# Do U Have Written Trading Plan?



## JetDollars (2 August 2004)

Dear All,

1. I just wondering, does everyone here got a trading plan?
2. is it written down?
3. How often do you review them?
4. Do you stick to your trading plan when you trades?
5. Does your trading plan need to be specific? ie. Purpose, Objective, Entry, Stop Loss and Exit Signals. Money Management, Time Frame...

Thank You.


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## GreatPig (3 August 2004)

> 1. I just wondering, does everyone here got a trading plan?



Working on it.



> 2. is it written down?



Will be.



> 4. Do you stick to your trading plan when you trades?



Intend to try, although of course that will require regularly updating parts of the plan to improve the effectiveness of it.



> 5. Does your trading plan need to be specific? ie. Purpose, Objective, Entry, Stop Loss and Exit Signals. Money Management, Time Frame.



I will be trying to make it fairly specific.

I think this is important if you intend to operate as a business, rather than just as a casual investor. If you want to convince the ATO it's a business, thus allowing trading losses to offset other income (although of course I hope there won't be too many of those), then one thing they'd expect is a business plan (including budgets, etc).

Also, I think having a well formulated set of "rules" will help remove emotion and subjectivity from the trading decisions, and help ensure that I don't get carried away and put too much money into certain areas (eg. speculative stocks). As part of the plan, I intend to detail what funds will be allocated to what types of stocks, etc. and how those amounts might vary depending on the results.

Of course all this might sound good in theory, but that's the plan for the plan at this stage . 

GP


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## JetDollars (3 August 2004)

Thank GP for your replied.

I guess we are at the stage and process at the moment.

I am sure we will enjoy trading in the near future and will be profitable according to your trading plan.

Dear Wayne, Stefan and other,

I know you guys trading fulltime for a living. I am sure you will be able to help me with the following questions:
1. Do you trade as individual? if so do you have an ABN for your trading?
2. or do you trade under trust structure? if so what extra process do I need to take beyond setting trust. Do I have to have ABN for trust as well?
3. I know you won't get 50% discount of capital gain if you don't held the stock more than 12 months. What is your strategy?


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## jkool (3 August 2004)

To the initial questions:
Yes I do have a written trading plan helping me to eliminate the emotions from my trading. 

I am only a newbie really so I havent reviewed my plan yet but will probably do so after while when evaluating profit/loss ratio of my current plan. 

Later questions (taxing, trusts etc):
I think that you should be able to trade without an ABN considering its not your only income. You should also be able to offset your eventual loss against another. However I would love to hear from somebody more experienced here also.


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## JetDollars (3 August 2004)

I know for the fact that you can't claim your loss against property investment loss because I am still holding on my loss just over $2000 from tech wreck back in 2000.

Therefore, any time from now if I make profits just over $2000 it will going to be a full profit, but again it is my money because I made a loss before.


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## wayneL (3 August 2004)

I'll do my best not to confuse:

1. I just wondering, does everyone here got a trading plan? Yes....and No. Entry is a very specific setup. Exit, including stop is very discretionary. A bit like the Wing Chun Chi Sao
2. is it written down? Nope!
3. How often do you review them? If I'm not doing as well as normal 
4. Do you stick to your trading plan when you trades? yes
5. Does your trading plan need to be specific? ie. Purpose, Objective, Entry, Stop Loss and Exit Signals. Money Management, Time Frame... Entry/exit as above. Money management and time frame very specific

1. Do you trade as individual? if so do you have an ABN for your trading? pty/ltd
2. or do you trade under trust structure? if so what extra process do I need to take beyond setting trust. Do I have to have ABN for trust as well? no trust
3. I know you won't get 50% discount of capital gain if you don't held the stock more than 12 months. What is your strategy? Just take permissable deductions and pay the tax


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## GreatPig (4 August 2004)

> I know for the fact that you can't claim your loss against property investment loss




I believe you can offset gains against losses provided they're of the same type: meaning income against income losses, capital gains against capital losses.

So if your earlier losses were considered capital losses, then you need capital gains to offset them - like selling a property rather than just rental income.

