Lessons › Trading psychology and process › Plan the trade, trade the plan

World 9 · Trading psychology and process · lesson 5 · level 2

Plan the trade, trade the plan

Decide everything before you click, then let the plan do the work.

In one line

Once your money is in, your brain gets louder. What if every decision had already been made?

Explained simply

Before a road trip, you plan the route at home while calm, not while stuck in traffic. A pre-trade plan is your route: where you get in, where you get out if it goes wrong, where you take profit and how big you go. Once you are driving, you follow the map instead of guessing at every turn.

The lesson

A pre-trade plan states the setup, entry, stop, target and size before any money is at risk. During the trade, emotions push you to move stops, add to losers or exit early, so the plan is your anchor. Changes are allowed only for reasons written in advance, such as a trailing-stop rule that moves the stop behind price. Judge yourself by whether you followed the plan, because one trade's result can be pure luck.

A worked example

Illustrative example: 20 trades with identical entries. Following the plan, 8 winners reach +2R and 12 losers stop out at -1R: 8 x 2 - 12 x 1 = 4R. Breaking the plan, the winners are closed early at +1R and the stops are moved so losers average -1.5R: 8 x 1 - 12 x 1.5 = -10R. Same entries, different discipline, and a gap of 4 - (-10) = 14R.

The same idea at four levels

1. Beginner. Write your plan before you click: setup, entry, stop, target and size.
2. Foundation. Once you are in the trade, follow the plan instead of your feelings.
3. Intermediate. Allowed changes must be written in advance, like 'move the stop to breakeven after +1R'.
4. Advanced. Emotions push the same way every time, widening stops on losers and grabbing early profits on winners, which shrinks your average win and grows your average loss.
5. Expert. Measure plan adherence as a number, such as the share of trades with no unplanned changes, and review every unplanned change as an error, even when it made money.

Mistakes to avoid

• Writing the plan after entering the trade.
• Changing the stop or target because of a feeling rather than a written rule.
• Judging the plan by one trade's result instead of by many trades.

Goal of this lesson: Write a simple plan before each trade and follow it without changing it mid-trade.