The Discipline of a Written Trading Plan

A simple, repeatable standard for execution.

Research and education only. Not investment advice. Trading involves risk, including loss of principal.

What this Playbook is

This section explains the practical side of our approach: how to think about risk, how to stay aligned with market conditions (uptrend, downtrend, or range), and how to size positions. We are not publishing proprietary indicators here. This is about behavior you can apply to any method.

Why a plan matters

Most trading mistakes come from how we act, not what we think. Without a plan, we improvise—chasing late entries, moving stops, and letting size follow mood. A written plan removes the guesswork. It sets the rules before the first dollar is at risk.

The core of the plan (entry + exit triggers + risk + management)

1. Entry trigger
   The objective “if/then” that starts the trade. No vague language—write the specific condition that must occur.
2. Exit triggers (price and time, for profits and losses)
   Exits are not only stop‑losses. Write both price‑based and time‑based exits for loss‑limiting and profit‑taking. That is what turns “timing” into behavior.
   • Protective—Price: the invalidation level that proves the idea is wrong for this timeframe.
   • Protective—Time: the maximum “time‑in‑trade” without required progress (e.g., no confirmation within your window; an end‑of‑session no‑carry rule).
   • Profit—Price: predefined structure levels for partial or full exits.
   • Profit—Time: a “profit‑stale” rule (e.g., if progress stalls for N intervals, harvest) or a catalyst‑window rule (e.g., close before an event you won’t hold through).
3. Max dollar risk & instrument
   The most you will lose on this idea and the vehicle that enforces it (shares, futures, or defined‑risk options). Risk is measured in dollars, not in comfort.
4. Management if right
   Pre‑commit what happens after the trade works so success doesn’t turn into drift:
   • Partials: where you take some off and how much.
   • Stop movement: when the stop goes to breakeven and how it trails thereafter (pick one trailing method and be consistent).
   • Runner logic: the rule that keeps a small piece open while the trend persists; close it by rule, not by feel.
   • Scaling: add only after progress and only if total open dollars at risk will remain ≤ the initial risk (tighten the stop to keep that true).
   • No drift: if progress stalls per your profit‑time rule, harvest rather than hope.

Timing is selection at entry and discipline at exit. Treat exits as true triggers—price and time—for both losses and gains.

Keep size intentional

Size only when your edge is present and your risk in dollars is defined. “Bet big” is useful only if you know exactly where the trade is invalidated and when profits go from “working” to “stale.” If the edge is thin or unclear, trade small—or stay flat.

Match the idea to the instrument

Ideas have a time horizon. Instruments behave differently across that horizon.
• Options: affected by time‑decay and changes in implied volatility; direction can be right while premium still decays.
• Futures: marked‑to‑market with contract tick values and roll considerations.
• Shares: linear exposure, no time‑decay.
State your intended holding period, choose the instrument that fits it, and include a time exit so slow drift cannot quietly erode the trade.

Why analysts rarely publish “short” calls—and the lesson

Public incentives are not symmetric:
• A bullish call that works gets maximum credit.
• A bearish call that works is often discounted as luck, and the analyst may be tagged “perma‑bear” in the next upswing.
• A bullish call that fails is usually forgiven (“we were all in the same boat”).
• A bearish call that fails is the cardinal sin; clients and readers leave.

This is why public commentary skews optimistic and explicit short calls are scarce. The takeaway for traders: remove that bias from your own process. Hold longs and shorts to the same standard—same entry clarity, same invalidation, same time‑ and price‑based exit triggers, same dollar cap.

Keep it simple—on purpose

Simplicity is a risk‑control tool. Fewer moving parts mean fewer mid‑trade decisions and cleaner reviews. “Keep it simple” is not a slogan; it is how plans stay executable when markets move fast.

Learn, adjust, repeat

Progress comes from making mistakes in a controlled way and adjusting one rule at a time. Over a large sample, edge comes from recognizing repeatable patterns and acting with conviction when your conditions line up.

Plan template

Trade name
• Regime / Context (one line)
• Entry trigger — objective “if/then” condition
• Exit triggers — Protective (limit loss)
 – Price: invalidation level for this timeframe
 – Time: max time‑in‑trade without required progress / no‑carry rule
• Exit triggers — Profit‑taking (bank gains)
 – Price: level(s) for partial/complete takes
 – Time: profit‑stale window / catalyst‑window rule
• Max dollar risk & instrument — dollar cap and how it’s enforced
• Management if right
 – Partials: what % and where
 – Stop movement: when to breakeven; chosen trailing method
 – Scaling: only after progress; total open dollars at risk ≤ initial risk
 – Runner close: rule for exiting the final piece

Governance

Once a week, ask three yes/no questions: Did I respect the price exit? the time exit? the dollar cap? If any answer is “no,” fix the rule before seeking more information.

There are many ways to trade. This Playbook shows one: clear, repeatable, and battle‑tested. Use it as scaffolding—adopt it, adapt it, and make it your own. Next up: Patience Is a Position (why waiting and holding cash improve results), followed by Sizing You Can Live With.