How to Create a Trading Plan (With Template)

A trading plan is a written set of rules that decides what you trade, when you trade, how you enter and exit, and how much you are allowed to lose, before any money is at risk. You write it when you are calm so that you do not have to make those decisions when you are excited or scared. It is the practical side of trading psychology: instead of hoping to feel disciplined, you follow a document you already agreed with.

Quick answer: A trading plan is a written rulebook that a trader sets in advance, covering goals, markets and trading hours, entry and exit rules for each setup, risk per trade, daily and weekly loss limits, position sizing, a daily routine, and a journal review process. Its purpose is to make trading decisions repeatable and to cap losses before emotions take over.

---

3:14

Read the transcript

Can you become a successful trader? The short answer is yes. The longer answer depends on one question: what does success actually mean to you?

I am Gianluca Pizzituti, CEO of Velotrade. I've been trading for over 25 years, and during that time I have met many successful traders who could not have been more different from one another.

When I was working at a bank in London, there was a trader who was famous for being one of the most volatile performers in the City. In one year, he reportedly made around 25 million dollars. In another year, he lost around 10 million dollars.

If you were his manager, you knew exactly why you hired him. You wanted the possibility of that extraordinary year. But to get that possibility, you also had to accept the volatility that came with it.

I spoke with him a few times, and it became very clear that his way of thinking was completely different from mine. My approach was more conservative. If I reached a level of profit that satisfied me, I was comfortable protecting it.

I wanted to build wealth steadily. I did not need every good month to become an extraordinary month. He was different. When he reached a strong P&L, he did not slow down. He pressed the advantage.

His thinking was: what could go wrong? Worst case, I lose the profit I made this month, or the profit I made this quarter. Best case, I turn a good period into an exceptional one.

That requires a very particular mindset. Some people are genuinely wired that way. Most people are not.

And let me be clear, I am not talking about taking random risks. He had the experience, a mandate and a defined approach. This was not a beginner doubling his position because he felt lucky.

The lesson is not that you should copy him. The lesson is that success must match your temperament, your capital, your objectives and your tolerance for loss. If your strategy keeps you awake at night, it is not the right strategy for you, regardless of how impressive somebody else's results look.

For one person, success means producing a consistent second income with controlled risk. For another, it means pursuing exceptional returns and accepting substantial volatility. Neither definition is automatically right or wrong.

The mistake is borrowing somebody else's definition and pretending it belongs to you. You do not need the biggest P&L in the room. You need an approach you can tolerate, repeat and sustain.

So, which one are you? Are you the steady builder, or are you prepared to accept more volatility for the possibility of an exceptional result? Drop it in the comments.

In this video, Gianluca Pizzituti, Velotrade's co-founder, with more than 25 years of trading at London banks and building algorithmic strategies, explains why there is no single definition of trading success. His point is that success must fit your own temperament, capital and tolerance for loss, and that "You need an approach you can tolerate, repeat and sustain." A trading plan is where you write that approach down.

Trading plan key facts

What is a trading plan and why do you need one?

A trading plan is your personal operating manual for the market, and you need one because decisions made in the moment are the ones most affected by fear, greed and fatigue. Broker disclosures and academic studies consistently find that most retail day traders lose money. A plan does not change those odds by itself, but it removes avoidable errors: oversized positions, boredom trades, and losses left to grow because no exit was decided. It also makes results measurable, because a journal can only test rules that were actually followed.

What should a trading plan include?

A trading plan should include nine components, each explained below.

1. Goals and your definition of success

Your goals define what a good month looks like, and they should be process goals as much as profit goals. In the video, Gianluca contrasts a steady builder who protected profits with a trader who accepted large swings for the chance of an exceptional year. His warning is direct: "If your strategy keeps you awake at night, it is not the right strategy for you." Write down which kind of trader you are, how much time you have, and what drawdown you can accept without changing your behaviour.

A good goal is "Follow my entry rules on 95% of trades this month." A goal like "Make 2,000 USD this month" pushes you to force trades.

2. Markets and sessions

This section lists exactly which instruments you trade and during which hours. A few markets studied well usually beat many watched loosely. If you are unsure which style fits your schedule, see types of trading.

3. Setups with entry and exit rules

A setup is a repeatable pattern you are allowed to trade, written precisely enough that someone else could follow it. For each setup, record:

1. Context: the trend or condition that must be present (for example, price above the 50-day moving average).
2. Trigger: the exact event that gets you in (for example, a pullback to prior resistance that now acts as support).
3. Order type: many experienced traders prefer limit orders so they control the price they pay, which is how the SEC's Investor.gov guide to order types describes a limit order; Gianluca's own preference is limit orders. See market order vs limit order.
4. Stop-loss: where the trade idea is proven wrong.
5. Target or exit rule: a fixed target, a trailing exit, or a time exit.

Before entering, know your reward-to-risk ratio, because it sets the win rate you need to break even.

The chart shows why: at 1:1 you must win half your trades before costs, while at 1:3 a 25% win rate breaks even. A plan that targets at least 1:2 gives you room to be wrong often and still survive.

