How To Create a Trading Plan

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We all know that a trading plan is an essential tool for trading success. (that’s why you’re here!)

But knowing how to create a trading plan you actually stick to is another matter!

Within a few minutes, you’re going to:

Like many traders, you’ve probably spent the weekend constructing a solid trading plan, you’re all fired up for the market open on Monday and within days you’ve ignored it completely and are back to square one.

Let’s change that right now…

What is a Successful Trading Plan?

If you are an active trader, the whole point of a trading plan is to give you a set of rules and a roadmap for trading the markets.

A trading plan acts as a comprehensive decision-making tool, guiding you on what, when, and how much to trade.

It doesn’t matter if you are a day trader, swing trader, scalper, trading stocks, forex, equities or far month orange juice futures!

A trading plan is similar to a business plan, providing structure and strategy to help you identify opportunities and risk boundaries to help you achieve your trading goals.

Your trading plan outlines how you will act and trade under specific conditions.

A good trading plan removes as many unnecessary ‘on-the-fly’ decisions as possible. Leaving only the trading decisions you need to make to perform.

(I think it’s important to note you aren’t trying to create an automated system here. You are a discretionary trader making trading decisions based on charts, order flow and other pieces of data. Incidentally If you are trying to automate then here are two podcast episodes to check out later. Robert Carver and Jarrod Goodwin)

The trading plan rules aren’t meant to remove your ability to trade with discretion.

The rules of the trading plan are designed to keep you focused on the job at hand and keep the guard rails in place.

Consistently successful traders treat their trading plan as a business and lean on it to maintain that all-important discipline over time.

Ready to build yours?

Let’s go…

What Goes into a Trading Plan

This is where many traders slip up.

They add pages and pages of rules and regulations.

“Do this, don’t do that. Take this trade, not that. Wait for this candle, not that.”

It’s a sea of trading rules you cannot possibly stick to!

And once you break a rule, it’s too easy to throw the whole trading plan out of the window.

We don’t want to do that…

You want a simple trading guide with a few clear rules that will help you:

Not go outside of your trade risk levels
Keep you focused on the trade setups that work
Prevent you from sliding into destructive trading behaviours

“Setting clear trading objectives for yourself is crucial for maintaining discipline, focus, and consistency in your trading decisions.”

The plan is not there to remove all the intuition and discretion from your trading. As a discretionary trader, I always believe you need to nurture that trading intuition, not suppress it.

You want:

1) Risk rules,
2) Trading strategies
3) Goals.

Before setting these rules, evaluate your risk tolerance and risk appetite… think very carefully, “would I be comfortable losing this on a trade?” If the answer is no, decrease your risk limits.

That’s it.

Long-winded multi-page trading plans will never be adhered to. (you know ‘cos you’ve tried it right!)

A simple plan that stays on your screen next to your trading charts during the day will help you remember what’s important.

How to Create a Trading Plan (Modular, Step-by-Step)

So, if we agree that long trading plans aren’t that useful. How do we add all the information we need into the plan?

By using what I call a modular approach.

What does that mean?

Well, it’s an approach that I found works for me over the years, so I’ll share it with you, and you can make your own decision

Our trading plans should be simple and short, but at the same time, we need to understand the nuances of our setups, the rules, the screen shots. So how do we achieve both?

We create a simple trading plan, but then link to other more in-depth documents. Voila! One simple plan, supported by the longer stuff.

Let me explain…

Let’s say we want to use a specific trading strategy in our plan.

And let’s use the solid opening range breakout strategy as an example.

What we don’t want to do is fill the plan up with the rules, trade filters, trade triggers, example screenshots etc for that strategy. (We want to keep things short and simple, remember)

The trading plan needs to be simple, but we still want to go into depth and document the trading strategy in as much detail as possible.

Nuances like when to pull the trigger on a trade, targets, stop loss areas, add points, scaling rules, and sizing.

If we don’t want to clutter up the plan what do we do?

The answer here is to reference the trading strategies from within that plan. But have a separate trading strategy document that goes into more detail.

