Why you need a plan
Why you need a plan
A trading plan is a short set of rules you write before the market opens. It decides what you trade, when, how much you risk and when you stop, so those choices are not made in the heat of a trade.
This module is free and earns the Green belt. It is about the trader, not the chart: the plan you follow, the journal you keep, the numbers that tell you how you are doing, and the habits that make people break their own rules. In this lesson you learn what a trading plan contains and why it is written before the market opens.
Green belt mission: by the end of this module you will write your own plan and journal 10 practice trades with it. Lesson 11.6 sets out the mission in full.
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1 Decide before the market opens
Once a trade is open, every tick pulls at you. Price runs your way and you want to grab the profit. Price runs against you and you want to give it “a bit more room”. Decisions made in that moment are usually made by feelings, not by rules.
A trading plan moves those decisions to a calm moment: before the market opens, with no position on. While the market is open, your job is to follow the plan, not to rewrite it.
If you want to change a rule, write the change down and use it from the next session. Never change a rule in the middle of a trade.
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2 What a plan contains
A plan does not need to be long. One page is enough. It should answer these questions:
- Markets and timeframes. Which pairs, and which chart (for example EURUSD on H4).
- Setup. What must be on the chart before you consider a trade.
- Entry. The exact event that gets you in (for example, a candle closing back above a level).
- Stop-loss. Where the trade is proven wrong. Set before you enter, never moved further away.
- Exit. Where you take profit, or how you decide to close.
- Risk per trade. For example 1% of the account (Module 1).
- Daily loss limit. The loss after which you stop for the day (lesson 11.4).
- When you trade, and when you do not. Hours, news, your own state (lesson 11.6).
- Record and review. Every trade goes in the journal (lesson 11.2), reviewed every week.
Quick check
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3 Rules you can check
A good rule is one that a stranger could check from your journal. Compare:
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Vague: “Buy when it looks strong.”
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Checkable: “Buy only after an H4 candle closes back above a level that has held at least twice.”
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Vague: “Don’t risk too much.”
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Checkable: “Risk 1% of the account per trade. With $2,000, that is $20.”
If you cannot tell afterwards whether you followed a rule, it is not a rule yet.
Quick check
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4 The plan turns risk into a lot size
The risk rule only works if you turn it into a position size before every trade (lesson 1.4).
Example: the account is $2,000 and the plan says 1% per trade. The stop is 25 pips away on EURUSD.
- Money at risk: $2,000 × 1% = $20
- On EURUSD, 1 pip on 1.00 lot is $10, so 25 pips on 1.00 lot is 25 × $10 = $250
- Lot size: $20 ÷ $250 = 0.08 lot
Check: 0.08 lot is $0.80 per pip, and 25 × $0.80 = $20.
Quick check
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5 Write yours in the terminal's practice account
Open this in the terminal (opens in a new tab)Write your first plan now, on paper or in a document. Keep it to one page and cover all nine points. Then use it only on the practice account in the web terminal: open the account panel and note your balance, because your risk per trade and daily loss limit are worked out from it.
A plan is not a promise of profit. It is a way of making the same decision the same way each time, so your journal can show you whether the decisions are any good.
0 of 3 questions right. Answer them all to complete the lesson.