How to Write a Trading Plan
A trading plan is a written document that defines exactly how you trade. What you trade, when you trade, how you enter, how you exit, and how much you risk. Without one, you are gambling. With one, you have a business.
Why Most Traders Skip This Step
Because it is not exciting. Nobody gets a dopamine hit from writing rules in a Google Doc. They want to find the next 10-bagger on TikTok. But here is the reality: every profitable trader has a plan. Every blown account started without one.
Think About It
Would you invest £50,000 in a business with no business plan? No financial projections? No operating procedures? Of course not. Your trading account IS a business. Treat it like one.
Section 1: Trading Goals
Be specific and realistic. "I want to make money" is not a goal. Here are examples of proper goals:
Short-term (3 months):
- Complete 50 trades following my plan exactly
- Keep a journal for every trade
- Achieve a win rate above 45%
Medium-term (12 months):
- Grow account by 15-20% (not 500%, be real)
- Reduce average losing trade size by 20%
- Trade consistently 4 days per week
Long-term (3 years):
- Build account to fund a part-time trading lifestyle
- Develop a second strategy to diversify
Reality Check
If your goal is "turn £1,000 into £100,000 in a year," close this page and go do something else. That is not trading, that is lottery thinking. Consistent 1-3% monthly returns on a growing account is how real wealth is built through trading.
Section 2: Market and Timeframe
Define exactly what you trade and when:
- •Markets — FTSE 100 stocks, major forex pairs, US indices? Pick 2-3 markets maximum. Master them before adding more.
- •Timeframe — daily charts for swing trading? 15-minute for day trading? Be specific. Trading the 1-minute chart one day and the weekly the next is a recipe for confusion.
- •Trading hours — when do you sit at the screen? UK market hours (8am-4:30pm)? The US open (2:30pm-4:30pm UK time)? Asian session? Define it.
- •Trading days — every weekday? Monday to Thursday (avoiding Fridays before big weekends)? Write it down.
Section 3: Entry Rules
This is where you define your edge. What conditions must be true before you click buy or sell? Be mechanical:
Example entry rules (trend-following strategy):
1. Price above 200 SMA (long-term uptrend)
2. Price pulls back to 20 EMA
3. Bullish candlestick pattern at the 20 EMA
4. RSI between 40-60 (not overbought)
5. No major news event in next 2 hours
ALL five conditions must be true. Not four. Not three. All five.
If any condition is missing, I do not trade. Period.
Section 4: Exit Rules
Entries get all the attention. Exits are where the money is made or lost:
- •Stop loss — defined before entry. Below the 20 EMA or recent swing low. Never moved further away.
- •Take profit — at the next resistance level, or 2x the risk distance, or trailing stop. Pick one method and stick with it.
- •Time-based exit — if the trade has not moved in your favour within 3-5 candles, close it. Dead money sitting in a flat trade could be deployed elsewhere.
Section 5: Risk Rules
- •Risk per trade: 1% of account balance
- •Maximum open positions: 3
- •Maximum daily loss: 2% (then stop for the day)
- •Maximum weekly loss: 5% (then review and reset)
- •No trading during major news events (NFP, rate decisions, elections)
- •No trading when tired, stressed, or after alcohol
The Review Process
Your trading plan is a living document. Review and update it:
- •Weekly — review all trades against your plan. How many followed the rules? What was the result of rule-following trades vs. impulse trades?
- •Monthly — review overall performance. Are you on track for your goals? Does anything in the plan need adjusting?
- •Quarterly — deep review. Backtest any proposed changes before implementing them. Never change your plan mid-trade or mid-losing streak.
Golden Rule
Never change your plan because of a single trade outcome. One loss does not invalidate a strategy. One win does not validate reckless behaviour. Decisions should be based on data from 50+ trades, not emotions from the last one.
Risk Warning
Having a trading plan does not guarantee profits. Trading financial instruments carries a high level of risk. This content is for educational purposes only and does not constitute financial advice.