Building a Trading Plan

What this unit covers

Write your own trading plan: entry criteria, a position-sizing rule, a stop-loss rule and a minimum risk-reward, bringing together everything in this level.

By the end you will be able to

• Explain why a specific written plan can say no, but a vague intention cannot.
• Identify the four blocks every trading plan must include.
• Draft your own entry, size, stop-loss and reward rules as a first plan.

How it starts: A Trade Decided in the Heat of the Moment

1. A stock jumps 8 percent in minutes and you feel the pull to buy.
2. You decide how much to risk right there, in that instant.
3. What would you have decided the day before, while calm?

Words you will meet

Trading plan

A written set of rules for entry, size, stop-loss and reward, made before you trade.

Entry criteria

The exact condition that must happen before you open a trade.

Position size

How much of your capital you risk on one trade.

Stop-loss

The exact price at which you exit a trade if it moves against you.

In this module: Trading Psychology

1. Fear
2. Greed & FOMO
3. Sticking to the Plan
4. Building a Trading Plan (this unit)