Trading with a Plan
A trading plan is a written set of rules that tells you what to trade,
when to enter, where to exit, and how much money to risk. It helps reduce
emotional decisions and keeps your trading consistent.
1. Define your trading style: Choose one approach:
Intraday: Buy and sell within the same day.
Swing trading: Hold for days or weeks.
Position trading: Hold for weeks or months.
2. Set entry rules: Before entering a trade, decide:
What stock or asset will you trade?
What technical/fundamental conditions must occur?
What is your planned entry price?
What confirms the trade?
3. Always define your stop-loss:
A stop-loss limits the amount you can lose if the trade moves against you.
Example:
Capital = ₹1,00,000
Maximum risk per trade = 1% = ₹1,000
Entry = ₹100
Stop-loss = ₹95
Risk per share = ₹5
Maximum quantity = ₹1,000 ÷ ₹5 = 200 shares
4. Set a profit target: Determine your target before entering. For example,
if you risk ₹5 per share and target ₹10, your potential risk/reward is 1:2.
5. Control position size: Don't put your entire trading capital into one trade.
Position sizing should be based on your predetermined risk, not on how confident you feel.
6. Create daily rules: For example:
Maximum 2–3 trades per day. Stop trading after reaching your daily loss limit.
Don't revenge-trade after a loss. Don't increase position size to recover losses.
Avoid trades that don't meet your setup.
7. Keep a trading journal:
Record: Date → Stock → Setup → Entry → Stop-loss → Target →
Quantity → Result → Reason for trade → Mistake/lesson.
After 20–50 trades, review the journal to identify patterns in your performance.
Simple Trading Plan:
Trading style: Swing trading. Entry: Predefined setup.
Risk/trade: 1% of capital. Stop-loss: Defined before entry.
Target: Predefined. Position size: Based on stop-loss.
Daily loss limit: Predefined.
Journal Every trade: Rule violation No new trade until reviewed.
Key principle: Plan the trade before you trade the plan. A good plan cannot
eliminate losses, but it can make your decisions more systematic and keep
a single losing trade from becoming a major portfolio loss.
Wishing you all the best,
http://www.seeyourneeds.in
