on the exchange, shutting down trading

- a stock gets halted for 2 days when you have a position in it

- the seventh largest company in America goes bankrupt

- you become emotionally upset about personal issues and lose focus on trading

Try to think what you would do in each case, and then try to expand this list. Write down your emergency plans, and review them at least weekly. When the emergency happens, you'll be ready to swing into action!

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