What is a Trading Plan?
Trading Plan
Forex Trading Glossary
Quick Answer: A trading plan is a written document defining your strategy, risk management rules, entry/exit criteria, and trading psychology guidelines. Professional traders never trade without one.
What is a Trading Plan?
A trading plan is a written blueprint that outlines your strategy, risk management rules, and review process. Professional traders rely on their plan to maintain discipline regardless of market noise.
Core Components
- Strategy definition: Describe the setups you trade and the conditions that invalidate them.
- Risk rules: Specify position sizing, max daily loss, and drawdown limits.
- Execution checklists: Outline pre-trade analysis and post-trade review.
- Improvement loop: Include journaling, metrics, and scheduled performance reviews.
Treat It Like SOP
Before placing any trade, make sure every step in your plan has been satisfied. Deviations are logged and reviewed to prevent bad habits.
Keeping the Plan Current
- Quarterly updates: Refresh the plan as market conditions evolve.
- Stress tests: Simulate worst-case scenarios for leverage and drawdowns.
- Accountability: Share the plan with a mentor or trading partner.
- Mindset work: Incorporate routines that prepare you mentally for trading sessions.
Related Terms
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