Trading plan template with risk limits and a checklist

The template, section by section

The same questions are in the workbook. To print this page or save it as a PDF, use your browser’s print command; the site’s menus are left out of the printout.

1. Goals and constraints

   • Why do you trade, and what would make this year a success apart from profit (for example, following the plan on every trade)?
   • How many hours a week can you give to trading, and when?
   • How much capital is set aside for trading, and how much of it could you lose without changing your life?

2. Markets and universe

   • Which markets and instruments do you trade (for example, US stocks and ETFs only)?
   • What minimum share price and average daily dollar volume must a stock have?
   • What do you not trade (for example, stocks reporting earnings before the planned exit, very thinly traded stocks)?

3. Routine and schedule

   • When do you prepare (before the open or after the close), and for how long?
   • Which steps make up the routine: market check, watchlist scan, plans for new trades, orders?
   • When do you not trade (major scheduled news, after reaching a loss limit, when tired or unwell)?

4. Market conditions

   • How do you judge the market’s state (for example, the S&P 500 above or below its 50-day average, market breadth)?
   • What changes in each state: the number of positions, the risk per trade, or no new trades?

5. Systems and setups

   • Which written systems do you trade? Name each one.
   • For each system: the entry trigger, the initial stop, the exit and the target.
   • What must be true before a setup counts (trend, volume, liquidity, minimum reward-to-risk)?

6. Risk per trade and position sizing

   • Risk per trade as a percentage of the account.
   • How the size is calculated (account × risk % ÷ distance from entry to stop).
   • The largest position allowed, as a percentage of the account.

7. Loss limits and drawdown

   • The daily loss limit (in R or dollars) and what you do when it is reached.
   • The weekly and monthly loss limits.
   • The most risk open across all positions, and the most positions at once.
   • At what drawdown you reduce the risk per trade, and when you restore it.

8. Orders and execution

   • Which order types you use for entries and stops, and when orders are placed.
   • What you do when a stock gaps through the stop or far beyond the entry.
   • Your rule for earnings reports and other scheduled events.

9. Records and review

   • What you record for each trade (the plan, the fills, the result in R, whether the plan was followed).
   • When you review (daily, weekly, monthly) and the questions you answer each time.
   • Which statistics you track: win rate, average win and loss in R, expectancy, drawdown, plan adherence.

10. Changing the plan

    • When rules may change (only at a scheduled review).
    • What evidence a change needs (a backtest, a minimum number of recorded trades).
    • How you keep yourself accountable (a written log of changes, a review partner).

Risk limits, worked through

Illustrative numbers for a $25,000 account, as the Risk limits sheet works them out:

• Risk per trade 1%: $250 per trade, so a stop $2.50 from the entry allows 100 shares.
• Daily loss limit of 3R: stop trading for the day after $750 of losses.
• Weekly loss limit of 6R: $1,500.
• Open risk of at most 5%: $1,250 at risk across all positions, five full-size trades.
• Cut the risk per trade at a 10% drawdown: an account value of $22,500, reached after 11 losing trades in a row at 1% each.

Pre-trade checklist

• The setup matches a system in this plan, and every one of its conditions is met.
• The market’s state allows new trades under the plan.
• Entry, stop and target are written down before the order is placed.
• The risk is within the per-trade limit, and the size was calculated from the stop.
• Total open risk stays within the limit with this trade.
• No earnings report or other scheduled event before the planned exit, unless the plan allows it.
• The stock passes the plan’s liquidity rule.
• Today’s loss limit has not been reached.
• The planned reward-to-risk meets the plan’s minimum.
• The trade is recorded in the journal as a plan before the order is sent.

How to use it

1. Download the workbook and answer the questions on the Plan sheet, section by section. Short, specific answers work best: numbers, times and names rather than intentions.
2. On the Risk limits sheet, enter your account size and the percentages in the shaded cells. Check that the dollar figures are amounts you could lose without changing how you trade; if not, lower the percentages.
3. Name each system you trade in section 5 and write its entry, stop and exit, or link its written rules. A system without written rules can’t be tested or reviewed.
4. Print the Checklist sheet or keep it open, and run through it before every order. Log each trade in a trading journal.
5. Change the plan only at a scheduled review, never during a trade, and only with evidence: a backtest or enough recorded trades.

Use it in Google Sheets

1. Download the .xlsx file above.
2. In Google Sheets, choose File › Import › Upload and select the file (or upload it to Google Drive and open it with Google Sheets).
3. Choose “Create new spreadsheet”. The formulas, the drop-down lists and every sheet come across; the template is then yours, in your own Google account.

Related guides and tools

• How to write a trading plan
• How to build a trading system
• Five written trading strategies
• Position size calculator
• Drawdown recovery calculator
• Trading journal template

Other templates

• Trading journal template for Excel and Google Sheets