How to Develop a Trading Plan

Sometimes there is a misconception that you need highly evolved market knowledge and years of trading experience to be successful. However, we often see that the more information we have the more difficult it is to create a clear plan. More information tends to create hesitation and doubt, allowing emotions to creep in and cloud judgment.

If you don’t know where you're going, any road will get you there. In trading, a lack of planning leads to inconsistency and failure. Most traders lose money because they don’t have a defined strategy. Trading with a plan is like building a business—it’s about being profitable overall, not about winning every trade.

Why a Trading Plan is Important

The most successful traders have a plan—and often multiple plans. Always write things down: it helps you stay focused and consistent. A plan reduces the need for on-the-spot judgment, helping manage emotions and reinforcing discipline. Creating a plan is good, but **using it** consistently is what makes it effective.

How to Build a Trading Plan

Build your plan around your needs. Test your strategy regularly and adjust where necessary. Ask yourself:

• • Why am I trading?
• • What is my motivation?
• • Is the capital I have enough to achieve my goals?

These questions form the foundation of your plan and should be revisited often.

Matching Goals to a Trading Style

Once you determine your goals and risk tolerance, evaluate what type of trader you are. Your personality, time availability, and financial situation should dictate your trading style—not your ideal vision.

Base your strategy on timeframes: Short, Base, and Long. The base timeframe is your primary chart; short and long timeframes are used to confirm your outlook.

Choosing Analysis Methods

Decide whether you're a fundamental or technical trader—or a combination of both.

• Fundamental analysis: News-based decisions (economic, political, environmental events).
• Technical analysis: Uses data, charts, and indicators (e.g., Fibonacci, RSI) to forecast movement.

Incorporate your chosen method(s) into a detailed step-by-step strategy.

Money and Risk Management

Know how much you’re truly willing to risk. Trading is not a deposit-and-hold activity. Liquidation occurs when your margin is exhausted. Success doesn’t depend on more winning trades—it depends on how well you manage losses.

Follow the 3% Rule: On a $10,000 account, risk no more than $300 per trade. This gives you 33 trades before your account is wiped. More room for error allows for a more realistic path to profitability.