How to Write a Trading Plan

Step-by-Step Guide

1. 1

   Step 1: Decide which financial instruments you will trade.

   You may be strictly a stock or currency trader, or you may be trading multiple markets.
   
   Create a separate category in your trading plan for each financial instrument.
2. 2

   Step 2: Determine which stocks

   For example, you may be interested in a few company stocks.
   
   Or when trading currencies, you might trade only one currency pair or all pairs related to the Great British Pound (GBP).
   
   List the names of the specific companies, currencies or commodities. , For example, you might trade a particular currency based on a series of chart indicators related to momentum, moving averages and trend lines.
   
   Write down the exact conditions that must be met before you can enter a particular trade. , Thinking through the trading size ahead of time will help you to avoid taking risks that may result in tremendous loss.
   
   Record the number of shares or lots you intend to purchase. , Your goal may be to buy a particular stock when it reaches a specific price.
   
   Write down at which price you will buy the stock, plus or minus a few points, if applicable. , When day trading, for example, you might check the price of your stock or currency every 15 minutes.
   
   Or you might set an alarm to alert you to these time increments. , Documenting your exact strategy for trade exits prevents last-minute or impulsive trading decisions, such as exiting a trade too early or holding it for too long.
   
   If you have a well-tested and profitable trading system with a strict money management plan, exiting your trade based on set parameters will yield the best results.
   
   Write the exact conditions that must be met before you can exit your trade.
   
   This may be an exact price point, a chart indicator level or a specific time of day. , If trading the 24-hour foreign exchange market, trading can be a nonstop event.
   
   Decide on a trading schedule and write it into your trading plan.
   
   When day trading stocks, you might work for 4 hours each day starting at the daily open.
   
   If you trade in longer time frames, your trading schedule may involve only a 15-minute daily commitment to check prices and read relevant market news. , Include a section in your trading plan for evaluating your trades.
   
   This can be a comment box where you write down whether you adhered to your trading plan.
   
   Alternatively, it may be a list of steps you must check off while trading.
3. 3

   Step 3: currencies or other financial instruments to trade.

4. 4

   Step 4: Identify your market indicators.

5. 5

   Step 5: Decide ahead of time how many shares or lots you will purchase.

6. 6

   Step 6: Set specific price entry points.

7. 7

   Step 7: Write down the process of how you will monitor each trade.

8. 8

   Step 8: Decide on the parameters for trade exits.

9. 9

   Step 9: Include a section for trading times.

10. 10

    Step 10: Evaluate your trading plan.

Detailed Guide

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