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Quest 2012 Trading Plan

Developed by Ryan Jones

March 1, 2011

This document may not be copied, reproduced, transferred, disclosed or in anyway

revealed to another person or entity, in whole or in part, electronically or otherwise,

without the express written permission of Ryan Jones. All rights reserved.

(Note – All Shaded Areas are my added commentary for further explanation of

parts of the trading plan for those who are seeing the plan for the first time.

This trading plan is the exact trading plan being used in a trading program called

Q-2012 Live Forex. The goal of Q-2012 Live is to take a $5,000 account and turn it

into $100,000 in just 1-year, providing members the exact signals so they can

follow along in their own account.

There are two Q-2012 Live programs. One for the Forex and one for the S&P E-

mini. If you would like more information on joining this unique program and

possibly following along in your own account, go to the following link for more

information:

www.SmartTrading.com

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Introduction

A trading plan to trading is as important as a business plan is to business. It is no

coincidence that businesses fail at about the same rate as traders fail. A poor

business plan with improper capitalization causes the same problems in trading.

Only with trading, it is usually not the lack of capital, it is risking a greater amount

of the available capital than should be risked.

There are, of course, other contributing factors as well, but for the most part, a

trading plan can help in all areas.

Table of Contents

Starting Capital…………………………………………. 3

Beginning Risk………………………………………….. 3

Risk Levels…………………………………………………. 3

Goal……………………………………………………………. 3

Quest 2012 Summary………………………………. 3

General Strategies to be Used…………………. 4

General Risks Explained…………………………… 4

Money Management Strategy………………….. 5

Category 1 Trade Size Table……………………. 5

Category 2 Trade Size Table……………………. 6

Rate of Decrease……………………………………… 7

Additions of Strategies…………………………….. 8

Summary of Beginning Systems…………….. 9

Evaluations………………………………………………. 10

Back Up Plan……………………………………………. 11

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Starting Capital

$5,000

Beginning Risk

40%

Risk Levels

1. Semi-Aggressive with Initial Capital

2. Semi-Aggressive with Profits up to $100,000

3. Semi-Conservative with Profits Above $100,000 (risk = approximately 20%)

4. Conservative if 40% Initial Risk is Realized

Goal

To Reach $100,000 by end of Year 1

To Reach $1 million by end of Year 2

The average monthly profit needed to reach year 1 goal based on a lot size of $50,000

without money management is approximately $1,500 per month. See Money Management

section below.

Quest 2012 Summary

The general approach to achieving the goals of the Quest 2012 trading plan is to start off

with lower risk, high probability trades based on a combination of mechanical trading

systems and semi-mechanical trading signals. Within 6-months, the goal is to transition

into all 100% mechanical trading systems once the account has some breathing room

(account level reaches approximately $10k - $15k).

As the account grows, Q-2012 will increase diversification, while attempting to decrease the

overall risk on a per trade basis. The underlying goal is to achieve a minimum monthly

profit based on a constant unit of trading ($1,500 per month based on $50,000 lot sizes).

As the account grows, adding additional diversification will add profit potential without

having to necessarily increase lot size at the same rate.

General Strategies to Be Used

The first few strategies will be based on trend-following patterns and seasonal influences.

We will quickly add at least 1 intraday mechanical strategy that will focus on shorter-term

profits (through auto-execution). As the account grows, we will continue to add strategies

based on a wide range of approaches. Some will be trend following looking for the bigger

moves. Others will be range trading looking for 8 – 12 pips per trade with small risks, and a

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host of other types of strategies. At all times, the goal is to create optimum diversification

to diminish correlating drawdowns during certain types of market cycles.

General Risks

The initial risk of Q-2012 is small at $2,000. Accordingly, the initial lot size will be

approximately 2 – minis ($2 per pip) on lower risk trades. The maximum stop on lower risk

trades is at 30-pips. This means a loss at that maximum risk would yield a loss of about

($60).

The larger risk trades will sometimes be as big as 100 pips, but will quickly decrease as the

market allows. We will start larger risk trades with 1 mini ($1 pip). The average risk will be

around 60 pips, or a potential loss of ($60). These trades will be looking for 100 – 400 pip

moves, but will be quicker to exit at the beginning so as to not give back profitable trades.

The trade size will increase according to the tables below.

It would take approximate 33 losses in a row without a winning trade to reach our $2,000

initial risk level. However, we will decrease trade AND conduct an evaluation of the trading

strategies if the account realizes an initial $1,000 loss from the starting balance (see section

“Evaluations”).

