What is a trading plan?
A trading plan is a written set of rules that decides in advance what you trade, when you enter and exit, how much you risk and when you stop for the day. Its value is that it is written while you are calm, so decisions in the moment become checks against it rather than new choices.
Key points
- Written in advance, checked at the moment of entry.
- Covers setups, risk, limits and the trader’s own rules.
- A trade that breaks it is an off-plan trade — worth tracking separately.
What a trading plan includes
- Markets and sessions you trade.
- Setups: what qualifies an entry, where the stop goes, where you take profit.
- Risk: risk per trade, daily loss limit, maximum number of trades.
- Rules for yourself: when not to trade, the pause after a loss, when to stop.
Why writing it down helps
Plans phrased as if-then rules — “if price reaches my level and the stop fits my risk, then I enter” — are acted on more reliably than general intentions. A meta-analysis of 94 tests found a medium-to-large effect of such plans on reaching goals (Gollwitzer & Sheeran, 2006).
Off-plan trades
An off-plan trade breaks at least one rule of the plan. Marking them makes their cost visible: compare the results of on-plan and off-plan trades over a month, in R. In StatWidget an entry whose checklist answers go against the plan is recorded as “against plan”, and the dashboard shows what those trades cost.
Example
A one-screen day plan: EURUSD and GBPUSD; London open; levels from the morning analysis; 0.5% risk per trade; a 1.5% daily loss limit; at most 3 trades; stop after 2 losses; no trading 30 minutes around high-impact news.
Numbers are illustrative.
Questions
How detailed should a trading plan be?
Detailed enough that two people would make the same decision from it. A rule that needs interpretation in the moment tends to be interpreted in your favour.
What is the difference between a trading plan and a strategy?
A strategy says when the market offers a trade. A plan adds how much you risk, how many trades you take and when you stop — the rules for the trader.