Cheers,
GP


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## stefan (4 August 2004)

Here's what I have to say:

1. Do you trade as individual? if so do you have an ABN for your trading?

I'm having a personal trading account as well as a PTY/LTD one. That doesn't mean anything for you. You have to check with an accountant to find the best structure for your own need.

2. or do you trade under trust structure? if so what extra process do I need to take beyond setting trust. Do I have to have ABN for trust as well? 

No trust. Trusts have lost a lot of their appeal a few years ago with new tax laws. Again, check with a professional accountant. 


3. I know you won't get 50% discount of capital gain if you don't held the stock more than 12 months. What is your strategy? 

If you trade under a company, then you will be taxed at 30%, as long as the ATO doesn't consider you being an investment company. And they will pretty much immediately do that if you don't have another source of income. In short: 

There is no legal way to save tax in Australia by setting up a company or other structure. The ATO has done a good job and you will find it VERY hard to beat it. You will hear a lot of nonsense from other people about how to save tax. Bottom line: All crap. Talk to an accountant to get professional advice on this. 

Wayne is 100% correct: "Just take permissable deductions and pay the tax. "

After all, if you have to pay a lot of tax, then you obviously made a lot of money. So you should be happy anyway. If you put your energy into making more money instead of trying to cheat the tax man, then you'll be much better off. (I'm not saying you're trying to cheat on taxes. This is just a general statement).

Happy trading

Stefan


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## JetDollars (4 August 2004)

Wayne, Stefan &amp; GreatPig,

Thank you very much for your help. As I am just starting out I probably will just start with a normal trading account like I did back in tech boom time.

Also, because I got a second income therefore I believe I don't have to set up Pty Ltd or Trust...

Thank once again.


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## stefan (4 August 2004)

Start slowly. So opening an account under your name (or under your wife's if you happen to have one and she's not working full time) is an appropriate thing to do. You can always change to something different if your situation changes considerably.

Happy trading

Stefan


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## GreatPig (4 August 2004)

JetDollars,



> I got a second income therefore I believe I don't have to set up Pty Ltd or Trust




I would seriously suggest you talk to a good accountant *before* you start doing anything. You want to have it right from the start, as it can be very expensive to change if you later decide the way you're doing it is not ideal.

The ideal structure will depend on your circumstances and whether you're intending to be an investor or a business trader. Each option has its advantages and disadvantages.

From my understanding, the basics are:

- As an investor (where gains and losses are capital in nature), then the most likely choice would be between a trust and your own name. A company won't allow you to receive the 50% CGT discount. A trust is more flexible if you have a family and low income beneficiaries and provides better asset protection. It's also more expensive to operate.

- As a business trader (where gains and losses are income by nature), all choices are reasonable. Trading in your own name means you pay all the tax at your own marginal rate, but also means you get the tax benefit if you make annual losses. A company pays a lower tax rate on gains than a high income earner, but a trust gives more flexibility in distributing income if you have low income beneficiaries, and may ultimately give a better tax rate than a company (for smaller gains). From an asset protection point of view, either operating from a trust or from a company owned by a trust would likely be best, but also more expensive.

For the ATO to regard you as a business trader though, there are guidelines here:

http://law.ato.gov.au/atolaw/view.htm?find="2001/745"&amp;docid=AID/AID2001745/00001
http://law.ato.gov.au/atolaw/view.htm?find="2001/745"&amp;docid=AID/AID2001746/00001

Perhaps take a look at Nick Moustacas's site here:

http://www.strategicwealth.com.au/e2content.asp?Request=Structure.Structure

and Chris Batten's site here:

http://www.chrisbatten.com.au

Much of the good oil on Chris Batten's site is only available though if you pay to join his site.

Dale Gatherum-Goss has a couple of good books too, called "Trust Magic" and "Tax Battles". They're a bit spendy, but a very good overview I reckon:

http://www.gatherumgoss.com/shopping.htm

He also hangs out on the Somersoft property forums:

http://www.somersoft.com/forums/index.php

as does Nick Moustacas occasionally.

Cheers,
GP


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## JetDollars (4 August 2004)

Thanks Stefan...

GreatPig,

I know and read those site when i start investing in property, and thank you for mention it again.

I also got 'Trust Magic' and it's really good, but I think it's good for property structure portfolio.

The ATO links are great....thanks


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