Creating Your Trading Plan
Trading plans are the foundation of every successful trader’s career. Their purpose is to hold the trader
accountable for their own actions and to give them direction in the trades. It also provides tools that the trader
can use to look at their own performance and make changes to their plan if it is necessary.
A trading plan should never be changed or altered in the middle of a trade. The best time to do any changes is
after the trading day is over and notes have been made as to how the trade went. Changing a plan in the middle of
a trade is a good way to make a mess of things.
All trading plans should be re‐evaluated occasionally. Market conditions change often and as a trader gets more
skills, they will find they want to do things differently. Even brand new traders should create their own plan and
not copy anyone else. Personalities and trading styles are different so that what one trader prefers another may
not like at all.
Every trading plan put together should have the basic framework that makes up all good trading plans. These are
things that make the trading plan worth following and should not be left out.
Making sure you are honest with yourself as a trader is very important to your future success. Don’t say you’re
better than you are, it doesn’t do any good. False confidence can cause large capital loss, so it’s just not worth it.
Once your plan is in place practice and test it with paper trading. Work on sticking with your plan all the way
through the trade no matter what goes on. The time to make changes is after the trade ends, so just be sure to
take detailed notes for your journal so you can have them to read later on.
Trying to trade when you don’t feel good is never a good idea. Trading is a very mental activity and being prepared
for it is a must. Get plenty of sleep, stay focused and motivated and use positive affirmations and mantras to get
you in the right mindset. Your mantra should create a mental readiness for the trading day ahead and create a
Decide ahead of time how much you want to risk each day in your trades. It is typically between 1‐5%. Once the
limit is set, stick to it and when you reach that limit for the day, stop trading. Do not add funds to continue
because this almost never turns out well and can just add to the losses.
Setting goals is an important activity for any trader and should be a part of the trading plan. Weekly, monthly and
yearly goals are important, as are goals for profits, and risk/reward goals as well. What you set your risk/reward at
is up to you, but just remember that once it’s set, stick to it.