What it means
Write it when calm, follow it when not, and change it only outside market hours on real evidence.
In practice
A plan makes the decisions before the market opens: which markets and sessions to trade, which setups qualify, how much to risk, when to stop for the day. During the session the job is only to carry it out.
It also gives a standard to measure against. A losing trade that followed the plan is a good trade; a winner that broke it is not.
What to watch for
A plan too long or too vague to follow gets ignored. So does one that is rewritten after every loss; changes should come from a review of many trades.
Related terms
3 terms- Setup and triggerThe setup is when conditions are worth trading; the trigger is the exact event that gets you in.
- Daily loss limitA hard cap on how much you can lose in a day; hit it and you stop trading until tomorrow.
- Trading journalA record of every trade, with context and behaviour, used to find what works and what you keep getting wrong.