Contents
A plan is a set of decisions made in advance
The purpose of a trading plan is not to describe your strategy. It is to move every decision that can be made in a calm state into a document, so that the decisions that remain for the hot state are few and mechanical.
A trader with a good strategy and no plan makes dozens of discretionary decisions per session, and every one of them is an opportunity to introduce an error. A trader with a documented plan makes perhaps three decisions per trade, and they are all pre-specified.
This is why people with worse strategies often trade more consistently than people with better ones. We covered the psychology of that in why most gold traders lose.
The eight sections of the plan
One, the market and instrument: XAUUSD, one account, one broker, one contract specification. Multiple instruments multiply the learning problem, and for most people there is no reason to trade anything but gold.
Two, the session: which windows you trade, in IST, and which you do not. We recommend one primary window. The session guide has the details.
Three, the setup: a single named setup, defined so precisely that two people reading the description would take the same trade. If the definition contains a judgement word like “strong” or “clear”, it is not finished.
Four, the entry: the trigger, the order type, and what you do if the entry is missed. Missed entries are a specific and avoidable source of revenge trading, and having a rule about them prevents the worst of it.
Five, the exit: the stop placement rule, the target rule, the time stop, and the discretionary exit conditions. The time stop is the one most plans omit, and it is what stops a losing position from becoming a multi-day carry cost.
Six, the sizing: the percentage per trade, the volatility adjustment, and the daily loss limit. The sizing guide has the formula.
Seven, the review: the weekly review, the metrics you track, and the one behaviour you will change. The journal template covers this.
Eight, the rules: the hard constraints, such as no trading after a loss limit is hit, no increasing size after a win, no trading during releases unless the setup is designed for it, and no adding to losers.
Writing it so you will follow it
The plan should fit on a couple of pages. A twenty-page plan is a document nobody consults in the moment, and a plan that is not consulted in the moment is decorative.
Write it in a form you can consult quickly. A checklist on a single sheet, plus the setup definition, plus the risk table, covers what you need at the terminal. The longer narrative version can live in a separate document for reference.
Then do the step most people skip: test the plan against your last twenty trades, before you trade it live. For each one, ask whether you would have taken it under the plan, whether the entry and stop would have been the same, and whether the position size would have been the same. The gaps between your actual behaviour and your written plan are the thing you most need to know.
The review cycle that keeps it alive
A plan that is never revisited becomes wrong, because the market changes and because you change. The monthly review should check three things: whether the setup's expectancy is still positive in live trading, whether the market behaviour the setup depends on still holds, and whether the rules are being followed.
The rules section is the one to scrutinise most carefully. A rule you are consistently breaking should be examined in one of two ways. Either it is unrealistic and should be changed, or it is correct and the behaviour needs addressing. What must not happen is the rule being quietly abandoned, because then the plan is fiction while still claiming to be a plan.
And the plan should be versioned. When you change it, date it and note what changed and why. This creates a record of your thinking over time, which is a genuinely useful artefact, and it prevents the slow drift where each change is individually reasonable and the accumulated result is unrecognisable.
The three most common plan failures
The first is over-complication. A plan with six setups and four timeframes is a plan you will not execute consistently, and consistency beats optimisation at every stage of skill development. One setup, executed for six months, will teach you more than six setups executed for a month each.
The second is the plan that is written but not lived. If your live trading does not match the plan, you are running an unwritten plan, and the written one provides only the comforting illusion of discipline. This is why the test against your last twenty trades is worth doing, because it exposes the gap early.
The third is the plan with no edge in it. It is possible to write a complete, disciplined, well-structured plan around a strategy that does not work, and the discipline then executes the unprofitable strategy very efficiently. This is why the validation step comes before the plan, not after. The edge-building guide covers the validation, and the backtesting guide covers the testing discipline.