NOTE – Initial risk does not equal maximum risk. Initial risk is the risk amount prior to a

required change in how the account is being traded. If initial risk levels are hit, further risk

is possible, however, the Q-2012 trading plan will go into more of a capital preservation

mode until ground is regained. (See section ‘Q-2012 Backup Plan’)

Money Management Compounding Strategy

{The money management compounding strategy is fully explained in the Mission Million

online course that comes with Q-2012. This is a 10-hour course that will forever change

the way you look at trading. Rather than focusing on the holy grail of trading strategies,

you will realize and see just how important it is to instead focus on money management, for

both the profit and the risk potential in trading.

Every trader, bar none, makes a money management (trade size) decision EVERY single

time they get in the market. Every trade you have ever made required a money

management (trade size) decision. Yet, most spend little time thinking through the

consequences of making the wrong trade size decision. It is, by far, the greatest

contributing factor to being able to substantially increase wealth through trading.}

We will be using the Fixed Ratio strategy and implementing separate ratios based on system

categories (also known as the Ratio Efficiently Valued, or REV strategy). In other words,

systems with more risk will be assigned a larger ratio while strategies with less risk will be

assigned a smaller ratio. Category 1 systems will have a ratio of $200 per mini. Category 2

systems will have a ratio of $750 per mini increase. Both tables are below:

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{The Fixed Ratio strategy is a very specific, and straight-forward algorithm that let’s us

know exactly when to increase trade size, and when to decrease trade size based on the

risks of the strategy and profit goal of the trader. The Fixed Ratio strategy is the most

efficient money management strategy for smaller accounts and is fully explained in the

Mission Million Money Management Course, which is included FREE to Q-2012 members.}

Account

Equity Delta Lot Size No MM Perf

$5,000 $200 2 $5,200

$5,400 $200 3 $5,400

$6,000 $200 4 $5,600

$6,800 $200 5 $5,800

$7,800 $200 6 $6,000

$9,000 $200 7 $6,200

$10,400 $200 8 $6,400

$12,000 $200 9 $6,600

$13,800 $200 10 $6,800

$15,800 $200 11 $7,000

$18,000 $200 12 $7,200

$20,400 $200 13 $7,400

$23,000 $200 14 $7,600

$25,800 $200 15 $7,800

$28,800 $200 16 $8,000

$32,000 $200 17 $8,200

$35,400 $200 18 $8,400

$39,000 $200 19 $8,600

$42,800 $200 20 $8,800

$46,800 $200 21 $9,000

$51,000 $200 22 $9,200

$55,400 $200 23 $9,400

$60,000 $200 24 $9,600

$64,800 $200 25 $9,800

$69,800 $200 26 $10,000

$75,000 $200 27 $10,200

$80,400 $200 28 $10,400

$86,000 $200 29 $10,600

$91,800 $200 30 $10,800

$97,800 $200 31 $11,000

$104,000 $200 32 $11,200

Category 1 Trading System MM Table

Lot Size is based on Mini’s.

In other words, a lot size of 2

means 2 mini’s. Each pip is

worth $2 with this lot size.

At the end of this table, the

account has grown to

$104,000 with money

management, trading only

3.2 standard lots (each pip is

worth $32).

Compare this to NOT

applying money management

to the strategy. The end

result is growing the account

from $5,000 to only $11,200.

The money management

strategy alone increased the

profit potential by a factor of

15.9!

Do not discount the power of

what you are seeing here. At

$104,000, the risk per trade

on a 20 pip loss is LESS than

the risk at $5,000 (% basis).

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Account Equity Delta Lots No MM Perf

$5,000 $750 1 $5,750

$5,750 $750 2 $6,500

$7,250 $750 3 $7,250

$9,500 $750 4 $8,000

$12,500 $750 5 $8,750

$16,250 $750 6 $9,500

$20,750 $750 7 $10,250

$26,000 $750 8 $11,000

$32,000 $750 9 $11,750

$38,750 $750 10 $12,500

$46,250 $750 11 $13,250

$54,500 $750 12 $14,000

$63,500 $750 13 $14,750

$73,250 $750 14 $15,500

$83,750 $750 15 $16,250

$95,000 $750 16 $17,000

$107,000 $750 17 $17,750

$119,750 $750 18 $18,500

$133,250 $750 19 $19,250

$147,500 $750 20 $20,000

$162,500 $750 21 $20,750

$178,250 $750 22 $21,500

$194,750 $750 23 $22,250

$212,000 $750 24 $23,000

$230,000 $750 25 $23,750

$248,750 $750 26 $24,500

$268,250 $750 27 $25,250

$288,500 $750 28 $26,000

$309,500 $750 29 $26,750

$331,250 $750 30 $27,500

Both category 1 & 2 systems will review and possibly adjust the delta and MM Table at the

$50,000 level to reflect account performance and drawdowns.

Category 2 Trading System MM Table

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{Money Management Tables Explained

Account Equity – As your account reaches these levels, you increase your lot size on new

trades according to the lot size column. For example, if you start out with $5,000 trading 2

lots (mini), and your account increases to $5,750, on the next category 2 trading signal,

you will place it with 3 lots.