This modular approach allows us to add multiple strategies to the plan while keeping the master plan simple to read.

Make sense?!

But wait, we need more in our plan….

Another example of a key component of your trading that needs to be in your plan might be a trading routine or trading checklist you want to run through at specific times.

Trading checklists are a great way to ensure you stick to a process you know gives you the highest chance of success.

Yet you don’t want to outline every checklist in your plan. This would clutter it up.

So just like we linked out to specific stategy documents before, we do the same here and reference any checklist document seperately…

Example trading checklists:

Before the trading day, I will run through a pre-market checklist
At the end of the trading day, I will complete a session debrief (Check out my guide to journaling for day traders)

This is a good point to remind you that it’s crucial to start a trading journal to document your trades, emotions, and the rationale behind your decisions. This helps you track your performance and make informed adjustments to your trading strategies over time.

Trading Plan Pro is a decent trading journal to consider.

All very important, but again we don’t want this cluttering up the plan…

Remember, your trading plan should be treated as a living document that evolves with your experience and changing market conditions.

Let’s explore in more detail how to build a trading plan using the modular approach.
We want a few core modules. (More can be added later but these I think are essential)

Trading goals: What are you trying to achieve?

This might sound like a silly thing to add to your trading plan, but you want your brain to know the coordinates of the destination. Even on a subconscious level…

Every single decision you make during the trading day should be aligned with that goal.

So, please note your trading goals down and save them for later (not sure what this is? Take some time to figure it out, it’s worth it)

Trading Risk Rules: What are your risk rules?

You might feel like this has no place in a plan, but trust me, even if you have the most profitable trading strategy in the world it’s totally useless if you can’t stick to risk rules!

So decide what your rules are. Start by evaluating your risk tolerance and deciding how much risk you are willing to take per trade, as this will guide your overall trading strategy and help you stay disciplined.

TIP: Imagine yourself losing that amount. How does it feel? If it seems devastating it’s too much risk. You don’t want to trigger trading tilt. Dial it down a bit.

Textbooks say your risk per trade should typically be set at 1–2% of your total capital to help manage risk and protect your account from large losses. But it’s your money, you make your own decision…

If it stings, but is not the end of the world, that’s probably the sweet spot.

It’s also important to consider your risk-reward ratio for each trade…RvR.
Many traders aim for 2 or 3 times their risk… calculate this by comparing your potential profit to your potential loss.

Calculating the risk-reward ratio helps you make informed decisions. Always use stop-loss orders to manage risk effectively and prevent getting smashed by more than you expect.

Trading Strategies: The setups you will deploy during the trading day.

Remember, each of your trading strategies has more detail elsewhere, but they are referenced in your trading plan.

When developing your trading strategies, some traders like charts, some like backtests, others use a blend of both technical analysis and fundamental analysis to make a decision… up to you. (I go into depth on building your trading strategies here)

Price, charts and sometimes technical indicators can play a crucial role in guiding your trade entry and exit points, helping you determine when to open or close that trade…

It’s also important to set clear entry and exit points,…with those entry/exit signals based on specific, objective conditions. e.g., some traders like to use technical indicators or candlestick patterns.

Always do your own market analysis. Identify any market trends and observe price movements for yourself… your own work will help you spot potential decent trading opportunities.

Stop losses are key, of course, but also consider setting profit targets as part of your trading strategy to lock in gains and manage risk effectively.

Sometimes you’ll get a nice runner… sometimes you won’t.

Here are some strategy examples you might include:

Remember… each of your trading strategies has more detail elsewhere but they are referenced in your trading plan.

If you are looking for inspiration I’ve done a deep dove into a variety of trading strategies.

Trading Plan Template

Here’s how that plan is constructed.

Use a simple Google doc, notes, Word or even good ol’ fashioned pen and paper if you need.
And start to break it down, using the modular approach…

Ok, let’s go…

Trading Plan Description

To capture momentum moves outside of ranges

(This gives us clarity on the type of trader we are trying to be)

Identifying your trading style is crucial, as it should reflect your personality, resources, and preferences. Textbooks say trading styles include day trading, swing trading, position trading, and long-term investing. But active traders are looking for more nuance than that.
Do you focus on the Nasdaq opening drive? Trade Gold in the Asian session? Or Scalp Yen?

