Trading Plan Generator

A comprehensive skill for creating disciplined, rule-based trading plans that help you manage risk, control emotions, and trade consistently.

What This Skill Does

Helps you create professional trading plans for:

• Day Trading - Intraday positions, quick scalps
• Swing Trading - Multi-day to multi-week positions
• Position Trading - Long-term trend following
• Options Trading - Directional and income strategies
• Investing - Long-term portfolio management

Why You Need a Trading Plan

Without a plan:

• Emotional, impulsive decisions
• Inconsistent position sizing
• No clear entry/exit rules
• Revenge trading after losses
• Account blowup risk
• Can't identify what works

With a plan:

• Disciplined, rule-based trading
• Consistent risk management
• Clear decision framework
• Emotional control
• Long-term profitability
• Measurable improvement

The Stats:

• 90% of traders fail (most have no plan)
• Professional traders ALL have written plans
• Plan + discipline = edge

Core Components of a Trading Plan

1. Trading Goals & Mindset

• Financial goals (realistic)
• Time commitment
• Risk tolerance
• Trading philosophy
• Success definition

2. Risk Management (MOST IMPORTANT)

• Maximum risk per trade (1-2% recommended)
• Maximum daily loss limit
• Maximum drawdown tolerance
• Position sizing rules
• Stop-loss requirements
• Risk/reward minimums

3. Market Selection

• What markets you trade (stocks, forex, crypto, options)
• Liquidity requirements
• Price range preferences
• Sector focus (if any)
• What you DON'T trade

4. Trading Setup Criteria

• Entry signals (technical/fundamental)
• Confirmation requirements
• Timeframes used
• Pattern recognition
• Market condition filters

5. Entry Rules

• Exact entry triggers
• Order types (market, limit, stop)
• Position sizing calculation
• Scaling in (if allowed)
• Time-of-day restrictions

6. Exit Rules

• Stop-loss placement (hard rules)
• Take-profit targets
• Trailing stop strategies
• Time-based exits
• Scaling out rules
• Break-even stops

7. Trade Management

• When to adjust stops
• When to add to position
• When to reduce size
• When to exit early
• Never scenarios (what you never do)

8. Psychology & Discipline

• Pre-market routine
• Emotional state check
• Tilt recognition
• Break requirements
• End-of-day review
• Accountability measures

9. Performance Tracking

• Trade journal requirements
• Metrics to track
• Review frequency
• Improvement process
• Strategy adjustment criteria

Risk Management Frameworks

The 1% Rule (Recommended for Most Traders)

Never risk more than 1% of account on single trade

Example:

• Account size: $50,000
• Maximum risk per trade: $500 (1%)
• Stock entry: $100
• Stop-loss: $98
• Risk per share: $2
• Position size: $500 / $2 = 250 shares
• Total position: $25,000 (50% of account)
• Actual risk: $500 (1% of account)

Benefits:

• Can survive 20+ consecutive losses
• Removes emotion from sizing
• Consistent risk across trades
• Protects capital

The 2R Minimum Rule

Only take trades with 2:1 reward-to-risk or better

Example:

• Entry: $100
• Stop: $98 (risk = $2)
• Target: $104 (reward = $4)
• R:R = 2:1 ✅

Why it matters:

• Can be profitable with 40% win rate
• Forces selective trading
• Improves overall edge

Maximum Drawdown Limit

Hard stop trading if down X% from peak

Recommendations:

• Conservative: 10% drawdown → stop trading
• Moderate: 15% drawdown → stop trading
• Aggressive: 20% drawdown → stop trading

When hit:

1. Stop trading immediately
2. Review all trades
3. Identify mistakes
4. Paper trade until recovered mentally
5. Resume with reduced size

Trading Styles

Day Trading

Definition: Open and close all positions same day

Characteristics:

• Multiple trades per day
• No overnight risk
• Pattern Day Trader rules ($25K minimum)
• High screen time requirement
• Quick decisions

Best for:

• Full-time traders
• High risk tolerance
• Quick decision makers
• Pattern recognition skills

Key rules:

• Never hold overnight
• Reduce size near close
• Stop trading after daily loss limit
• First 30 min often volatile

Swing Trading

Definition: Hold positions 2-10 days

Characteristics:

• 2-5 trades per week
• Overnight risk acceptable
• Part-time friendly
• Technical + fundamental mix

Best for:

• Part-time traders
• Day job professionals
• Trend followers
• Patient traders

Key rules:

• Always use stop-losses
• Check positions before/after market
• Respect earnings dates
• Weekend gap risk consideration

Position Trading

Definition: Hold positions weeks to months

Characteristics:

• Long-term trend following
• Fundamental focus
• Low trade frequency
• Larger position sizes

Best for:

• Investors with edge
• Low time availability
• Fundamental analysts
• Macro trend followers

Key rules:

• Wide stops (volatility-based)
• Focus on major trends
• Ignore daily noise
• Strong thesis required

