Building a Trading Plan and Journal

Most trading mistakes are not about analysis. They are about decisions made in the moment: taking a trade outside your setup, moving a stop, trading bigger after a loss. A written plan makes those decisions in advance. A journal shows whether you followed the plan and whether the plan works. Together they are the closest thing trading has to a feedback loop.

Key points

• A trading plan sets your markets, sessions, setups, risk per trade and daily loss limit before you trade.
• A journal records every trade with enough detail to analyze later.
• Measure trades in R-multiples: profit or loss divided by the amount you risked.
• Expectancy = (win rate × average win) − (loss rate × average loss). Calculate it after costs.
• Review weekly. Sort by setup, session and whether you followed the plan.
• Change one thing at a time so you know what made the difference.

Why write it down

Decisions made during a trade are made under pressure. A written plan makes the important choices in advance, so in the moment you are following rules rather than reacting. It also gives you something to measure against. Without a plan, you can't tell whether a loss came from a bad setup or from breaking your own rules.

What a trading plan covers

• Markets and contracts: for example, MES and MNQ only.
• Sessions: when you trade and times you avoid, such as the minutes around scheduled releases. See Futures Trading Sessions.
• Setups: each one written out with entry, stop and target rules.
• Risk per trade: a fixed dollar amount or percentage.
• Maximum daily loss: the point at which you stop for the day.
• Maximum trades per day: to prevent overtrading.
• Rules for prop accounts: drawdown level, contract limits and news restrictions, if you trade an evaluation.

Worked example: a one-page plan

• Account: $10,000. Risk per trade: 1% = $100.
• Contract: MES only, 9:30 a.m. to 11:30 a.m. ET.
• Setup A: pullback to the opening range high after a breakout. Stop 6 points below entry; target 12 points.
• Size: $100 ÷ (6 × $5) = 3.3, so 3 MES (risk $90).
• Daily loss limit: 3 losing trades or $270, whichever comes first.
• No trades from 2 minutes before to 5 minutes after scheduled 8:30 a.m. or 10:00 a.m. ET releases.

Use the position size calculator to set size for each setup.

What to journal for each trade

Record: date, time, session, contract, direction, size, entry, stop, target, exit, profit or loss in dollars and ticks, commissions, the setup used, and whether you followed the plan. Add a chart screenshot and one sentence on why you took the trade. Note anything unusual, such as slippage on a stop or a news event.

Measure in R-multiples

An R-multiple compares the result to what you risked. If you risk $90 and make $180, that is +2R. If you lose $90, that is −1R. If slippage turns the loss into $100, that is about −1.1R. R-multiples let you compare trades of different sizes and contracts on the same scale.

Worked example: R on an MES trade

You buy 3 MES with a 6-point stop: risk = 6 × $5 × 3 = $90 (1R). The target 12 points away fills: profit = 12 × $5 × 3 = $180, or +2R. Check the ratio before entry with the risk-reward calculator.

Expectancy

Expectancy is the average result per trade. It tells you whether a setup is worth trading.

Expectancy = (win rate × average win) − (loss rate × average loss)

Worked example: is the setup profitable after costs?

Over 40 trades, a setup wins 45% of the time. The average win is $90 and the average loss is $60.

• Gross expectancy = (0.45 × $90) − (0.55 × $60) = $40.50 − $33.00 = $7.50 per trade.
• You trade 3 contracts per trade and assume $2.00 round-turn cost per contract: $6.00 per trade.
• Net expectancy = $7.50 − $6.00 = $1.50 per trade.

A setup that looks good on gross numbers can be close to breakeven after costs. Forty trades is also a small sample, so treat early results as a hint, not proof. Compare broker costs on our broker rankings.

Reviewing

Once a week, sort trades by setup, session and whether you followed the plan. Ask:

• Which setups have positive expectancy after costs?
• Which sessions or days produce most of the losses?
• How much did rule-breaking trades cost in total?
• Is slippage larger than you planned for?

Worked example: the cost of breaking rules

Your week has 20 trades. 16 followed the plan and netted +$240. Four did not (late entries, a moved stop) and lost $310. Your week was −$70, but your plan was profitable. The fix is discipline, not a new strategy.

Change one thing at a time, and give each change enough trades to judge it.

Journals for prop firm traders

If you trade an evaluation, add the remaining drawdown after each day and how close you came to any daily limit. Patterns such as large losses on the first trade of the day show up quickly. See How Prop Firm Evaluations Work for the rules to track.

Next lesson

Your plan should include when you trade, and that depends on when markets are open, including on holidays. Continue with Futures Market Hours and Holiday Schedule.

Frequently asked questions

Do I need special software for a journal?

No. A spreadsheet works. Dedicated journaling tools can import trades from your platform automatically, which saves time.

How long should a trading plan be?

One or two pages is enough. It should be short enough to read before every session.

What is a good expectancy?

Any positive expectancy after costs, over a large enough sample, means the setup has made money historically. Past results do not guarantee future results.

How often should I change my plan?

Review weekly but change rarely. Make one change at a time and test it over a meaningful number of trades.

Should I journal simulated trades?

Yes. Simulator and evaluation trades show your habits the same way live trades do.