Before the trade
A useful plan defines what must be true before entry and what evidence would show that the original idea is no longer valid. This makes the decision reviewable instead of relying on memory after the result is known.
- State the market thesis in one or two sentences
- Identify the invalidation level
- Calculate the loss at the intended exit
- Check scheduled events, spreads and liquidity
- Confirm that total account exposure remains within the chosen limit
During the trade
The purpose of the plan is to reduce improvised decisions under pressure. Traders should know in advance whether the position can be adjusted, what conditions justify an adjustment and what conditions require an exit.
Adding to a losing position, moving an exit further away or increasing size after a loss can materially change the original risk. Any such decision should be governed by a rule established before the trade.
After the trade
A profitable trade can involve a poor process, and a losing trade can still follow a sound process. Separate outcome from execution when reviewing performance.
- Was the setup consistent with the plan?
- Was the position sized correctly?
- Did actual execution differ from the intended price?
- Were the exit rules followed?
- What should remain the same or change next time?
Measure what can be improved
A journal can record screenshots, rationale, timing, costs, emotions and rule adherence. Over a meaningful sample, this creates evidence about the process without implying that past performance will continue.