4. Risk per trade and daily or weekly limits

Risk per trade is the amount you lose if your stop is hit, written as a percentage of the account. A common rule of thumb is 0.5% to 1%. On top of that, set a daily loss limit (for example 2%) and a weekly loss limit (for example 4%). When a limit is hit, you stop opening new trades for that day or week, with no exceptions. These limits stop a bad day from becoming a bad month, the main defence against revenge trading.

5. Position sizing

Position sizing converts your risk rule into a number of shares, units or lots. The formula is:

Position size = (account size x risk %) / distance to stop per unit

Example: a 10,000 USD account risking 1% can lose 100 USD. You buy SPY with a limit order at 500 USD and place the stop at 490 USD, so you risk 10 USD per share. 100 / 10 = 10 shares. A wider stop means a smaller position, so the money at risk stays the same. The position size calculator does this arithmetic for any instrument.

6. Routine

Your routine is the fixed sequence of steps around each session. A simple version:

1. Before the session: check the economic calendar, mark key levels, and list which setups are possible today.
2. During the session: only take trades on the list; place stops at entry.
3. After the session: log every trade and close the platform.

7. Journal and review

A trading journal records every trade, and the review turns that record into decisions. Measuring results in R-multiples (1R is the amount you risked) makes trades comparable across different position sizes.

In this illustrative set of ten trades, the trader wins only four (a 40% win rate) yet finishes at plus 3R, because the winners are larger than the 1R losses. A weekly review should answer that question: do your setups produce positive results in R?

8. Rules for breaking rules

Every trader breaks a rule eventually, so the plan must say what happens next. For example: after any rule break, halve your risk for the next five trades and explain the break in the journal; after two breaks in a week, stop until the weekly review. The mistake then has a consequence you chose in advance, rather than becoming a spiral.

Trading plan template

Copy this table into a document or spreadsheet and fill in the right-hand column.

Example trading plan for a part-time swing trader

This hypothetical trader has a full-time job, a 10,000 USD account and about five hours a week. Swing trading means holding positions for days to weeks.

There is no checking prices at work and no trades outside the watch list. For a part-time trader, not trading is part of the plan.

How to adapt a trading plan for a prop evaluation

In a prop evaluation, the firm's limits become hard edges of your plan, and your personal limits should sit well inside them. Velotrade, a multi-asset prop trading firm, runs simulated evaluations with two hard limits:

The daily loss limit resets at 00:30 UTC and is set from the higher of your balance or equity at that time. The maximum drawdown is static, meaning it is fixed from your starting balance for the life of the account (static maximum drawdown explained). There is no time limit, only a minimum trading period per phase, and there is no cap on risk per trade, so the sizing discipline has to come from your plan.

Worked example on a 10,000 USD CLASSIC 2-Step account:

1. Static maximum drawdown is 10%, so the account must stay above 9,000 USD. Your total loss budget is 1,000 USD.
2. At 0.5% risk (50 USD) per trade, you could take 20 consecutive full losses before reaching that floor. At 2% risk (200 USD), only five.
3. Set a personal daily stop at 1.5% (150 USD), well inside the 5% daily limit, so one bad session cannot end the evaluation.
4. Because there is no time limit, the plan should never include "trade more to finish faster."

Swing traders should also note that positions can be held over weekends, except single stocks, which have earnings, dividend and holding restrictions. For the most common ways evaluations fail, see why traders fail prop challenges, and compare the plans on the challenges page.

Common trading plan mistakes

• Too vague. "Buy strong stocks on dips" is not a rule.
• No loss limits. Risk per trade without a daily or weekly cap still lets a losing run do serious damage.
• Copying another trader's plan. It will be abandoned the first time it hurts.
• Changing the plan after every loss. Three losers in a row is normal noise, not evidence.
• Planning entries but not exits. Most damage happens after entry.
• Never reviewing. A plan without a journal review cannot improve.

When should you change your trading plan?

You should change your trading plan only after the change has been tested and your sample is large enough to mean something, not in reaction to recent results. A practical process:

1. Write the proposed change as a precise rule.
2. Test it with backtesting on historical data, or forward-test it with paper trading.
3. Collect a meaningful sample. Many traders wait for at least 30 to 50 trades of one setup before judging it, and more is better.
4. Compare the results in R against the current rule, after costs.
5. Make the change at a scheduled review, never during a session.

Can AI help with a trading plan?

AI tools can help you draft a template, find patterns in a trading journal (such as which setups or times of day lose money), and speed up backtesting of rule changes. See AI trading strategies.

AI does not remove market risk or decide your loss tolerance. Treat its output as a draft to check with your own backtesting and judgement.

Sources

• Investor.gov (SEC), "Types of Orders": how market, limit and stop orders work.
• Investor.gov (SEC), "Stop Order": how stop orders trigger and execute.
• FINRA, "Frequent Intraday Trading: Understanding the Basics": risks of frequent intraday trading.