In this lesson
- find out everything that belongs in a trading plan
- see an example of a one-page plan
- set limits that stop you before you do damage
Pilots use a checklist even after ten thousand hours of flying. Not because they cannot fly, but because everyone makes mistakes under pressure. A trading plan is the same thing for trading: you make all the important decisions in advance, with a clear head – and in the trade you only follow them.
What belongs in the plan#
- Markets and timeframes – what you trade (say only BTC and ETH) and on which charts (week, day, four hours).
- The situation you are looking for – described exactly. Not "when it looks good", but for example "price above a rising SMA 200, a retest of a support zone on the daily chart".
- Entry – what has to happen for you to buy, and with which order.
- Stop-loss – where exactly and why there (where your idea turns out wrong).
- Exit – a profit target, a trailing stop or another rule. And when you end the trade even if it reached neither the target nor the stop-loss.
- Position size – risk per trade (say 1%) and the formula.
- Limits – how much you may lose in a day, a week and a month before you stop trading.
- When you do not trade – before major news, when you are tired, angry or after a losing streak.
- Review – when and how you go through your journal (more in the next lesson).
An example of a one-page plan#
| Item | My rule |
|---|---|
| Markets | BTC/USDT, spot, no leverage |
| Timeframes | week for direction, day for structure and zones, 4 hours for entry |
| Situation | price above a rising SMA 200 (day) and a retest of a broken resistance |
| Entry | limit order in the zone, only after a 4h candle closes above the zone |
| Stop-loss | below the bottom of the zone, at least 1.5% below the entry |
| Exit | half at +2R, the rest with an 8% trailing stop |
| Risk | 1% of the account per trade, at most 2 open trades |
| Limits | −3% in a week or 4 losses in a row = a week off |
| I do not trade | on major news days, after midnight, when I am angry |
| Review | journal every Sunday, statistics in R every month |
This is not a recommended strategy – it is an example of what a specific plan looks like. Yours can be completely different. What matters is that it is written down and unambiguous: if someone else got it, they would make the same trades.
Limits: the emergency brake#
The most important part of the plan is the one most often forgotten: when to stop. After a losing streak people try to "win it back" – they increase positions and break rules. A firm limit (say a week off after −3%) stops the damage before a bad week turns into a bad year.
A plan you do not follow is not a plan
Most traders have some kind of plan – in their head. But a plan in your head is easy to change in the middle of a trade. Write it down and change it only at the weekend, never with an open position.
Common myths#
- "I have the plan in my head." A plan in your head changes with your mood.
- "The plan restricts me." That is the point – it restricts the decisions you make under stress.
- "If I break the plan and it works out, it does not matter." It does. You learned that breaking rules pays off.
Summary
- A trading plan is a list of decisions made in advance, with a clear head.
- It covers markets, the situation, entry, stop-loss, exit, position size, limits and review.
- It has to be written down and so unambiguous that someone else would make the same trades from it.
- Loss limits stop you before a bad week turns into a bad year.