That’s the level of detail you need here…

Choose a trading style that suits your strengths, weaknesses, and available time. (This gives us clarity on the type of trader we are trying to be)

Trading Risk

Before you start trading, decide how much trading capital or available capital you can afford to dedicate to trading. This is essential for responsible risk management and helps you determine how much capital to allocate per trade.

Your risk is clearly defined and broken down into trade, day and weekly risk.

For every single trade, calculate risk carefully and avoid being tempted to put too much capital into a single position. Use position sizing rules that factor in volatility and your total capital to determine how much to invest in each trade.

Set a maximum daily drawdown to limit how much can be lost in a day…. if this limit is reached, stop trading for the day to protect your trading capital. (I know it sounds boring, but this is where the hidden risk is in trading…)

eg:

Daily Risk = $500
Weekly Risk = $2,000
Trade Risk = $150

Trading Rules

4 key trading rules we will stick to.

Walk away after a loss of $500
Do not trade in the first 5 minutes
No more than 3 losing trades in a row
A max of 50% drawdown from days P&L high

Maintaining trading discipline is essential, especially when executing and exiting trades, to avoid impulsive decisions and stick to your plan.

And it’s even more important when it comes to your risk rules….

Also, remember to set clear exit point criteria for every trade. This helps manage risk and lock in profits without overthinking; (if you’re an automated trading guy, you can consider using automated exit points to remove emotional interference)

As you gain experience and as market conditions change, remember to adjust your trading rules to stay effective…

Trading Market

It might sound obvious but we need to define the market or markets we will focus on. (to stop us from getting shiny object syndrome!)

“Market selection is a crucial step… choose your market or markets based on your knowledge and comfort level with different asset classes, such as forex, stocks, or commodities. Assessing your familiarity with various asset classes helps determine which markets are most suitable for your trading plan and risk management approach.”

If you are trading forex, you might want to focus on major currency pairs like EURUSD, GBPUSD, and USDJPY. These pairs offer high liquidity, tight spreads, and significant trading volume.

EURUSD
GBPUSD
USDJPY

Trading Strategies

Ok so…

1) We’ve chosen the strategies we’ll deploy
2) When the trade setups trigger.

This is where you list all the strategies you’ll deploy, with links out to deeper explanations and chart examples.

eg:

Opening Range Breakout
VWAP Magnet
DAX 7 am Alarm Clock

Trading Routines and Checklists

These are checklists we want to ensure we complete at key times during the trading day.

Just like a pilot completes pre-flight and pre-landing checklists to ensure nothing goes wrong, as traders, we want to mirror that professionalism.

Structuring your trading activities with routines and checklists helps maintain consistency and discipline in your trading practices.

I believe that specialising in one particular market or one specific strategy is the fastest path to consistency.

As is documenting your trading journey by keeping a trading journal or trading diary.

This allows you to track all the metrics that matter: Wins, losses, emotions, and market conditions, which are essential for refining your trading strategies and checklists over time.

3 Minute Re-Focus
Prepare for the trading day
Pre-Trade Checklist
Trade Idea Generation

Trading Area to Focus On

Finally, in this trading plan example, we have two key areas to focus on. Not 15, but 2!

TO STICK TO MY RISK RULES FOR TEN DAYS
TO FOCUS ON TAKING A+ TRADES ONLY

Less is more here. You just want to be doing ONE job during the trading session.

Forex Trading Plan Template Download [PDF]

Look at this trading plan pdf example. Notice how simple and clear it is…

The detail comes in your strategy documents, no need for war and peace here.

This type of thing can be printed off and placed on your desk during the trading day. Use it to scribble on notes and ideas.

The 4 Biggest Trading Plan Mistakes

Most committed day traders and swing traders know they need a plan. But time after time they make these same mistakes.

Make sure it’s not you!

Pledge now to build a simple trading plan.

Add all the key components of a trading plan and stick to it religiously for 10 days.

