Key takeaways
- A plan is a decision document written before the pressure arrives.
- Cover purpose, markets, timeframes, setups, exits, risk, routine and review.
- Make every rule checkable with a yes or no answer.
- Keep risk rules as the core, and change rules only on scheduled review days.
A trading plan is a written set of rules that decides in advance what you will trade, how much you will risk and when you will stop. Its main job is not to make you clever. It is to stop you from improvising under pressure, when improvised decisions tend to be at their worst. This template can be copied, filled in and revised as you learn.
What a plan is and is not
A plan is a decision document. It answers questions in a quiet moment so that you do not have to answer them while a position is moving against you. It is not a prediction of where a market will go, and it is not a promise that following it will pay. A plan can be followed perfectly and still lose over a short period, because a sound method has losing streaks.
A good test is whether a stranger could read it and tell, for any given chart, whether a trade is allowed and how big it should be. If the answer depends on how you feel that day, the plan has gaps.
The eight-part template
Fill these in once, then revise on a schedule
- Purpose and constraints. State why you trade and what the money is for. Note the amount you can afford to lose without changing your life, and the time you can realistically give each day.Tip: Money you will need within a year does not belong in a leveraged account.
- Markets and instruments. List the few markets you will trade and why, for example two or three currency pairs or a small group of liquid shares. Fewer instruments means you learn their habits and costs.
- Timeframe and trading hours. Choose the chart timeframes you use for context and for timing, and the hours you will be at the screen. A plan that requires watching charts overnight needs automated protection.
- Setup conditions. Describe in checkable terms what must be true before you consider a trade: trend direction, a level, a pattern, a volatility filter. Keep it short enough to hold in your head.
- Entry, stop and exit rules. Define how you enter, where the stop goes and why, and how profits are taken. Say what you do when the trade is partly through, and what you do if the setup is invalidated before the stop.
- Risk rules. Fix risk per trade as a percentage of the account, a maximum daily or weekly loss, a maximum number of open positions and a limit on correlated exposure.
- Routine and records. Define the pre-session check, the news calendar scan, and what you record after each trade. A journal turns the plan into data.
- Review and change control. Set how often you review and what evidence is needed to change a rule. Changes happen on review days, not in the middle of a drawdown.
A filled-in example
The table below shows how the sections might look for a part-time swing trader. Every entry is an illustration of the format, not a recommendation of a method or a market.
| Section | Illustrative entry |
|---|---|
| Purpose | Learn the craft with a small account; no withdrawals needed for 12 months |
| Markets | Three major currency pairs; no exotic pairs, no thin shares |
| Timeframes | Daily chart for direction, 4-hour chart for timing; review once in the evening |
| Setup | Trend defined by structure on the daily chart; trade only pullbacks into a marked zone |
| Entry and stop | Stop beyond the last swing plus a volatility buffer; skip the trade if the stop is wider than the plan allows |
| Risk | 1% per trade, 3% maximum open risk, pause for the day after two losses, pause for the week after a 5% weekly loss |
| Routine | Check the economic calendar; no new trades 30 minutes before or after high-impact releases |
| Review | Every 20 trades; a rule changes only if the journal shows a consistent problem |
Writing rules you can actually check
Vague rules fail on the day that matters. Compare 'only trade when the trend is strong' with 'only trade when price has made two higher lows on the daily chart and sits above the 50-period moving average'. The second can be answered yes or no. It may still be a poor rule, but you can test it, journal it and improve it, which is impossible with the first.
- Prefer numbers to adjectives: 'at most three trades a day' beats 'don't overtrade'.
- Write exits as carefully as entries; most plans spend 90% of their words on the entry.
- Include a rule for doing nothing: what a no-trade day looks like and what you do with the time.
- Add a 'what if' list: platform outage, a gap through your stop, a margin call warning, an unexpected news headline.
Reviewing and changing the plan
A plan that never changes will eventually stop fitting, and one that changes after every loss is not a plan at all. A workable compromise is to separate observation from adjustment. During the trading week you only record. On the review day you look at a sample of trades, compare results with expectation, and decide whether a rule needs altering.
Be especially wary of changing rules straight after a losing streak. A streak of five losses is often normal variance, particularly if you were following the plan. If the journal shows the losses came from rule breaks, the fix is discipline, not a new method. If every trade followed the rules, wait for a larger sample before concluding that the rules are broken.
Frequently asked questions
How long should a trading plan be?
Usually one to two pages. If you cannot hold it in your head, you will not follow it under stress. A short plan with precise rules beats a long one with vague ones.
Do investors who buy and hold need a plan?
Yes, but a different one: contribution schedule, allocation targets, rebalancing rules and what you will do in a large market fall. The same principle applies, which is to decide before the stress.
What if I follow the plan and still lose?
That can happen over short periods. Compare the results with the plan's expected range, check costs and execution, and wait for a meaningful sample before changing the method.
Should my plan include profit targets?
It should say how profits are handled, whether that is a fixed target, a trailing stop or a time exit. Not having a rule leaves the decision to emotion.