OptionsAcademy

A trading plan is a written document you create before you enter a trade. It defines:

• Why you're entering
• Where you'll exit if right
• Where you'll exit if wrong
• How many shares/contracts

Key Components

Setup: What you're looking for (e.g., "stock breaking above $150 resistance")

Entry: Exactly when you'll enter (e.g., "on close above $150.50")

Target: Where you'll take profits (e.g., "$160")

Stop: Where you'll cut losses (e.g., "$148")

Risk/Reward: Expected profit vs. max loss (e.g., "$10 profit vs. $2.50 loss")

Why It Works

• Removes emotion: You've already decided when to exit
• Improves discipline: You follow the plan, not your feelings
• Tracks performance: You can review what worked and what didn't
• Protects capital: You know your max loss before entering

Before Entering Any Trade

Write down:

1. What setup triggered this trade?
2. Where will I exit if I'm right?
3. Where will I exit if I'm wrong?
4. How much can I lose?

Sticking to the Plan

This is the hard part. When a trade moves against you, emotion says "hold, it'll come back." But your plan says "exit at stop." Follow the plan.

Related: Discipline, Stop Loss, Profit Target, Trade Journal