The trading plan

A written plan does four things that memory and intuition cannot:

• 1It removes improvisation. Decisions are made beforehand, not in the middle of a price move.
• 2It makes decisions repeatable. You can execute the same thing dozens of times, the same way.
• 3It lets you measure. If the rules are fixed, you can see what works and what does not.
• 4It protects you from emotion. Fear and greed show up anyway; the plan tells you in advance what to do when they appear.

The realistic context: trading leveraged instruments is hard. Data published by regulated brokers in the EU, under ESMA requirements, shows that between 74% and 89% of retail investor accounts lose money on CFDs. A plan does not change this risk and does not guarantee profit. But the absence of a plan all but guarantees inconsistency — and inconsistency is the first thing that separates those who stay in the market from those who leave.

Four words are often used as synonyms. They are not. Separating them helps you understand exactly where the plan sits and why it contains the others.

In other words: the technique is a brick, the strategy is the wall, the system is the room, and the plan is the house you live in as a trader. For actually building strategies and systems, see the Trading strategies section.

A complete trading plan covers ten blocks. You can write them on a single page or on ten — what matters is that they all exist. Below are the ten, each with the page where we cover it in detail.

Process goals, not just outcome goals

A process goal — "I follow the entry rules on every trade", "I fill in the journal every day" — is within your control. An outcome goal — "I make X%" — also depends on the market. Good plans put the emphasis on the processes you can control. Avoid targets like "double the account in three months": they push you toward excessive risk and emotional decisions.

The profile: the plan fits the real person

• Capital. How much you can allocate without affecting your day-to-day life. There is no universally "correct" amount — it depends on your situation and your appetite for risk.
• Time. How many hours a day you can watch the market. This determines the style you can realistically practice.
• Risk tolerance. How much you can lose on a trade without making emotional decisions.

Trading style largely derives from the time available:

There is no "better" style. There is the style that fits your life — and a plan that demands more time than you have leads to poor execution.

What you trade — and what you do not

The plan sets out the instruments you trade and, just as importantly, the ones you avoid. Specialization beats dispersion: it is easier to know a few instruments well (a few currency pairs or a few indices) than to track dozens. For over-the-counter (OTC) derivatives, such as CFDs, the plan also notes the costs that affect your result: spread, commission, swap.

Strategy and systems — the execution part

Here you write, as precisely as possible:

• AThe setup — what conditions must be present for a trade to exist.
• BThe entry — at what price or signal you get in.
• CThe profit exit — where you close your gain.
• DThe loss exit — where the stop-loss is, decided before the entry.
• EThe confirmations — what confluences you look for (level + trend + signal).

Recommendation: attach screenshots with examples of valid and invalid setups. A plan with images is easier to follow than one with text alone. For actually building strategies, see Trading strategies, Technical analysis and Fundamental analysis.

This is where the plan becomes a defense system. Three rules underpin most serious plans:

• 1Risk per trade. Many traders limit the potential loss to a small percentage of capital on a single trade (a commonly used benchmark is 1-2%). The exact percentage depends on your tolerance — what matters is that it is fixed and written down.
• 2Maximum loss per day or week. A threshold that, once reached, stops you from trading. It protects the account on bad days, when the temptation to "win it back" is greatest.
• 3Risk/reward ratio. How much you risk versus how much you aim to gain. The plan can require a minimum ratio on each trade (for example, you risk 1 to aim for at least 2).

Position sizing ties these rules to reality: how many units you open so that, if the stop-loss is hit, the loss is exactly the percentage you set — no more. We do not go into formulas here; we cover them on the dedicated pages:

• Risk management — stop-loss, risk/reward ratio, maximum loss, drawdown.
• Account size — position sizing relative to capital.

The plan is not a document you write once and forget. It becomes useful through the daily routine. A typical routine has three moments:

Before the session

• You check the economic calendar for high-impact news.
• You note the levels and instruments to watch.
• You confirm your state: if you are tired or tense, the plan can say "I do not trade today".

During the session

• You execute only the setups from the plan.
• You place the stop-loss at the moment of entry, not later.
• You do not change the rules "on the fly". Pre-planned management (moving to breakeven, partial closes) is allowed; emotional improvisation is not.

After the session

• You record the trades in the journal.
• You note what you followed and what you did not.

A short, tickable checklist is worth more than a long text you do not read.

Three components of the plan decide whether the rest works in practice:

Psychological rules

The plan says in advance what you do in the difficult moments: after two consecutive losses, after a big win, when you feel the urge to "win it back". Written with a cool head, these rules protect you from decisions made in the heat of the moment. The mental side — fear, greed, cognitive biases — we cover separately on the Trading psychology page.

Record-keeping

The plan sets out what you record for each trade and how you review the data. The journal is the tool through which the plan becomes measurable. What to note and which metrics matter — on the The trader's journal page.

Review

A plan is not fixed forever, but it does not change after every bad day either. The professional benchmark: you review at fixed intervals (weekly, monthly, quarterly) and change the rules only based on a sufficient sample of trades, not on a single loss. A commonly used methodological rule calls for at least roughly 30 trades for basic patterns and 50-100 for stable conclusions about a system.

A simple way to start, without getting stuck for months on the "perfect plan":

• 1Define your profile and process goals (ch. 05).
• 2Choose the markets and instruments — few at the start (ch. 06).
• 3Write a single clear system: setup, entry, profit exit, stop-loss (ch. 06).
• 4Set the risk rules: percentage per trade, maximum loss per day, minimum risk/reward ratio (ch. 07).
• 5Write the routine and the daily checklist (ch. 08).
• 6Write the psychological rules and the journal format (ch. 09).
• 7Test the plan on a demo account before real capital. The demo does not reproduce emotional pressure, but it shows whether the rules are clear and executable.
• 8Review at a fixed interval and adjust based on the data.

• A plan that is too complicated. Dozens of rules you cannot follow. Start simple and add as you go.
• A plan without risk rules. The strategy gets all the attention, the risk none. This is exactly the opposite of how it should be.
• Changing the plan after every loss. A loss does not mean the plan is wrong; it can be normal variance.
• Unrealistic outcome goals. "Get rich quick" targets push you toward excessive risk.
• A plan that is written but not followed. A plan in a drawer changes nothing. The value comes from execution and review.
• Copying someone else's plan. What works for someone else may be unsuitable for your capital, time and temperament.