Lesson T10.4 · 4 of 6 · Strategy, testing and the trading journal
How to write a trading plan: what goes in it, with a full template
A trading plan is the document that puts your system into practice: what you trade, when, by which rules, and how much you can lose per trade, per day and per month. It also says in advance what you do after a losing streak, so the hard decision isn’t made in the heat of the moment.
Terms in this lesson
- Stop-loss
- An order that sells automatically if the price falls to a level you choose.
- Maximum drawdown
- The largest fall in price from a peak to the lowest point after it.
What goes into a trading plan
Which instruments you trade, on which timeframe and at what times you look at them. The rest of the time, the platform stays closed.
Entry, stop, exit and position size, written out as in the lesson on trading systems.
How much you risk per trade, how much you can lose per day and per month, and what you do when you hit a limit.
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Create a free accountMaximum risk per trade, per day and per month
| Limit | Example | For a $20,000 account |
|---|---|---|
| Per trade | 0.5% of the account | $100 at the stop |
| Per day | 2% of the account | $400, then you close the platform |
| Per month | 6% of the account | $1,200, then a break until next month |
| From the peak | -10% from the highest balance | risk per trade is cut in half |
The figures are an example, not a rule for everyone. What matters is that they are written down and worked out in advance, not which values you pick.
What to do after a losing streak
Every system has losing streaks, and the lesson on recovering from losses showed how often they turn up. A plan can’t stop them, but it can decide in advance what you will do, while you are still calm.
- A break after the daily limit: close the platform and open no new positions until the next day.
- Lower risk after a fall: for example, at -10% from the high you go from 0.5% to 0.25% per trade, and only go back up after a new high.
- A journal check: after every 5 losses in a row, check whether you followed the rules. If you did, the system is going through a tough patch; if you didn’t, the problem is your execution.
- No new rules in the heat of the moment: an idea that comes to you during a losing streak gets written down and tested later, not used straight away.
A trading plan template
A template as a list, with example figures. You can copy it and fill in your own rules; what matters is that every line can be checked.
- Goal: learn to follow a system over 100 trades with small losses. Not a particular profit.
- Markets: 10 liquid shares, chosen once a month by volume.
- Timeframe and schedule: daily candles; I check for signals once a day, after the close, in 30 minutes.
- Entry, stop, exit: the system’s rules in full, with no “just this once” exceptions.
- Risk per trade: 0.5% of the account, worked out from the distance to the stop.
- Limits: no more than a 2% loss per day, 6% per month and no more than 3 open positions at once.
- After losses: at -10% from the high, risk drops to 0.25%; at the monthly limit, a break until the next month.
- Journal: I record every trade on the day I close it.
- Review: on the first day of each month I work out the statistics from my journal and decide whether to change anything.
Lessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: the calculations in this lesson. The template and its figures (0.5% per trade, 2% per day, 6% per month, -10% from the high) are a teaching example, not a recommendation or an official rule.