Forex glossary
Trading Plan
A trading plan records market selection, entry rules, position size, exits and review procedures in advance. It supports checking execution against the intended process and distinguishing deviations from strategy problems. Costs and stopping conditions belong in the plan; compliance alone does not establish profitability.
Illustrative example
How does it work in practice?
Assume a demo plan permits entry only after an H1 close, limits size to 100 units and stops new entries after two losses. Afterwards, compare the journal with those rules and assess execution separately from outcome.
A case to work through
Profit after breaking a limit
A hypothetical plan permits one position; a second is opened and closes with a profit of 30.
- The second position violates the limit regardless of its positive result.
- Recording only the profit would hide the process deviation.
What follows? Record outcome and rule compliance separately.
Example boundary: Compliance does not establish profitability; rules need assessment on appropriate data.
Two assessment dimensions
Text description of the diagram
- Prior rule: Decision and limit recorded before the trade.
- Execution compliance: Did the action meet the written conditions?
- Financial outcome: Profit or loss after actual costs.
A useful distinction
Trading Plan / Backtesting
A plan records rules for future decisions; backtesting simulates their historical application.
Check your understanding
Identify a process deviation despite a profit.
Show the answer and explanation
Profitable but noncompliant with the stopping rule
The result does not undo the violation.
From a plan to automation tests
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Related terms
Sources and documentation
- CME – trade-plan methodology
Predefined decision, risk and review components of a trading plan.
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The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.