Building a Trading Plan

In one line: A trading plan is a short written rulebook you make when calm, so the market cannot trick you into rash choices when money is on the line.

🎯 What you'll learn

• What a trading plan is, and why "if it is not written down, it is not a plan".
• The 8 parts every plan should have.
• A fill-in-the-blanks template you can copy today.
• How a plan turns trading from gambling into a calm, repeatable business.
• When to review your plan (and when to leave it alone).

📘 Key concepts

Why write it down first

Your brain is smart when calm and foolish when scared or greedy.

• A plan is like a shopping list before you enter a busy bazaar. It stops you buying random things.
• You decide the rules in a quiet room, not while prices are jumping.
• A plan in your head is not a plan. It changes with your mood. Only paper (or a notes app) holds it firm.
• It removes the two enemies: fear (selling too early) and greed (chasing too much).

The 8 parts of a plan

Think of it as one page. Each part answers one question.

1. Goals — why you trade. Example: "Learn steadily and protect my money." Not "become rich fast."
2. Market and style. Which things you trade (say, large Indian company shares on the NSE [National Stock Exchange]) and your timeframe [how long you hold a trade — minutes, days, or weeks].
3. Capital and risk per trade. Your total trading money, and the fixed slice you risk on one trade — usually just 1% to 2%. (Risk = the money you lose if the trade goes fully wrong.)
4. Your setups. The exact chart patterns or signals you will act on — and only those. Like a cricket batsman who only plays balls in his strong zone.
5. Entry, stop-loss, exit. Where you buy, where you cut a losing trade (stop-loss = a preset price where you sell to stop further loss), and where you take profit (target).
6. Daily/weekly loss limit. The most you allow yourself to lose before you stop for the day or week. Then you walk away.
7. Daily routine. The steps you do every trading day, in order.
8. Review. How and when you check what worked.

Rules for risk, in plain words

This is the heart of the plan.

• Risk the same small amount each time. If money grows, the amount grows slowly with it.
• One stop-loss on every trade. No exceptions.
• Hit your daily loss limit? Close the screen. Tomorrow is another day.

🔍 Example

Riya has ₹1,00,000 to trade. Her plan says: risk 1% per trade = ₹1,000.

She spots her one allowed setup. Her plan tells her exactly what to do:

Buy price     : ₹200
Stop-loss     : ₹190   (₹10 risk per share)
Shares        : ₹1,000 ÷ ₹10 = 100 shares
Target        : ₹220   (₹20 gain per share)

• If it goes wrong, she loses ₹1,000 — a small, planned amount.
• If it goes right, she gains ₹2,000.
• Her daily loss limit is ₹2,000. After two losing trades, she stops. No revenge trading.

Because the numbers were decided before, she does not panic. She just follows the page.

⚠️ Common mistakes

• Keeping the plan in your head. Moods rewrite it. Write it down.
• No stop-loss. Hope is not a plan. A small cut beats a big wound.
• Trading setups not in the plan. "Just this once" is how accounts shrink.
• Ignoring the daily loss limit. Chasing losses turns a small bad day into a big one.
• Changing the plan mid-trade. Never edit rules while a trade is live. Fix it later, calmly.

✅ Key takeaways

• A plan decides your rules before emotions arrive.
• If it is not written down, it is not a plan.
• Risk a small, fixed amount (1–2%) with a stop-loss on every trade.
• Trade only your chosen setups; obey your daily loss limit.
• Review and improve the plan on quiet days — never mid-trade.

📝 Quick check

1. Q: Why should the plan be written, not just remembered? A: Because a plan in your head changes with fear and greed. Paper stays firm when the market gets loud.
2. Q: If you have ₹50,000 and risk 2% per trade, how much do you risk on one trade? A: ₹1,000 (2% of ₹50,000).
3. Q: You just lost twice and hit your daily loss limit. What does the plan say to do? A: Stop for the day. Close the screen and come back tomorrow.

📖 New words

• Trading plan — a short written rulebook for how you will trade.
• Timeframe — how long you hold a trade (minutes, days, or weeks).
• NSE — National Stock Exchange, a main place to buy and sell Indian shares.
• Risk per trade — the money you lose if one trade goes fully wrong; kept small (1–2%).
• Stop-loss — a preset price where you sell to stop a loss from growing.
• Target — the price where you plan to take your profit.
• Daily loss limit — the most you allow yourself to lose in a day before stopping.

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Educational content only — not financial advice. Trading involves the risk of losing money.