Trading plan
A trading plan is a written set of rules: what, when and how you trade, how much you risk and what you do after losses. It replaces in-the-moment emotional decisions with ones made in advance.
How it works
You write the plan before trading, while calm. It usually covers: markets and timeframes, trading hours, exact entry conditions, where the stop and take-profit go, risk per trade as a percentage, daily and weekly loss limits, the maximum number of trades, and rules for moving stops and taking partial profit.
Why it matters: during a trade your thinking gets worse, and fear and greed push you into mistakes. If the rules are already written, your job is simply to follow them. A plan also makes results measurable: you can compare trades that followed it with those that did not, and see whether the problem is the strategy or your discipline.
A plan is not set in stone. Review it based on your trade journal, for example once a month, not in the middle of a trading day after a bad trade.
A short example plan. Markets: BTC and ETH, 4-hour chart. Entry: only in the direction of the daily trend, on a pullback to a level with a confirming candle. Stop: beyond that candle's extreme. Target: at least 2R. Risk: 1% of the account. Daily limit: −3%, after which trading stops until tomorrow. Maximum 3 trades a day.
The mistake is writing a plan and not following it, or keeping it 'in your head'. A plan you do not follow is useless, and one in your head changes with your mood. Write it down, keep it in view while trading and after each trade note in your journal whether you stuck to the rules.
Questions and answers
What is a trading plan in simple terms?
It is your instruction sheet for trading: where and when to enter, where to exit, how much to risk and when to stop.
What should a trading plan include?
Markets and timeframes, entry and exit rules, risk per trade, loss and trade-count limits, and how you keep your journal. The more specific, the better.
How often should you change your trading plan?
Not mid-day because of one trade. Review it using your journal statistics, for example once a month or after a meaningful number of trades.
Related terms
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Updated: 2026-10-19