Trading Plan Basics: Key Components and Examples

What Is a Trading Plan?

A trading plan is a written guide that defines what you trade, how you enter and exit, how much you risk, and how you review results. It turns vague ideas into repeatable rules so you can improve through practice instead of guesswork.

Good plans are simple, specific, and tested on historical charts before risking money. They aim to reduce impulsive decisions and keep you focused on process over outcomes.

Core Components to Include

1) Objectives and Scope

• Goal: a measurable target (e.g., consistency over 20 trades, not a dollar amount).
• Market and timeframe: the instruments and chart intervals you will trade.
• Session and frequency: when you trade and how many trades you’ll take at most.

2) Setups and Triggers

• Setup: the price pattern or condition you wait for (e.g., pullback to support in an uptrend).
• Entry trigger: the precise event that gets you in (e.g., break of the pullback candle high).
• Invalidation: what proves the idea wrong before entry (e.g., loss of trend structure).

3) Risk and Trade Management

• Risk per trade: the most you’re willing to lose on one trade (e.g., 0.5–1% of account or a fixed dollar amount).
• Position size: the quantity that aligns the stop-loss with your risk per trade.
• Stop-loss: where the trade thesis fails on the chart (e.g., below swing low).
• Exit: define profit-taking logic (single target, partials, or trailing stop).
• Daily loss cap: a limit that ends your session if reached.

4) Routines and Review

• Pre-trade checklist: trend, level, risk, catalyst, and trade location.
• Trade journal: record entry, stop, size, result, and a brief note on execution.
• Metrics: track win rate, average win vs. loss, and whether you followed rules.

Two Simple Example Plans

Example A: Intraday Pullback in Trend

• Market/timeframe: liquid stock or index future on 5-minute charts during first 2 hours.
• Setup: clear uptrend with higher highs and higher lows; price pulls back to prior breakout or VWAP area.
• Entry: buy when a bullish candle closes making a higher low and breaks prior candle high.
• Stop-loss: below the pullback swing low.
• Risk per trade: 0.5% of account; max 3 trades/day; daily loss cap 1.5%.
• Exit: first target at 1x risk; trail stop under higher lows for runners until structure breaks.
• Notes: skip if average volume is low or if price is extended far from VWAP after entry.

Example B: Swing Breakout With Retest

• Market/timeframe: large-cap stock on daily chart; entries placed on close or next open.
• Setup: consolidation below a clear resistance; breakout close above resistance; buy the first clean retest that holds.
• Entry: limit buy at the breakout level after a bullish reversal day.
• Stop-loss: below retest low.
• Risk per trade: 1% of account; max 5 open positions; sector diversification preferred.
• Exit: partial at prior swing high; trail under higher swing lows or 20-day moving average close.
• Notes: avoid entries ahead of major earnings for the symbol.

Build, Test, and Improve

• Simplify: start with one setup and one timeframe to reduce noise.
• Define numbers: write exact triggers, stops, and trade limits so position sizing is straightforward.
• Replay and review: practice the rules on historical charts, log 20–50 sample trades, and refine only what consistently underperforms.
• Guardrails: use a daily loss cap and a “no-trade” rule after three consecutive plan violations.
• Learn safely: new to practice? Read how to practice without risk at this guide.

When you’re ready to rehearse your plan quickly, try accelerated historical chart practice with TradingView charts in ChartingPark. Build reps, measure consistency, and iterate at https://app.chartingpark.com.