What a trading plan should contain (and why you follow it)

The purpose of a plan is to move decisions out of the heat of the moment. In the moment you are emotional, biased, and tired; in advance you are calm and rational. Everything you can decide beforehand, you should — that's the entire value proposition. A complete plan covers three areas: the edge (entries and exits), risk (sizing and limits), and routine (when and how you operate).

1. The edge: entries and exits

Define the exact setup that constitutes your edge, the objective trigger that puts you in, where the stop goes, and how you exit. “Objective” is the key word: if two people reading your plan wouldn't take the same trade, it's not specific enough. This is where most plans fail — they describe a feeling, not a rule.

2. Risk and sizing

Specify risk per trade as a fixed percentage, position size anchored to your account and its drawdown limit, a daily loss limit that stops you for the day, and a cap on concurrent or correlated positions. These rules exist to make oversizing and revenge trading structurally impossible.

3. Routine — and why following the plan is the whole point

Define your sessions, news rules, a pre-session checklist, and how you'll grade execution (not P/L). Then comes the hard part: following it. A plan you override is not a plan — it's a suggestion you ignore when uncomfortable, which is exactly when it matters. The plan's job is to be followed precisely on the day a loss makes you want to abandon it. If you'll only follow it when it's easy, you don't have a plan. This is the deepest reason a rules-based system helps: it makes the plan executable without requiring you to win an argument with yourself every session.