Delta – This is a variable in the Fixed Ratio money management equation that indicates

how aggressive the growth rate is. The delta is different based on the different types of risk

that are involved with individual strategies. Higher risk strategies require a higher delta.

Lower risk strategies require a lower delta

This is FULLY explained in the 10-hour online Mission Million Money Management course

which is available at no cost to all Q-2012 members.

No MM Perf – This column shows what the account performance would be if there were no

increases in trade size. With category 2 strategies, if our system makes only $10,000

based on a single mini-lot, the money management will turn that into over $70,000 in

profits. At around $13,000 in total net profits based on a single mini-lot, the money

management turns it into over $100,000. This represents an increase of almost 10-fold!}

Rate of Decrease

The rate of decrease represents the levels at which risk (lot size and/or strategies) are

decreased if equity drops below a certain amount. The first table is the initial decrease

based on an equity drop below the starting amount:

Account Equity Category Lots

$5,000 No decrease

$4,000 Category 1 1

$4,000 category 2 Evaluate Strategy

$3,500 Category 1 Evaluate Strategy

$3,000 Evaluation Plan Change Strategy

If the equity drops to $4,000, we will decrease 1 mini lot category 1 strategies. We will also

evaluate category 2 strategies to make sure they are not overly contributing to the equity

drop. At $3,500, we will all category 1 systems. If the account hits an equity value of

$3,000, an evaluation will be conducted to determine if a different direction needs to be

pursued altogether (with strategies).

Decreases After Increases

We will use a delay of 1 level for decreases levels. What this means is if we increase from 2

to 3 lots at $5,400, we will not decrease back to 2 lots unless the equity drops below $5,000

again. An increase to 4 lots at $6,000 will not decrease back down to 3 lots unless the

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equity drops below $5,400, and then back to 2 lots at $5,000. Re-increases will be at the

original increase levels.

If 2 decreases occur, the Rate of Decrease will then change to decreasing at a 2:1 ratio of

the increase rates. For example, if the account reaches $13,800 trading 10 lots (minis) in

category 1 systems, the next drop to 9 lots will occur at $12,000, and then 8 lots at

$10,400. However, a 3rd drop to 7 lots would occur at $9,700 (instead of $9,000). A drop

to 6 would occur at $9,000, so that at every increase level, our capital preservation strategy

would drop 2 lot sizes instead of just one.

Accordingly, if the decrease started at the 10 lot level, in theory, we would be back to 1 lot

at an equity of $6,800. In reality, we will have stopped trading the strategy responsible for

dropping the equity long before (probably around the $8,400 level).

Decrease Table

Account Equity Delta Lot Size

$6,800 $200 2

$7,300 $200 3

$7,800 $200 4

$8,400 $200 5

$9,000 $200 6

$9,700 $200 7

$10,400 $200 8

$12,000 $200 9

This decrease table enacts a preservation of capital approach should the base drawdown of

a specific system or the account as a whole increase beyond expectations.

If 3 decreases are made, an evaluation of the performance will be conducted to determine

the cause of the excessive drawdown. Strategies and the overall plan may be adjusted

should such an event occur.

Note – It is extremely important to understand the power of money management from a

risk capital preservation perspective. The power of the compounding creates a situation

where the strategy can then turn around and lose everything it gained based on having

never increased trade size, but because of the money management plan, it retains a

significant profit.

For example, if we have a category 2 strategy that makes $10,000 based on never

increasing lot sizes, but then turns around and goes into a $10,000 drawdown, the person

who did not use the Fixed Ratio money management plan has $0 profits to show. They lost

everything that was gained. However, the same situation with the Fixed Ratio increase

strategy takes the account up to over $63,000 during the profitable streak, but in the

drawdown, if all the decreases are allowed to happen, it drops to an account level of

This table is based on a drop in equity. As

equity drops below $12,000, the lot size drops

to 9. At $10,400, the lot size drops to 8. Etc. If

the equity begins to increase again, the lot size

also begins to increase again at these same

levels.

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$12,500. In other words, the net result is +$7,500 instead of nothing. Remember, the

trader who does not use the Fixed Ratio money management strategy had an equity high of

only +$10,000. So after the worst possible scenario drawdown, the trader using money

management is almost at the equity high of a trader who didn’t use it.

Of course, in this scenario, the trading plan would never continue trading a strategy to that

account level. After 4 – 5 decreases, most strategies would be replaced…and they would be

replaced having netted a significant profit in this example (around $15,000 in profits)

instead of having nothing to show for it.

Addition of Strategies

Category 1 Systems

Account Equity Add System

$5,000 1

$9,500 2

$26,000 3

$75,000 4

$250,000 5

$500,000 6

These levels are tentative and may be adjusted based on actual account performance and

type of systems being added.

