A trading plan is a written set of rules that governs every trade you take. Without one, you are gambling. With one, you are running a business. Every professional trader has a plan. This lesson shows you how to build yours.
Why You Need a Plan
When real money is on the line, emotions take over. Fear makes you close winners too early. Greed makes you hold losers too long. A plan removes the need to make decisions in the heat of the moment — you have already decided. You just execute.
Components of a Trading Plan
Key Concept
Your plan should answer these questions BEFORE you trade:
1. What market? (e.g., FTSE 100 stocks, major forex pairs)
2. What timeframe? (e.g., daily charts for direction, 4hr for entry)
3. What strategy? (e.g., pullbacks to the 20 EMA in an uptrend)
4. Entry criteria? (e.g., price touches 20 EMA + bullish engulfing candle + RSI above 40)
5. Exit criteria? (e.g., target at previous resistance, stop below previous low)
6. Risk rules? (e.g., max 1% per trade, max 3 trades per day, no trading during news)
Example Trading Plan
Market: FTSE 350 stocks
Timeframe: Daily chart (trend), 4-hour chart (entry)
Strategy: Trend-following pullback entries
Entry rules: Stock must be above 200 SMA (uptrend). Wait for pullback to 20 EMA on daily. Enter on bullish reversal candle (hammer or engulfing) with RSI between 30-50.
Stop loss: Below the pullback low, minimum 1.5x ATR.
Target: Previous swing high or 2x the risk distance.
Position size: 1% account risk per trade.
Max exposure: No more than 5% of account in open trades.
No-trade rules: No trading on FOMC days, no trading after 2 consecutive losses (take a break).
Trade Journaling
Every trade you take should be recorded. Your journal is your most valuable learning tool:
| Field | Example |
|---|---|
| Date | 15 March 2026 |
| Asset | Barclays (BARC) |
| Setup | Pullback to 20 EMA, hammer candle |
| Entry | £2.45 |
| Stop loss | £2.35 |
| Target | £2.65 |
| R:R | 1:2 |
| Result | Target hit, +£100 |
| Notes | Clean setup, followed plan perfectly |
Monthly Review
At the end of each month, review your journal. Look for patterns: Are your winners bigger than your losers? Which setups perform best? Which perform worst? Are you following your plan, or breaking rules? Adapt based on data, not feelings. If something is not working after 30+ trades, change it. If it is working, do more of it.
Example
After 3 months of journaling, you discover that your breakout trades have a 30% win rate but your pullback trades have a 55% win rate. The data tells you clearly: take more pullback trades and fewer breakout trades. Without the journal, you would never have known this.
Risk Disclaimer: Trading financial markets involves significant risk of loss. The content on this page is for educational purposes only and does not constitute financial advice. Past performance is not indicative of future results. You should not trade with money you cannot afford to lose. 70-80% of retail investor accounts lose money when trading CFDs and spread bets. Consider whether you understand how these products work and whether you can afford the high risk of losing your money.