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Glossary · Trading basics

Trading plan

A written set of rules defining what you trade, when, how you enter, how much you risk and when you stop for the day.

By Sky Trade editorial teamUpdated

A trading plan turns vague intentions into decisions made in advance, while you are calm. Its job is to stop you inventing rules in the middle of a losing streak.

A workable plan for short-term trades usually covers:

  • the instruments and hours you trade, and those you avoid;
  • the exact setup that justifies a trade, and the expiry that goes with it;
  • the stake as a fixed share of your balance;
  • a daily loss limit and a maximum number of trades;
  • what you do after two or three losses in a row.

The most common misunderstanding is that a plan is a winning strategy. It isn't. A plan can be followed perfectly and still lose if the setup has no edge; that is what testing and a trading journal are for. What a plan does do is make your results measurable, because every trade was taken by the same rules.

Keep it short enough to read before each session; a ten-page plan nobody follows is worse than five lines you actually obey. The demo practice plan shows how to test one before trading real money.

Example

Plan: EUR/USD only, 09:00–12:00 UTC, stake 1% of balance, stop after 3 losses or −4% for the day. On a $500 balance that means $5 stakes and a hard stop at −$20.

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