A trading plan is a comprehensive written document that defines how you trade—covering everything from entry and exit rules to risk management, position sizing, and daily routines. It transforms trading from emotional gambling into systematic execution. Without a plan, you’re making it up as you go. With one, every decision is predetermined.
- A written plan removes emotion from trading decisions
- Covers: strategy, risk rules, sizing, routine, and review process
- Should be specific enough that someone else could follow it
Trading Plan Components
A complete trading plan includes:
Trading Plan Framework:
1. Trading Philosophy & Goals
2. Markets & Instruments
3. Entry Rules (specific conditions)
4. Exit Rules (stops, targets, time)
5. Position Sizing
6. Risk Management Rules
7. Daily Routine
8. Psychology Guidelines
9. Review & Improvement Process
Quick Reference: Plan Sections
| Section | Key Questions | Example |
|---|---|---|
| Goals | What am I trying to achieve? | 15% annual return, max 10% drawdown |
| Markets | What do I trade? | Nifty 50 stocks, liquid names only |
| Entry | When do I buy? | Breakout above 20-day high with 150% volume |
| Exit | When do I sell? | 8% trailing stop or major resistance |
| Size | How much per trade? | 1% risk, max 5% of portfolio |
| Risk | What are my limits? | Max 2% daily loss, stop trading after 3 losses |
Example: Simple Trading Plan
Goal: Consistent 20% annual return with max 15% drawdown
Markets: Top 100 NSE stocks by volume
Entry Criteria:
- Stock in uptrend (above 50-day MA)
- Pulls back to 20-day MA
- RSI between 40-50
- Bullish reversal candle at MA
Exit Rules:
- Stop loss: 2× ATR below entry
- Target 1: 1.5R (sell 50%)
- Trailing stop: 10-day low (remaining 50%)
Position Sizing:
- Risk 1% of portfolio per trade
- Maximum 5 positions
Daily Routine:
- 8:30 PM: Scan for setups
- 9:00 AM: Review pre-market, adjust orders
- 3:00 PM: Update trailing stops
- 4:00 PM: Journal trades
Risk Rules:
- Maximum 3% daily loss → stop trading
- 2 losses in a row → reduce size 50%
- 5% weekly profit → reduce size Friday
A trading plan is a written document defining your complete trading approach. It includes entry and exit rules, position sizing, risk limits, and daily routines. Every decision should be predetermined, removing emotion from trading.
Why Most Traders Don’t Have Plans
1. Overconfidence
“I know what I’m doing” → Until stress hits and emotions take over.
2. Laziness
Creating a plan takes effort. Trading without one feels easier (until losses mount).
3. Vague Plans
“Buy quality stocks on dips” isn’t a plan. Specific rules feel constraining but work.
4. Fear of Commitment
A written plan means accountability. Many prefer to hide behind vagueness.
How to Create Your Trading Plan
Step 1: Define Your Goals
What return are you targeting? What drawdown can you tolerate? What’s your trading style?
Step 2: Choose Your Markets
What instruments? What criteria for selection? What hours will you trade?
Step 3: Define Entry Rules
What specific, measurable conditions trigger an entry? Be precise.
Step 4: Define Exit Rules
Where’s your stop? What’s your target? When do you trail?
Step 5: Set Position Sizing
How much per trade? Based on what (percentage risk, fixed amount)?
Step 6: Create Risk Rules
Maximum loss per day? Per week? When do you stop trading?
Step 7: Design Your Routine
Pre-market, during market, post-market. What happens when?
Step 8: Plan for Review
Weekly review? Monthly? What do you measure?
Living By Your Plan
The Test: When a setup triggers, do you need to think about whether to take it? If yes, your plan isn’t specific enough.
The Discipline: Following your plan when you don’t feel like it is the entire game. Anyone can follow a plan when it’s easy.
Common Mistakes
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No written plan – A plan in your head changes with your mood. Write it down.
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Too vague – “Buy strong stocks” isn’t actionable. Define every term.
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Changing mid-trade – The plan was right when you made it. Trust it.
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Never updating – Plans should evolve through formal review, not random changes.
How JournalPlus Supports Your Trading Plan
JournalPlus helps you document your trading plan and tracks whether you’re following it. By logging each trade’s setup versus your rules, you can measure plan adherence and identify where you deviate, helping you build consistency.
