How do we make a Trading Plan?

We usually make a travel plan before we start a journey; in the same way, before we start trading with real money, we need to make a trading plan. A travel plan helps us know when, where, and how to start and end the journey, in the same way a trading plan enables us to identify when, where, and how to trade. A travel plan acts as a travel guide in the same way a trading plan acts as a personal guide and a rulebook for how to enter, manage, and exit trades. A trading plan helps you reduce emotional decision-making and increase successful trades.

A Trading Plan will help us become more consistent and disciplined traders.

1. Define Your Trading Goals by asking yourself:

• • What do you wish to achieve with trading – Income or wealth building, or learning.
    

• • Expected monthly or annual return.
    

• • The time you can dedicate to trading.
    

• • If you are a part-time or full-time trader.
    

Setting smart goals means being Specific, Measurable, Achievable, Realistic, and Time-bound.

2. Choose Your Trading Style, which is based on your lifestyle, experience, and risk appetite:

• • Scalping – multiple trades per day ( time-period of seconds to minutes).
    

• • Day trading – intraday trades.
    

• • Swing trading – holding positions for days or weeks.
    

• • Position trading – long-term trades.

Choosing a trading style is essential for a successful trading plan and profitable trades.

 3. Select Your Markets and Instruments

• • Markets: Stocks, Forex, Commodities, Crypto, Index futures, Options.
    

• • Instruments:  Nifty 50, Sensex,  BTC/USD, Reliance, Gold, etc.
    

Stay focused, and you will eventually specialize in the few instruments that you prefer.

4. Establish Entry and Exit Rules 

Examples:

• • Entry: Moving Average crossing over and a Bullish candlestick pattern with volume.
     

• • Exit: Target 1:2 risk-reward or stoploss at high or low of entry candle.
    

Establishing Entry and Exit Rules means to identify and define the criteria that will trigger a trade.

You can use indicators, volume, patterns, and price action. It is advised to keep it simple and rule-based.

5. Risk Management Rules

• • Risk per trade: Typically 1–2% of account balance.
    

• • Stop-loss
    

• • Position sizing
    

• • Maximum daily or weekly loss

Setting rules to manage risk is vital to protect our capital.

6. Trade Management Rules

• • Move the stop loss to breakeven after a certain profit.
    

• • Trail your stop loss through the swings.
    

• • Book partial profits
    

Setting trade management rules or managing your trades requires clarity and consistency in execution.

 7. Set Trading Routine

• • Time of day you’ll trade
    

• • Pre-market analysis and preparation
    

• • End-of-day review and journaling
    

You need to set a trading routine to incorporate structure into your trading.

8. Trading Journal

• • Entry, exit, stop-loss, reason for trade
    

• • Note down emotions felt.

• • Mention whether the plan worked or not to identify patterns and improve over time.

Preparing a trading journal involves documenting what, when, and why you initiated a particular trade.

9. Backtest and Forward Test

• • Do backtesting with historical data.
    

• • Do paper trading first, then start trading with small capital in the real-time market as a forward test.

10. Review and Improve

• • Review your performance.
    

• • Analyze mistakes.
    

Set a time slot each week or month to review or make small adjustments if needed, for improvements.

So, create a trading plan and become a successful and profitable trader. We hope this post regarding the trading plan will assist you on your journey towards wealth creation.