How to write a forex trading plan

A trading plan is a written set of rules that decides, before you enter a trade, what you will trade, when, how much you will risk and how you will exit. Its job is to remove the decisions you would otherwise make in the moment, when emotion is highest.

What a plan must contain

• Markets and sessions: the pairs you trade and the hours you trade them.
• Timeframes: the chart timeframe you use for the setup and the one you use for the wider trend.
• Setup definition: every condition that must be true before you consider a trade. Write them so two people would mark the same chart the same way.
• Entry rule: the exact trigger, such as a close beyond a level or a confirmed pullback.
• Stop-loss rule: where the stop goes, and what price move would show the idea is wrong.
• Exit rules: the target or trailing method, and anything that closes the trade early.
• Position size: how many units you trade, derived from your risk rules. See risk per trade.
• Daily and weekly limits: the loss at which you stop trading for the day or the week.
• Review schedule: how often you check your results against the plan.

Write the rules so you can test them

A rule you cannot check against a chart is a feeling. Replace phrases such as "strong momentum" with conditions you can measure or point to on the chart. Once the plan is written, you can backtest it, review each trade against it, and see exactly where you departed from it.

Follow the plan, then change it deliberately

Changing rules in the middle of a losing run is one of the most common ways traders undo a plan. Keep a log of proposed changes, test them separately, and adopt a new rule only after you have reviewed the evidence.

Risk warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. You could lose more than your initial deposit. This page is education only and is not financial advice. Simulated and backtested results do not guarantee future results.