Trading plan
An illustrative plan for a USD 10,000 account caps new risk per trade at 0.5%, or USD 50, and aggregate planned losses on open positions at 1%, or USD 100. Its daily net P&L threshold is −1.5% of starting daily equity, or −USD 150, including open positions and costs with no cash flows. Two positions risking USD 50 each exhaust the open-exposure budget. This does not mean actual losses cannot exceed it or that these percentages suit every trader.
What the plan establishes before trading
The plan specifies instruments, available time, trading mode, data sources, limits and reasons not to trade. A risk percentage needs a denominator: current equity, balance or reference capital. A daily limit requires a time zone and treatment of open P&L, costs and deposits. Include failures, management of remaining positions and restart conditions. Clear instructions support decisions without removing market uncertainty.
Plan, playbook and decisions under pressure
The plan provides overarching constraints; the playbook describes approved scenarios. A promising setup cannot override plan limits. Consult relevant rules before the session and order rather than assuming the document should be opened rarely. Written rules can limit improvisation but guarantee neither adherence nor profit. Distinguish mandatory gates, guidance and hypotheses so their status is not changed in response to the latest trade.
A review with an audit trail
Specify the review schedule and triggers for an earlier assessment, such as changes to contract specifications or execution arrangements. Record process compliance, breaches and procedural effectiveness separately from P&L. Updates need a version, rationale and implementation time; retain the prior document. The plan must fit actual available time and applicable account restrictions. Rigid, unattainable requirements can be as unhelpful as a document without concrete rules.
Further learning and sources
15.2 Trading plan and setup playbook — rules, risk and review; 9.11 Risk management plan – a template to fill in and a pre-trade checklist.
