How to Build a Trading Plan: Rules, Template and Journal

A trading plan is a written set of rules that decides, before you trade, what qualifies as a trade, how much you will risk, where you will get out and when you will stop trading altogether. You build one by writing each rule precisely enough to check afterwards, then filling in a short template before every entry. It is useful for anyone whose results suffer more from decisions made in the moment than from the analysis itself.

Why the plan has to be written

A plan kept in your head reshapes itself to fit whatever the market is doing.

Writing it down forces precision: "buy strong stocks on dips" sounds reasonable in your head and looks empty on paper. It also gives you something fixed to compare your behaviour against, which is the only way to tell whether a bad month came from the method or from not following it.

The rulebook and the per-trade plan

"Trading plan" covers two different documents.

• The overall plan is your rulebook. It is written once, reviewed on a schedule, and never edited during market hours.
• The per-trade plan is one filled-in template for one position, completed before the order goes in.

Without the rulebook, the template is just a form for justifying what you already wanted to do.

What goes in the overall plan?

Write each section so someone reading your trade log could tell whether you followed it.

1. Capital. Money you can afford to lose. Not the emergency fund.
2. Markets and timeframe. What you trade, for example liquid cash-market equities only, and how long you hold. If that is still open, settle swing trading vs day trading first.
3. What qualifies as a setup. Something a chart answers yes or no: weekly uptrend, pullback into a prior support zone, daily close back above it on above-average volume. Finding candidates is covered in how to select stocks for swing trading.
4. Entry rule. The exact trigger and order type. "A buy stop just above the trigger candle's high" is a rule. "When it looks ready" is not.
5. Stop rule. Where the stop sits relative to the structure, set before entry and only ever moved in the trade's direction.
6. Position sizing. A fixed share of capital at risk per trade, with shares derived from the distance to the stop. The formula is in risk management in trading, and the position size calculator does the arithmetic.
7. Exits and targets. Where profit is taken (a real level, not a round number), whether you exit in parts, and a time stop for trades that go nowhere.
8. Maximum loss limits. Daily, weekly and monthly, each with a consequence. "No new trades until Monday" is enforceable. "Be more careful" is not.
9. When not to trade. Company results inside your holding window, days you are unwell or distracted, after a loss limit, and any idea that arrived as a tip.
10. Review routine. When you read the journal, covered below.

A per-trade plan template you can copy

Fill in every row before placing the order. If a row cannot be filled in, the trade is not ready.

Field	What to write
Setup	Stock, which rulebook setup, and the chart evidence
Entry	Price and order type
Stop	Price, and the structure it sits beyond
Risk per share	Entry minus stop
Risk budget	Capital × risk per trade
Shares	Risk budget ÷ risk per share, rounded down
Target	The level, and why that level
Reward to risk	(Target minus entry) ÷ (entry minus stop)
Time stop	Exit date if neither stop nor target is hit
Events in the window	Results or other scheduled announcements
Rule check	Does this break any rule, including a loss limit?

A worked example in rupees

A hypothetical large-cap stock, described generically because this is an illustration and not a recommendation. The rulebook: capital of Rs 3,00,000, 1% risk per trade, and loss limits of 2% a day, 4% a week and 6% a month.

Field	Filled in
Setup	Weekly uptrend, pullback to a broken resistance zone near Rs 1,200, daily close back above it on above-average volume
Entry	Rs 1,240, buy stop above the trigger candle
Stop	Rs 1,198, below the zone
Risk per share	Rs 42
Risk budget	Rs 3,000
Shares	71, a position of Rs 88,040
Target	Rs 1,330, the prior swing high
Reward to risk	Rs 90 against Rs 42, about 2.1 to 1
Time stop	Exit at the close after 10 sessions

The share count came from the stop, not from a feeling. At 71 shares, a stop-out costs Rs 2,982, inside the budget. The loss limits become concrete too: the daily limit of Rs 6,000 is about two full-size losses, and the weekly limit of Rs 12,000 about four.

If the stock opens below Rs 1,198, the loss will be larger than planned. A plan cannot prevent a gap; it can only keep size small enough to survive one.

What to record in a trading journal

The per-trade plan records what you intended; the journal records what happened. The gap between them is the most useful data you will collect about your trading.

Field	Why record it
Setup name	Compare results setup by setup
Planned entry, stop, target, shares	Copied from the per-trade plan
Actual entry and exit	Shows slippage and gaps
Exit reason	Stop, target, time stop, or your own decision
Result in rupees and in R	R is the result divided by planned risk, so different sizes compare fairly
Costs	Brokerage and charges on the round trip
Rules followed	Yes or no, and which rule if not
State of mind	Rushed, tired, trying to recover a loss

• Daily, after the close. Log the trades while they are fresh. Change nothing.
• Weekly. Check each trade against the rulebook, counting rule breaks separately from losses.
• Monthly. Look at results by setup. This is the only point at which rules change, in writing, with the reason.

A losing trade that followed every rule is the method's normal cost. A winning trade that broke a rule is a warning, because it rewards the wrong behaviour.

Common mistakes

• A plan too vague to test. "Trade with the trend and cut losses quickly" can never be broken, so it can never really be followed.
• Changing rules mid-trade. Widening a stop once the position is open replaces a calm decision with one made under pressure.
• No loss limit. A bad day turns into a bad week, because each loss makes the next trade feel more urgent.
• Never reviewing. A journal nobody reads is a diary. You repeat the same errors with better notes.
• Borrowing someone else's rules. Rules copied from a channel do not fit your capital or schedule, and get abandoned at the first drawdown. The usual form of this is covered in how to stop following stock tips.

Start by writing the rulebook on one page and using the template for your next ten trades. A plan is only as good as the setups, levels and stops written into it, and learning to read those is what the Technical Analysis Foundational Course is for.

Frequently asked questions

What is the difference between a trading plan and a trading journal?

The plan is written before you trade and says what you intend to do. The journal is written afterwards and records what happened, including whether you followed the rules. Comparing the two shows whether losses came from the method or from not following it.

Should I keep my trading plan on paper or in a spreadsheet?

Either works, as long as the rulebook stays fixed and the per-trade template is filled in before the order. A spreadsheet makes the monthly review easier, because results can be sorted by setup. Paper is harder to edit on impulse. Pick one and stay with it.

What should I do when I hit my maximum loss limit?

Whatever the plan already says, such as no new trades for the rest of the week. The decision is made in advance because judgement is at its worst straight after a run of losses.

How often should I change my trading plan?

Only at a scheduled review, and monthly suits most swing traders. Never during market hours or while a position is open. When you change a rule, write down why, so the next review can check whether the change helped.

Do I need a trading plan if I only trade occasionally?

Arguably more so. An occasional trader has fewer trades to learn from and less practice following rules under pressure. A one-page rulebook and a template per trade take little time and remove most of the improvisation.

What does R mean in a trading journal?

R is a trade's result divided by the amount you planned to risk. If you planned to risk Rs 3,000 and made Rs 6,000, that is 2R; a full stop-out is minus 1R. It lets you compare trades of different sizes fairly.