Entry Strategies

Technical Entry Methods

1. Breakout Entry

• Price breaks above resistance
• Increased volume confirmation
• Wait for pullback or buy breakout
• Stop below breakout level

2. Pullback Entry

• Wait for trend pullback
• Enter at support/moving average
• Continuation confirmation
• Stop below support

3. Reversal Entry

• Identify overextended move
• Look for reversal signals
• Multiple confirmations required
• Wider stops needed

4. Pattern Completion

• Specific pattern (flag, triangle, etc.)
• Pattern completion signal
• Volume confirmation
• Target based on pattern

Fundamental Entry Triggers

For Stocks:

• Earnings surprise
• Guidance raise
• Product launch
• Sector rotation
• Insider buying
• Short squeeze setup

For Macro:

• Fed policy change
• Economic data surprise
• Geopolitical event
• Seasonality

Exit Strategies

Stop-Loss Methods

1. Percentage Stop

• Fixed % below entry
• Simple and clear
• Example: 2% below entry

2. Support/Resistance Stop

• Below key technical level
• Makes technical sense
• Varies by setup

3. ATR-Based Stop

• 1.5-2x Average True Range
• Adapts to volatility
• Prevents whipsaw

4. Time Stop

• Exit if no progress in X days
• Frees up capital
• Prevents dead money

Take-Profit Methods

1. Fixed R Multiple

• 2R, 3R, 4R targets
• Predetermined exit
• Consistent methodology

2. Technical Target

• Previous resistance
• Fibonacci extension
• Measured move
• Pattern target

3. Trailing Stop

• Move stop as profit grows
• Lock in gains
• Ride trends longer

4. Partial Profits

• Take 50% at 2R
• Trail remaining 50%
• Reduces regret
• Balances risk/reward

Position Sizing Formulas

Fixed Dollar Risk

Position Size = Account Risk $ / (Entry - Stop)

Example:
- Account: $50,000
- Risk per trade: $500 (1%)
- Entry: $100
- Stop: $97
- Risk per share: $3
- Shares: $500 / $3 = 166 shares

Fixed Percentage Risk

Position Size = (Account × Risk %) / (Entry - Stop)

Example:
- Account: $50,000
- Risk: 1%
- Entry: $50
- Stop: $48
- Risk per share: $2
- Shares: ($50,000 × 0.01) / $2 = 250 shares

Kelly Criterion (Advanced)

Position Size % = (Win Rate × Avg Win - Loss Rate × Avg Loss) / Avg Win

Example:
- Win rate: 55%
- Avg win: $500
- Loss rate: 45%
- Avg loss: $300
- Kelly: (0.55 × $500 - 0.45 × $300) / $500 = 28%
- Use 1/4 Kelly = 7% position size (conservative)

Warning: Kelly can be aggressive, use fractional Kelly

Trading Psychology

Pre-Market Routine

• Review previous day's trades
• Check overnight news
• Identify key levels
• Plan potential setups
• Check emotional state
• Confirm risk limits

Emotional State Check

Don't trade if:

• Angry or frustrated
• Desperate for money
• Revenge mindset
• Distracted or tired
• Overconfident
• Fearful

Green light to trade:

• Calm and focused
• Following plan
• Accepting of losses
• Patient for setups
• Clear-headed

Tilt Recognition

Warning signs:

• Increasing position size
• Abandoning stops
• Taking marginal setups
• Revenge trading
• Checking P&L constantly
• Breaking rules

When tilting:

1. Stop trading immediately
2. Close all positions
3. Take a break (hour/day/week)
4. Review what triggered it
5. Return when calm

Daily Loss Limit

Critical rule: Stop trading at daily loss limit

Example:

• Daily limit: -2% of account
• Account: $50,000
• Stop at: -$1,000 loss

Why it matters:

• Prevents blowup days
• Forces you to stop tilting
• Tomorrow is another day
• Protects capital

Market Conditions & Filters

When to Trade

• Market trending clearly
• Volatility in normal range
• Volume above average
• Your setups present
• Clear technical levels
• Emotional state good

When NOT to Trade

• Choppy, rangebound market
• Major news pending (FOMC, etc.)
• Low volume (holidays)
• Extreme volatility
• No clear setups
• Emotional/tilting

Market Regime Recognition

Bull Market:

• Buy dips
• Longer holds
• Reduce short exposure
• Follow momentum

Bear Market:

• Sell rips
• Shorter holds
• Reduce long exposure
• Focus on defense

Sideways/Choppy:

• Reduce size
• Take quick profits
• Avoid breakout trades
• Trade ranges

Performance Tracking

Metrics to Track

Win Rate:

• % of trades profitable
• Target: >50% for day trading, >40% for swing

Average Win vs Average Loss:

• Avg $ won on winners
• Avg $ lost on losers
• Should be 1.5:1 or better

Profit Factor:

• Gross profit / Gross loss

• 1.5 is good, >2.0 is excellent

Expectancy:

• (Win Rate × Avg Win) - (Loss Rate × Avg Loss)
• Must be positive to be profitable

Maximum Drawdown:

• Largest peak-to-trough decline
• Track and improve over time

Sharpe Ratio:

• Return / Volatility

• 1.0 is good

Trade Journal Requirements

For each trade log:

• Date and time
• Ticker/instrument
• Entry price and size
• Stop-loss and target
• Exit price and reason
• P&L ($ and %)
• Setup/pattern
• Market condition
• Emotional state
• Mistakes made
• Lessons learned
• Screenshot

Review Schedule

Daily:

• Review all trades
• Calculate P&L
• Note mistakes
• Plan next day

Weekly:

• Calculate weekly metrics
• Identify patterns
• Best/worst trades
• Rule compliance %

Monthly:

• Full performance review
• Strategy adjustments
• Goal progress
• Mindset check

Common Mistakes to Avoid

❌ Fatal Errors

1. No Stop-Loss

• One bad trade can wipe account
• ALWAYS use stops
• No exceptions

2. Overleveraging

• Position size too large
• Can't handle normal volatility
• Forced exits at worst time

3. Revenge Trading

• Trading to "get back" losses
• Emotional decisions
• Breaks all rules

4. Moving Stops

• Moving stop to avoid loss
• Invalidates risk management
• Path to blowup

5. Averaging Down Losers

• Adding to losing position
• Doubles down on mistake
• Increases risk dramatically

6. No Plan

• Winging it
• Inconsistent decisions
• Can't improve

✅ Best Practices

1. Risk < Reward

• Always 2:1 R:R minimum
• Selective trading
• Math works in your favor

2. Consistent Sizing

• Same risk each trade
• Removes emotion
• Sustainable growth

3. Follow Your Plan

• Even when uncomfortable
• Trust the process
• Track compliance

4. Take Breaks

• After losses
• When tilting
• Regularly

5. Keep Learning

• Review trades
• Study markets
• Adapt and improve

Using This Skill

Generate a Trading Plan

./scripts/generate_plan.sh

Interactive workflow guides you through:

1. Trading style and goals
2. Risk management rules
3. Market and setup selection
4. Entry and exit criteria
5. Psychology and discipline
6. Performance tracking

Validate Your Plan

./scripts/validate_plan.sh path/to/plan.md

Checks for:

• Risk management defined
• Position sizing rules
• Entry/exit criteria
• Stop-loss requirements
• Performance tracking
• Completeness

Calculate Position Size

./scripts/position_calculator.sh

Quick calculator for:

• Shares based on risk
• Risk amount
• R:R ratio
• Compliance check

Access References

references/risk_management.md - Complete risk frameworks
references/trading_psychology.md - Mental game and discipline
references/technical_setups.md - Chart patterns and entries
references/performance_metrics.md - Tracking and improvement

Trading Plan Checklist

• Clear trading goals defined
• Risk per trade specified (1-2% recommended)
• Daily loss limit set and hard stop
• Position sizing formula defined
• Markets traded clearly identified
• Entry criteria specific and measurable
• Stop-loss rules mandatory for every trade
• Take-profit strategy defined
• Trade management rules for scaling
• Emotional checks before trading
• Trade journal template ready
• Performance metrics to track
• Review schedule committed to

Quick Start

Beginner Trader Template

• Risk: 0.5% per trade
• Style: Swing trading
• Daily loss: -1.5%
• Minimum R:R: 3:1
• Simple technical setups
• Conservative sizing

Experienced Trader Template

• Risk: 1-2% per trade
• Style: Your preference
• Daily loss: -3%
• Minimum R:R: 2:1
• Advanced setups
• Discretionary management

Important Disclaimers

This skill provides frameworks, not financial advice.

• Trading involves substantial risk
• Past performance ≠ future results
• Only trade with risk capital
• Educate yourself thoroughly
• Consider working with professionals
• Comply with all regulations
• You are responsible for your decisions

Risk Warning:

• You can lose all your capital
• Leverage amplifies losses
• Emotional control is critical
• No guaranteed profits
• Most traders lose money

Best Practices

1. Start Small

• Paper trade first
• Then micro positions
• Prove profitability
• Then scale up

2. Focus on Process

• Not on money
• Follow rules
• Track metrics
• Improve systematically

3. Protect Capital

• Risk management first
• Survive to trade tomorrow
• Slow and steady wins

4. Stay Disciplined

• Plan your trades
• Trade your plan
• No exceptions
• Review constantly

5. Keep Learning

• Markets evolve
• Adapt strategies
• Learn from mistakes
• Study the best

Summary

A trading plan is your blueprint for success. It:

• Protects your capital with risk management
• Guides decisions with clear rules
• Controls emotions through discipline
• Tracks performance for improvement
• Builds consistency over time

Remember: The goal isn't to get rich quick. It's to trade consistently, manage risk properly, and compound gains over time.

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"Plan your trade, trade your plan, and manage your risk. Everything else is noise."