Summary of Beginning Systems

Category 1

System 1

The first category 1 system we will implement is Time Code. This system is based on

various cyclical moves in the currency markets at certain times during the trading day.

There are 5 major opening and closing times in the currency markets. The first is the

Sydney open and the last is the Asian Open. Time Code uses a combination of these

cyclical times combined with price action.

Risks associated with the Time Code system average out to be 15 pips per trade. The

average profit averages out to be 12 pips while the win % at upwards of 75% - 80%. The

one drawback with the Time Code system is that it can go several months gaining little or

no ground and then experience bursts of extremely high win rates.

Time Code averages about 4 trades per week per currency pair. We will be placing trades

on 3 pairs after the first month of trading (we will limit to one pair the first month of

trading).

Category 2 Systems

Account Equity Add System

$5,000 1

$12,000 2

$25,000 3

$50,000 4

$100,000 5

$250,000 6

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Category 2

System 1

The first category 2 system we will implement is based on a combination of my PowerTrade,

Reloaded and Power Pattern Strategies. PowerTrade was a system developed back in 1997

and used both times I entered the live account Trading championship**. The system is

based on trading in the direction of the trend after a retracement. The average initial risk

per trade is between 60 and 100 pips, while decreasing that risk as the market moves in our

favor. There could be times when the initial risk exceeds 100 pips. During those times, we

may decrease the lot size accordingly. Most of the time, the average risk is around 60 pips

with a trailing stop in place. Reloaded is a spinoff of PowerTrade.

This strategy will be applied to major currencies with only one entry at a time per pair. If 3

major pairs have correlating entries working at the same time, I will choose the best one

available as opposed to entering all 3 at the same time. If we are in one pair and locked in

at a profit while another pair has a setup, we will take the setup in the 2nd pair for

diversification. At no time will we have more than 1 open position that could turn into a loss

at any time.

Power Pattern Strategies are high-probability patterns that I have refined over the years.

These are only going to produce an average of 1 – 2 trades per month. I will search

multiple pairs for setups.

PowerTrade and Reloaded are fully revealed to Q-2012 Live Trade Members. Power

Patterns is available to anyone, however, the signals are exclusive to Q-2012 Members.

----------------------------------------

**PowerTrade was traded in my first World Cup Trading Contest when I entered the 12-

month context with less than 1-month left and took 3rd place in the contest with a 42%

return. This was traded on daily bar charts in 3 different markets. The following year, I

entered the contest again and traded the PowerTrade on a 10-minute bar chart of the S&P.

My account increased from $15,000 to over $107,000 in 73 days.

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Evaluations

Monthly:

There will be regular monthly evaluations to monitor progress.

Account Performance:

1. If account drops from $5,000 to $4,000 there will be an evaluation.

2. Anytime there are 2 decreases in lot size there will be an evaluation.

3. At the following increase levels, additional evaluations will come at:

A. $10,000

B. $25,000

C. $50,000

D. $100,000

E. $250,000

F. $500,000

Performance evaluations are mainly to determine whether number of strategies are

adequate to maintain growth level and/or drawdowns are within limits.

(NOTE – Evaluations are not meant to micro manage the trading plan, merely to ensure

verify that changes are not needed at any given level. Most modifications to a trading plan

are minor and occur more at the beginning to more accurately align the trading plan with

the real-time performance of the plan).

Back Up Trading Plan

Evaluations are scheduled at $4,000 and any time there are 2 decreases in the lot size.

Should the account reach the $3,000 level (40% loss of starting account value), the back up

plan will be implemented. The back up plan will consist of trading 1 mini contract on one

high-probability strategy while capping the risk by taking trades that are limited to 50 pips

or less ($50).

Time Expectations

The slowest growth period is to be expected during the first 3 – 6 months of the trading

plan. This is due to the smaller trade size and limited number of strategies that are being

traded in the beginning. As trade size increases and the number of strategies being

implemented are added, the growth rate begins to become more geometric. Below are the

range expectations of performance provided that strategies perform within expectations.

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Month Min Exp Max Exp

1 $4,500 $6,500

2 $5,500 $8,000

3 $6,500 $10,000

4 $8,000 $12,500

5 $10,000 $17,000

6 $12,500 $24,000

7 $17,000 $30,000

8 $23,000 $40,000

9 $30,000 $52,000

10 $40,000 $65,000

11 $52,000 $80,000

12 $65,000 $97,000

These expectations are not the absolute, but the general ranges of account performance

should strategies perform as expected. If the account is falling below the minimum

expectations, the strategies are not performing and it will be addressed during the monthly

evaluations or other evaluations set up. It is also possible for the account to over-perform

with growth to the $100,000 mark as soon as the 6-month period, but this would be an

improbable exception.

These are general guides and AVERAGES only.

End.