A trading plan isn't a prediction about the market. It's a set of decisions made in advance, while you're calm, about what you'll do when you aren't.
What should a trading plan include?
A usable trading plan defines your markets and timeframe, the specific setups you'll take, entry triggers, stop and target logic, risk per trade and total open risk, daily and weekly loss limits, and your review routine. It should be short enough to read before a session and specific enough that someone else could follow it.
The eight sections
- Scope. Which instruments, which sessions, which timeframe. Narrow beats broad — you cannot develop a feel for forty markets at once.
- Setups. Name each one and describe its conditions concretely enough to be recognised or rejected in seconds.
- Entry trigger. The event that puts you in — a break, a close, a retest. A trigger, not a forecast.
- Stop logic. How you'll place invalidation. See where to place a stop loss.
- Exit logic. Targets, partial exits, trailing rules. Write how you'll let winners run, or you won't.
- Risk rules. Risk per trade, maximum simultaneous open risk, correlation limits.
- Circuit breakers. The daily and weekly loss that stops you trading, and the drawdown that cuts your size.
- Review. When you read the journal and what you do with it.
The pre-trade checklist
The plan is the constitution; the checklist is what you actually run before clicking. Five questions, answered honestly:
| Check | Pass condition |
|---|---|
| Is this a named setup in my plan? | Yes — or no trade |
| Where is invalidation? | A specific price, set before entry |
| What is the reward-to-risk? | At or above my written minimum |
| What size does the formula give? | Computed, not estimated |
| Am I within my risk limits today? | Open risk and loss limit both fine |
Any "no" ends the trade before it starts. The checklist's value isn't the trades it approves — it's the ones it quietly deletes.
Write it so it constrains you
Vague plans are comfortable and useless. "I'll take good setups in trending markets" permits everything. "I'll take pullbacks to the 20-period average in markets making higher highs and higher lows on the daily, risking 1%" permits one thing and forbids the rest. If your plan can't tell you no, it isn't a plan.
Keep it to a page or two. A twelve-page document is a writing project you'll never consult at 9:31am.
Update it deliberately, never mid-trade
Plans should change — when the journal shows a setup has negative expectancy, or a market regime shifts. But changes get made at review time, in writing, with a reason. Rules edited while a position is open aren't adjustments; they're rationalisations. That distinction is most of the discipline in trading.
Frequently asked questions
How long should a trading plan be? One to two pages. Long enough to be specific, short enough to reread before every session.
Do I need a plan if I only trade occasionally? Especially then. Infrequent traders get less practice, so pre-written rules do more of the work.
What if I break my own plan? Record it in the journal with the outcome. Repeated breaks usually mean the rule is unrealistic, not that you lack willpower — fix the rule.
A single tactic rarely changes an account; a repeatable process does. The Asymmetric Trader's Playbook ($29, reg. $39) walks through the full risk-first framework in seven parts — sizing, edge and expectancy, market regime, entries and exits, psychology, the journal, and a failure-mode audit.
More in the Make Money guides.
This article is general education, not financial, investment, or tax advice, and it is not a recommendation to buy or sell anything. All figures are hypothetical and illustrate a method only. Investing and trading involve real risk of loss — use money you can afford to put at risk, and consult a licensed professional before acting.