Trading the Plan

Step by step

There is a lot of advice out there about planning and trading. I'm going to try and make this simple by giving you a template and example that you can implement and follow without much work.

First off, the old saying: Plan the trade and then trade the plan.

This is not bad advice but you need to put this into a structure that is easy to implement, easy to use and easy to measure.

Whatever stage of trading you are at I suggest that you take just one of the strategies that you trade (or want to trade) and use that in this planning exercise - let's keep it simple, easy and fast to implement. If we do that then all of you with and without ADD (attention deficit disorder) will be able to do this, even without Ritalin. (Later on you can come back and add other strategies to the plan.)

There are 4 steps, 2 before you enter your first trade, 1 while trading, and 1 after trading on the weekends.

Step 1 - Name and Describe

Write down the name and description of your strategy.

My example:
Name: MA XOver
Description: Buy when 20 SMA crosses above 50 SMA and sell if cross is other direction.

Step 2 - Setup measurement and record keeping tool

(I assume day trading here but this can be used for any type of trading)

Here is a spreadsheet that was used in another article that will do very well as a template in this exercise: Trade Records Template

Adjust the spreadsheet by deleting and adding columns to suit the data that you want to collect. You will want to use the reason column for the short name of the strategy that you are planning. My example: MAXO.You may want to add a column called Taken. Put a true or false in this column to indicate if you took the setup or not.

Step 3 - Trading the Plan

While trading, after each entry and exit, note down the trade details in the spreadsheet. Depending on what's happening in the market and how you trade you may be able to do this immediately or you may only be able to do this after the trade or day is over. Fill in the spreadsheet as soon as possible while the trade details are fresh in your mind. DO NOT make the filling in of the spreadsheet a chore or you will stop doing it.

Note down the setups that you didn't take as well as the ones that you took. Also note the difference between your actual results and your planned results and the reason for the difference.

Step 4 - Measuring the Results

At the end of your first week of trading (and each week thereafter) take a look at you spreadsheet and the results. I use Excel as my spreadsheet program but these tools should be available on all spreadsheet programs. On Excel you can use the Data -> Filter -> Autofilter... option to select types of rows from your spreadsheet. This will easily allow you to look at (for example) Taken versus Missed trades and see if your results are skewed by the trades that you missed that would have made your profits bigger or smaller. Once filtered using the Autofilter feature you can just select the cells in the Net P/L column and in the status bar you will see a total and this will be positive or negative indicating how this subset of results (e.g. missed trades) would have affected your results.

(An aside: You will always miss some trades. Even if you have an automated system you cannot stop the connection to your broker going down or your automated system from crashing or disconnecting. In the long run this should even out.)

Excel also has sorting and reporting abilities which allow you to analyze your plan and its effectiveness easily.


That's it, you're done! My objective in this article was to give you the simplest, fastest and easiest trading plan that will be effective in giving you real results that you can measure and work with. By adding layers of complexity at the beginning just deters traders from doing this. You can add more detail and more strategies to this plan as you realize its effectiveness and use in your own trading.