Trading Plan

Introduction

A trading plan is a comprehensive, written document that defines your trading business. It acts as a professional roadmap, outlining exactly what assets you trade, when you will enter, how you will manage risk, and how you will review performance. Without a written plan, you are not trading; you are gambling based on whim and emotional reactions.

Why It Matters

• Protects Account Equity: Strict, pre-defined risk parameters prevent one emotional mistake from wiping out your capital.
• Builds Consistency: Ensures you execute the same edge in the same manner, allowing probabilities to play out over time.
• Simplifies Execution: Eliminates the stress of deciding what to do under pressure. The plan has already made the decision for you.
• Establishes Accountability: Creates a clear boundary between disciplined trades (following the plan) and emotional mistakes (violating the plan).

Structure of a Professional Trading Plan

A complete trading plan must contain the following six core sections:

  ┌─────────────────────────────────────────────────────────┐
  │ 1. Philosophy & Goals (Why you trade, target metrics)   │
  ├─────────────────────────────────────────────────────────┤
  │ 2. Risk Management (Risk per trade, max daily drawdown) │
  ├─────────────────────────────────────────────────────────┤
  │ 3. Market Filters (What assets, timeframes, and hours)  │
  ├─────────────────────────────────────────────────────────┤
  │ 4. Entry Rules (Exact technical triggers for setups)    │
  ├─────────────────────────────────────────────────────────┤
  │ 5. Exit Rules (Stop-loss, target, and trailing rules)   │
  ├─────────────────────────────────────────────────────────┤
  │ 6. Routine & Review (Pre-market prep, journal habits)   │
  └─────────────────────────────────────────────────────────┘

Writing Entry and Exit Rules

Your rules should be so clear that a computer or a third party could execute them.

• Vague Rule: "Buy when the trendTrendThe general direction in which a security or market is moving over time.Read full glossary entry → looks strong and RSI is oversold."
• Systematic Rule: "Buy on the close of a bullish engulfingBullish EngulfingA two-candle reversal pattern where a small bearish candle is followed by a larger bullish candle whose body completely overlaps or "engulfs" the prev...Read full glossary entry → candle that forms at the daily horizontal supportSupportA price level where buying pressure is strong enough to prevent the price from falling further. It represents a "floor" on the chart.Read full glossary entry → zone, provided the 4-hour trendTrendThe general direction in which a security or market is moving over time.Read full glossary entry → is bullish (price > 50 EMA) and RSI(14) on the 1-hour is below 30."

Routine & Review Habits

Professional plans outline your Daily Routine:

1. Pre-Market Prep: Review economic calendar events, check HTF charts, mark key levels, and establish daily bias.
2. Active Session: Execute trades ONLY when your rules are met. Do not search for setups that are not there.
3. Post-Market Review: Log all trades in your journal, screenshot charts, and calculate daily P&L.

Common Mistakes

[!WARNING]

• Keeping the Plan in Your Head: If your plan is not written or typed out, it is not a plan. Under emotional pressure, your mind will bend rules that are not physical.
• Rule-Hopping: Changing rules after three losses. A strategy needs a sample size of 50–100 trades to prove its expectancy. Give the strategy room to work.
• Ignoring the Daily Circuit Breaker: Exceeding your daily drawdown limit because you want to "get back to even." If you hit your limit, shut down the platform immediately.