A trading plan is a set of decisions made before you trade. Its purpose is not to predict the market; it is to reduce improvisation: what you can trade, which conditions you require, how much you are willing to risk and what you will do when the market—or your own behaviour—moves away from the planned scenario.
1. Define the purpose of the plan
Start by clarifying what type of trading you want to execute and how you will measure it. A useful objective goes beyond “make money”; it should include process, timeframe and measurable criteria. For example: trade only selected sessions, cap risk per trade, follow two defined strategies and review results every week.
2. Define markets, hours and context
Specify which markets you are allowed to trade and during which windows. If your performance changes between the open, mid-session and close, that information should be part of the plan rather than an in-the-moment decision.
- Permitted markets and instruments.
- Trading sessions and hours.
- Days or events you will avoid.
- Minimum liquidity or volatility conditions when relevant.
3. Describe each strategy
A strategy should be recognisable before entry. Define context, setup, mandatory conditions, trigger, invalidation and exit. If the description only makes sense after you know the outcome, objective analysis becomes much harder.
4. Turn risk into rules
Risk should be decided before every trade. Include at least risk per trade, maximum daily or session loss, simultaneous exposure and criteria for reducing or stopping trading.
Also decide how results will be measured: money, percentage, R/risk units or a combination. Risk units make trades comparable even when monetary size changes.
5. Define position management
Specify what happens after entry: initial stop, target, partial exits, break even, trailing, maximum time in market or invalidation exits. The more management depends on improvised decisions, the harder it becomes to separate strategy from emotion during review.
6. Add behavioural limits
A plan should govern not only the market but also the trader. Common limits include a maximum number of trades, no risk increase after a loss, mandatory pauses after a defined sequence, or a ban on trading outside approved setups.
7. Build a pre-trade checklist
Before opening a position, a short checklist can confirm the minimum conditions: correct market, valid strategy, calculated risk, acceptable context and no incompatible event around the setup.
8. Decide how the plan will be reviewed
A plan is a working document, not an immutable rulebook. Reviews should be data-driven. Decide how often you will review results and what evidence is required before changing a rule.
Avoid changing the plan after one loss or a short streak. Separate strategy problems, execution problems and small-sample noise.
How Trading Life Journal can help
Trading Life Journal lets you define rules, strategies, conditions, markets, risk and other plan components, then connect them with your actual trades. That makes it possible to review not only how much you made, but what happened when you followed—or broke—the plan.