Just 10 days!

You can do that, right?

Then log the results. How did it go?

“Tracking your win rate and other trading performance metrics will help audit and improve your results.
Evaluating your trading performance by calculating total return, profit factor, and average win/loss can help you identify strengths and areas for improvement.” – Douglas Brown

Watch: How I Build a Trading Plan (Video Walkthrough)

How To Improve Your Trading Plan Over Time

Once you’ve stuck to one simple trading plan for a while, you’re in a great position to make small adjustments as needed.

When adjusting your trading plan, consider other factors such as volatility, available capital, and your risk appetite, as these can significantly influence your risk management decisions.

If it didn’t work as you expected, now is not the time to throw everything away.

Start by asking yourself these questions...

Most traders make the mistake of adding reams of rules.

These are usually in response to something that happened in the last trading session or last week.

I think this is a mistake. Don’t make new rules based on a small sample size.

“It’s important to regularly review and evolve your trading plan as you gain experience and as market conditions change.”

Where Trading Strategies Belong in a Trading Plan

I mentioned earlier about the modular approach to a trading plan.

This is where you bolt on your trading strategies into your trading plan…

A great trading strategy example is the opening range breakout. (Check out this opening range breakout webinar explaining the full strategy in detail)

“Before implementing any new strategy, it’s important to objectively assess your current trading skills and knowledge to ensure they align with the trading style you want to pursue.”

The beauty of the modular approach is you can go as detailed as you like with the strategy

Triggers
Filters
Stops
Targets
Trade grading
Sizing

You can adjust and tweak the trading strategy to suit market conditions without overhauling your trading plan.

Handy…

“Traders who win consistently treat trading as a business, maintaining discipline, evolving their strategies, and updating their plans as needed to ensure ongoing success.”

FAQ

What’s the difference between a trading plan vs trading strategy?

A trading plan outlines how you will approach trading. Risk, rules, markets, strategies, etc. A trading strategy are the chart patterns or setups you will trade.

How do I build a trading plan?

Start from the basics.

Get your risk rules together, your method and your strategies.

Even something as simple as: I will buy a new high in the DAX, DOW, ES and FTSE after 5 pm.
It’s not pretty, but it’s a start!

Before risking real money, use a demo account to practice trading in a risk free environment and test your strategies.

Creating a trading plan for 2026 requires a structured, process-based approach that focuses on consistent execution rather than unpredictable market outcomes.

Once you have developed and tested your plan, you are ready to start trading.

Why can’t I stick to my trading plan?

Discipline combined with a plan you trust and believe in.

You need both to give yourself the best chance of success. This was a great podcast episode > Do something tough for 10 days

Do professional traders use trading plans?

Of course they do!

Look at any fund managers website and they very clearly define the strategy and approach.
Successful retail traders do the same too.

No one winning in this game is shooting from the hip…

What else can I add to my trading plan?

Your plan is exactly that… YOUR plan, so add what you need to help you improve as a trader.

For example, you might want a section on managing any open positions.
Perhaps you are trying not to meddle with trades, so your plan specifies that you’ll set alerts or notifications on your trading platform.

Your plan might also have space for things like:

1) Rules for how to monitor your trades
2) How and when to adjust your stop-loss orders
3) When to take partial profits or hold winners to final profit targets
4) Entry criteria and triggers
5) Exit criteria and time stops
6) Win rate goals (if you’re trying to improve your hit rate)
7) Financial markets news or investment research time (to keep your finger on the macro pulse)
8) Technical analysis on say the forex markets, or at least the USD which has a knock on effect to everything
9) Risk-to-reward ratio adjustments
10) Trading platform setup or layouts
11) Daily chart or higher timeframe analysis

You can add what you want, but just don’t make it too complicated, or you’ll lose the value.

Conclusion

Hopefully you are sold on the idea on building a trading plan! And you see the value in building a simple trading plan with a modular approach.Keep the plan clear and expand on the detail elsewhere.

Now go create that perfect trading plan.

One you’ll finally stick to!

Good luck,

Mark Holstead