Trading Plan
A written set of rules defining what you trade, how you size it, and when you exit.
Also called: plan · trading rules · system
In plain language
A trading plan converts decisions into rules made in advance, when you are calm and have no money on the line.
A usable plan is specific: which setups qualify, what risk per trade, where the stop goes, what invalidates the idea, and what daily or weekly loss ends the session.
Its real function is not prediction. It is removing improvisation from the moments when improvisation is most expensive.
Why it matters
Nearly every catastrophic trading loss is a departure from a plan rather than a failure of one. The plan is what makes the departure visible.
Common mistakes
- Writing a plan so vague that no action could ever violate it.
- Changing the plan while a position is open.
- Having entry rules but no rules for sizing or for stopping after a bad run.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
The set of rules that decides how much you can lose, before you think about what you can win.
A record of every trade, including the reasoning behind it and the result.
The fixed share of your account you are willing to lose on any single trade.
Taking more positions than your strategy actually justifies.
Trading to recover a loss rather than because a valid opportunity appeared.