Why you need a written plan
When money is moving on the screen, decisions made on the spot are usually emotional. You hold a loser because you hope, you close a winner because you are afraid, you add size because the last trade won. A plan is a promise to your future self made while you are calm. It does not predict the market; it controls your behaviour, which is the only thing you control.
A plan also gives you something to test. If you have no rules, you cannot tell whether a losing month was bad luck, a bad method or bad discipline. With rules and a journal, you can. If you are new to the market, first read what forex trading is and practise on a demo account, then write your plan before you risk real money.
The parts of a simple trading plan
A good plan fits on one page. These are the sections to include.
- Goal. Make it about process, such as "follow my rules on every trade for 60 days". Avoid income targets, which push you to take bad risks.
- Markets and time. Which pair or pairs, which sessions and which days. A beginner may choose one pair and two hours a day.
- Timeframes. One higher timeframe for direction and one lower for entry, for example daily and one hour.
- Entry rules. Exact conditions that must be true before you click buy or sell.
- Stop-loss rule. Where the stop goes and why, not just a number of pips.
- Exit rules. Where you take profit, and whether you move the stop to break-even.
- Risk rules. Risk per trade, maximum open trades and a daily and weekly loss limit.
- No-trade rules. Situations where you stay out, such as major news, low liquidity or after hitting the loss limit.
- Review rules. When and how you analyse the journal.
Writing clear entry and exit rules
A rule is clear if two people reading it would take the same trade. "Buy when the market looks strong" is not a rule. This one is: "Buy when price on the one-hour chart closes above a marked resistance level after the daily trend has been up for at least two weeks, and the stop-loss can be placed below the last swing low."
The ingredients for rules usually come from price action: trend direction, support and resistance levels and candlestick signals. Some traders add one or two indicators, but a plan with ten indicators is usually a plan with no rules. Remember that no setup works every time; the aim is a method whose average results beat its costs, which you can only learn from many trades. Include spreads and overnight fees in your thinking, as explained in spread, commission and swap.
Risk rules and position size
This is the most important section. Decide the percentage of your balance you will risk on one trade, then calculate lot size from the stop-loss distance. The numbers below are a calculation example, not a recommendation.
| Item | Example |
|---|---|
| Account balance | 1,000 (any currency of the account) |
| Risk per trade | 1 percent = 10 |
| Stop-loss distance | 25 pips |
| Allowed value per pip | 10 / 25 = 0.40 |
| Daily loss limit | 3 percent, then stop for the day |
The pip value for a lot size depends on the pair and your account currency, which is covered in lots, pips and leverage. The principle stays the same: the stop-loss distance and the money you risk decide the lot size, not your mood. See risk management for beginners for more.
What a trading journal should contain
A journal is a log of every trade, including the ones you are not proud of. A spreadsheet is enough. Record the following for each trade.
- Date, time and pair.
- Direction, entry price, stop-loss, take-profit and lot size.
- Risk in money and in percent of the account.
- Reason for the entry, in one sentence, and a screenshot of the chart.
- Result in pips and in money, and the exit reason.
- Did you follow the plan? Yes or no, honestly.
- Your emotional state before and after: calm, anxious, bored, angry.
The "followed the plan" column is the most useful one. After a month you can separate two groups: trades that followed the rules and trades that did not. Many traders find that their problems are not in the method but in the rule-breaking trades.
How to review the journal
Weekly review (20 minutes)
Look at all trades of the week. Count rule-breaks. Look at the largest loss and ask whether it was inside your risk limit. Pick one thing to improve next week, and only one.
Monthly review (one hour)
Calculate the number of trades, win rate, average win, average loss and total result after costs. A simple calculation example: 40 trades with 18 wins and 22 losses, average win 12, average loss 8. Wins give 216, losses give 176, the net is 40 before costs. If costs total 45, the net is negative. This invented example shows why a win rate below 50 percent can still work and why costs must be included before you judge a plan.
What to change and what not
Do not change the plan after one or two trades. Wait for a meaningful sample, such as 30 to 50 trades, then change one rule at a time and test it on demo. If your results are poor even when you follow the rules, simplify, reduce size or go back to demo.
Common plan and journal mistakes
- Too many rules. If you cannot remember the plan, you will not follow it.
- Writing the journal only after wins. A journal that hides losses is useless.
- No stop-loss rule. A plan without a maximum loss is only a hope.
- Revenge trading. Adding a trade right after a loss to win it back. Make it a no-trade rule.
- Copying someone else's plan unchanged. A plan must fit your time, capital and personality.
- Chasing prices that already moved. If you missed the entry, wait for the next setup.
- Buying "perfect" systems. Anyone selling a method with guaranteed returns is a warning sign; read how to spot forex scams.
A short sample plan you can adapt
This is an illustration of the format only, not a recommended method. Change every line to suit your own testing.
- Goal: follow every rule on every trade for 60 days.
- Market: one major pair, traded during the busiest hours of the day in your time zone.
- Direction: trade only in the direction of the daily trend.
- Entry: after a confirmed candle at a marked level on the one-hour chart.
- Stop-loss: beyond the level and the candle wick, set before the order is sent.
- Exit: at the next level, or earlier if the setup is clearly invalid.
- Risk: 1 percent per trade, at most two trades open, stop for the day after two losses.
- No trade: around major scheduled news, on Friday late evening, or when I feel angry or tired.
The plan fits a small card that you can keep next to the screen. Read it aloud before the first trade of each day. If a trade idea needs you to break one of the lines, the answer is no trade.
Tools for keeping a journal
You can use a paper notebook, a spreadsheet or a free note app. Some platforms also export account history, which you can combine with your notes. MetaTrader exports the account history to a file, and our MT4 and MT5 guide explains where to find it. Pick the simplest option you will actually use every day. If you trade through a broker such as the one described in the Exness review, compare your journal to the official statement at the end of each month to check that the numbers agree.
Test your plan on an Exness demo
Risk warning
Forex and CFDs are complex products with a high risk of losing money quickly because of leverage. Many retail clients lose money, and a written plan does not guarantee profit. Trade only with money you can afford to lose entirely. You must be 18 or older. Auron FX is an independent guide, not a broker, and this article is education, not personal investment advice.