Here is how to create a trading plan: before you place a trade, write down what you trade, when, which setups you take, how much you risk and how you review the results. Keep it to one page, write every rule as a yes-or-no check, and use the template below for the structure.
Quick answer: how do you create a trading plan?
1) Set process goals, not money targets. 2) Choose your markets, timeframe and hours. 3) Write entry and exit rules as yes/no checks. 4) Fix your risk per trade and a daily loss limit. 5) Add no-trade conditions. 6) Review weekly and only change rules after a decent sample of trades.
What a trading plan is, and what it is not
A trading plan is the rulebook you trade by. It decides the important things in advance, while you are calm, so that you are not making them up when a position is moving against you.
It is not a forecast, and it is more than a strategy. The strategy is the setups; the plan adds risk, routine and review, which is where most beginners go wrong.
How to create a trading plan in six steps
We build plans in this order, because each step depends on the one before it.
- Set process goals. Aim for “followed my rules on every trade this month”, not a profit figure.
- Choose markets and hours. One or two markets you can watch properly, at times that fit your life.
- Define your setups. The exact conditions that must be present before you look for an entry.
- Write exit rules. Where the stop goes, where you take profit and what you do if the trade goes nowhere.
- Fix your risk. Risk per trade, a daily loss limit and a maximum number of open positions.
- Plan the review. When you review, what you measure and how many trades you need before changing a rule.
Why process goals come first
A money target sounds motivating, but in our experience it pushes people to force trades late in the month. A process goal is fully in your control.
The trading plan template
Copy this table into a notebook or document and replace the example answers with your own. The examples are purely illustrative, not recommendations.
| Section | What to write | Example answer |
|---|---|---|
| Goal | A process goal | Follow every rule for 20 trades |
| Markets | One or two instruments | GBPUSD and the UK100 |
| Timeframes | Bias chart and entry chart | Daily for bias, four-hour for entries |
| Hours | When you analyse and trade | Analysis 7pm, orders set by 8pm |
| Setup | Conditions before entry | Uptrend structure plus a demand zone |
| Trigger | What starts the trade | Rejection candle closes in the zone |
| Stop | Where the idea is wrong | Beyond the zone and last swing |
| Target | Where you take profit | Next opposing zone, at least 2:1 |
| Risk per trade | Fixed % of account | 1% |
| Daily loss limit | When you stop for the day | 2 losses or 2% |
| No-trade rules | When you stay flat | Major news, holidays, after a rule break |
| Review | When and what | Sunday: rules followed, R per trade |
Writing rules you can actually follow
“Trade with the trend” is not a rule; you cannot check it. A good rule reads as if this, then that, and you can tick it yes or no in seconds.
Entry and exit rules
For the setup row, we start with direction from identifying market structure from highs and lows, then location at a zone. The full method for turning that into a checklist is in our guide to the filters and triggers trade entry process.
Exits matter as much as entries. Decide now what you do if price stalls halfway to target, because that is when most traders improvise.
Risk rules
The risk section is short but non-negotiable. Our pillar on building a rules-based risk model explains the reasoning, our article on how much to risk per trade covers the percentage, and calculating position size for forex, CFDs and spread bets turns it into a stake.
If your plan uses leveraged products, read your provider’s risk warning first. Under FCA rules on CFDs for retail clients, firms must cap leverage and show the percentage of retail accounts that lose money.
Pre-trade checklist
The template is the full plan; this is the short version you run through before every order. If any answer is no, there is no trade.
- Is this one of the markets in my plan, during my planned hours?
- Does the higher timeframe agree with the direction?
- Is price at a planned level, not in the middle of a range?
- Has my trigger actually happened, on a closed candle?
- Do I know my stop, target and position size before entering?
- Am I clear of major news and inside my daily loss limit?
The news question is the one people skip. Our guide to conditions when not to trade lists the situations where we simply stay flat.
A worked example: the risk section in numbers
Example: on a £5,000 account, the plan says 1% risk per trade, a daily limit of two losses and a weekly limit of 4%. That is £50 per trade, £100 at most on a bad day and £200 in a bad week.
Suppose a setup has a stop 40 points away on a spread bet. The stake is £50 ÷ 40 = £1.25 per point. If the stop is 100 points away, the stake drops to £0.50 per point, and the money at risk stays the same.
Spread bets and CFDs are leveraged, so gaps or fast markets can push a loss beyond the stop. After the second loss on a given day, the plan says stop and review, not try to win it back.
Reviewing and updating your plan
A plan only improves if you measure it. Each week we check two numbers: the share of trades where every rule was followed, and the average result per trade measured in units of risk.
Change one rule at a time, and only after a reasonable sample, say 20 to 30 trades. Our guide to running a weekly trading review shows the routine we use. To test a full rule set before trading it, see how to develop your own trading system. Recording every trade in a trading journal gives you that sample.
Common mistakes when writing a trading plan
- Making it too long. A 20-page plan does not get read; one page does.
- Vague rules. If you cannot answer it yes or no, rewrite it.
- Money targets. They reward forcing trades.
- Copying someone else’s hours. Pick a style that fits your day, using our guide to scalping, day, swing and position trading styles.
- Rewriting after every loss. No rule set can be judged on a handful of trades.
Most broken plans are broken by emotion, not by bad rules. Our guide to the psychological hurdles traders face explains why, and what helps.
Frequently asked questions
What should a trading plan include?
At minimum: goals, markets, timeframes and hours, setup and trigger rules, stop and target rules, risk per trade, a daily loss limit, no-trade conditions and a review routine. The template above covers each one.
What is the difference between a trading plan and a trading strategy?
A strategy is the set of setups you trade. The plan wraps around it, adding risk, routine, no-trade rules and review.
How long should a trading plan be?
One page is enough for most traders. If it is longer, you are unlikely to check it before every trade.
How often should I change my trading plan?
Review it weekly but change it rarely. Change one rule at a time, after enough trades to judge it, and note the date of the change.
Next steps
Now that you know how to create a trading plan, fill in the template tonight and run the checklist before your next trade. Then strengthen the two most important sections with our trading risk management pillar and the price action entry checklist.
A filters and trigger process, when not to trade and a rules-based risk model are all part of our price action trading course, and the basics section is free to start.
This article is for education only and is not financial advice. Trading leveraged products such as CFDs and spread bets carries a high risk of losing money.
