How to Build a Professional Trading Plan- Step-By-Step-Guide

If you’re looking to start your career in trading and investing, a trading plan can help you in your trading journey. The 5 ‘P’ in the business plan: “Proper Preparation Prevents Poor Performance”.

Famous quote:

 “An idiot with a plan can beat a genius without a plan”.

– Warren Buffett.

If you fail to plan, you plan to fail. So, Learn how to create a trading plan and put it into action.

What is a Trading Plan?

A complete decision-making tool for your trading activity is a trading plan. It assists you in selecting the right trades, timing, and quantity. It should be unique to you. You can use someone else’s strategy as a guide, however, keep in mind that someone else’s attitude toward risk and the amount of capital available may be very different from yours.

Why do you need a Trading Plan?

The reason it’s important is that it enables you to trade using logic rather than emotions. You can avoid making hasty decisions out of emotion if you have a solid trading plan.

Important factors:

1. Your “WHY” or Mission Statement

2. Trading Goals:

3. Trading Setup / Tactical trading strategies:

4. Plan for Mindset:

5. Backtesting:

6. Self Analysis Or Review:

A step-by-step guide to make a trading plan template:

Trading Plan

We will now look at a step-by-step approach for developing your plan while keeping in mind that nothing is rigid and there is always some degree of flexibility.

Step-1. Your “WHY” or Mission Statement:

As Jim Rohn says: When your “WHY is stronger, HOW becomes easier”. A crucial stage in developing your trading plan is determining why you want to trade and how much time you’re ready to invest. Write down your answer to the question “Why do you want to become a trader?” In conclusion, figure out your motivation for trading.

Step-2. Trading Goals:

How to create a trading plan

Process Goal:

In this paragraph, I’m going to discuss a process goal; this is more important than an Achievement Goal. You want to ensure that, you follow your trading plan, which means you execute your setup with the right entry, right position size, proper risk, and right exit strategy.

Achievement Goal:

Now it’s up to you, how much you want to make from trading. Write it down and split it into three parts:

a) Long-term trading goal:

b) Medium-term trading goal:

c) Short-term trading goal:

Step-3. Trading Setup

Identify your market and you should also decide what type of trader you are:

Make a Trading Blueprint.


Type of tradingCapitalTools & TechniqueTime
1. Trend following
2. Options buying
3. Swing trading
4. Day trading
Trading Blueprint

Trading Setup:

  • Entry
  • Stop loss
  • Target ( where to Exit)
  • Re-entry rule ( If there is any)
  • Pyramiding
  • Position Sizing

If you’re a Swing Trader and Trend Follower, I have a complete winning Trading Setup for you. So, take action to grab this opportunity.

stock trading book

Who grabs this opportunity? Only those people who are action takers.

Risk Management:

Prefer calculated risk instead of blind Risk. Remember The 2% rule in trading.

This rule says that on any given trade your loss should not exceed 2% of your total capital.

E.g. : Trading capital= Rs 100,000

Risk per trade= 2% of trading capital : Rs 2000

Make your own rule to Avoid Over Trading.

Step-4. Plan for Mindset for trading:

EMOTION CONTROL: You need sufficient self-discipline to follow your trading plan, avoid getting overexcited or depressed in the markets, and resist the temptation to make emotional decisions. This is a very important factor in the trading & investing profession. Thus, you should have a plan for your emotions management.

Read this article to learn about a “Super Trader”.

Step-5. Backtesting:

Backtesting a system provides you with more confidence in the system.

The best way to backtest any system is manually one by one chart, which covers all cycles of the market.

Task: Practice any trading system on 40 charts.

Step-6. Self Analysis Or Review:

For reviewing your trading work the best tool is TRADING JOURNAL: Maintain Trading Journal
Why it’s important?

A trading journal is one of the most effective tools for performance management. It is where you record and review daily trades for better output and future reference. A journal can help you track progress as well as study mistakes made when entering or exiting a trade. A trading journal is a necessary tool if you’re a technical trader.


Remember the 5 ‘Ps’ in the business plan: “Proper Preparation Prevents Poor Performance”. If you want to improve your performance and become a high performer, your only choice is to learn how to make a trading plan and develop your own trading plan. It provides you with a vision for your trading career. Making a professional trading plan, on the other hand, is only half the battle. Now you have to follow this consistently. It requires flawless execution; means acting on an opportunity (to trade) without hesitation the moment you notice it.

Here are Your Free gifts: Trading Journal and Daily affirmations template.

Thank You, I hope you’ve enjoyed this information as much as I loved writing it for you.

And give your valuable feedback about the information in this article and book.

Happy Trading!

FAQ (“Frequently Asked Questions.”)

Why is a business plan important?

As I mentioned above, “proper preparation prevents poor performance,” and a business plan will help you be a high performer in business. Similarly, trading is a business, so you have to plan for it.

Which Trading strategy is the best?

Before answering this question, you have to ask yourself: What type of trader are you? When you identify yourself, you have completed 90% of the task. If you’re a swing trader and trend follower, then you can take help from eBook shown above.

How to create a trading plan for forex?

I shared you a trading plan template for trading business; you can tweak it and make it your own unique plan according to specific trading style.

What is the difference between trading plan and trading strategy?

Without a trading plan you cannot survive long run in the markets. A trading strategy or trading setup can provide you with the entry and exit of a trade. And with the trading plan you can execute the trade based on a particular trading strategy.

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