Home / Course / Module 6 / Building a Written Trading Plan
Module 6 · Lesson 5 of 10A trading plan is a short written document that says what you trade, when you trade it, how much you risk and when you stop. It is the best defence against making decisions on impulse.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Educational content only. Nothing here is a recommendation, and no result is guaranteed.
Ask a beginner what their strategy is and the answer is often "I look at the chart and see what feels right". That is not a plan. It is a mood, and moods change with every candle.
A trading plan is a set of written rules you decide on while calm, away from live prices. When the market is moving and your pulse is up, you do not have to think. You only have to check the plan. This is the practical answer to the traps in Trading Psychology.
Think of a pilot's pre-flight checklist. Experienced pilots still use one, not because they forget how to fly, but because under pressure people skip steps. A plan works the same way for traders.
A good rule can be answered with yes or no. "Enter when it looks strong" is vague. "Enter only after a candle closes above yesterday's high on the 1-hour chart" can be checked.
A plan does not promise profit. It makes your behaviour consistent, which also makes your results measurable, so you can learn whether your approach is any good.
Your plan can fit on one page. Here is a template with a worked gold example. The example values are hypothetical and are shown only to illustrate the format, not as a recommendation.
| Section | Question it answers | Example (hypothetical) |
|---|---|---|
| Market | What will I trade? | Gold (XAUUSD) only |
| Timeframe | Which charts do I use? | 1-hour chart for set-ups, 15-minute for timing |
| Session | When will I trade? | Two hours around the London open, weekdays |
| Set-up | What must be true to enter? | Price retests a marked level and a candle closes back in the trend direction |
| Entry | How exactly do I enter? | After the candle closes, not before |
| Stop-loss | Where am I wrong? | Beyond the retested level, set before entry |
| Target | Where do I take profit? | At least 1.5 times the distance to the stop |
| Risk per trade | How much can I lose? | A small fixed percentage of the account |
| Daily limit | When do I stop? | After two losing trades or a set loss |
| Avoid | When do I stay out? | Ten minutes either side of major news |
Fill in each row in your own words. Gaps are useful: if you cannot answer a row, that is a decision you have been making on impulse.
The entry gets the most attention, but the exit rules decide how much you lose and keep. Decide three things before entering: where you are wrong (the stop), where you take profit (the target), and how big the position is. For the mechanics, see Stop-Loss and Take-Profit.
The ratio between potential gain and potential loss is the risk-to-reward ratio. If you risk 10 points to try to gain 15, the ratio is 1:1.5.
Suppose a plan requires at least 1:1.5 risk-to-reward, and a trader risks £20 per trade. Over ten trades they win four and lose six.
So with 1:1.5, winning only four in ten gets you to break-even before costs. Spreads and other costs then push it below zero. This shows why costs and honest record-keeping matter, and that a low win rate is not automatically fatal or automatically fine.
The numbers are an illustration. Real results vary and nothing here suggests a particular method will be profitable.
A plan with a good entry but no risk limits is incomplete. Add these rules.
Leveraged CFD trading can lose money quickly. Only trade with money you can afford to lose, and never set a plan that depends on a specific monthly income from trading.
Notice the plan sets limits on what you can lose, never targets for what you must earn. Profit targets set in money terms push people to over-trade and take bigger risks when they are behind.
A new plan is a hypothesis. Before real money, test it on a demo account and past data (see Backtesting and Demo Trading). Then run it for a meaningful number of trades before judging it.
Change it on a schedule, such as at the weekly or monthly review, and only with evidence from your records. Do not change rules in the middle of a trade or straight after a loss. That is the same impulse the plan exists to prevent.
Keep it short. A plan you read every day is better than a perfect document you never open. Next, learn how to record and review your trades in Trading Journal and Review.
One page is enough. If you will not read it before each session, it is too long or too complicated.
You can use it as a starting point, but test it and adjust it to your own time, risk tolerance and experience. Do not follow it blindly.
The Gold Desk shares XAUUSD signals on Telegram, with entry, stop loss and targets on every call. Signals are educational ideas, not advice, and no result is guaranteed. Not directed at residents of the USA. Join the free Telegram channel.