Module 12
Module 12: Building Your Trading Plan
A trading plan is a written document that defines every aspect of how and why you trade. It is not the same as a trading journal—it is the blueprint you create before you start trading.[^32][^33]
Components of a Complete Trading Plan
1. Markets and Instruments Define exactly what you trade: specific forex pairs (EUR/USD, GBP/USD), specific stocks (large caps, small caps), or specific crypto assets. Specializing allows you to learn the "personality" of your instruments.
2. Trading Sessions and Hours
For stocks, focus on the first hour (9:30-10:30 AM ET) and the last hour (3:00-4:00 PM ET) when volatility and volume are highest. For forex, focus on the London-New York overlap (8:00 AM - 12:00 PM EST) which accounts for roughly 50% of daily forex volume.[^4][^34][^35]
| Session | Time (EST) | Best For |
|---|---|---|
| Asian (Tokyo) | 7 PM – 4 AM | JPY pairs, low volatility |
| European (London) | 3 AM – 12 PM | GBP/EUR pairs, high liquidity[^35] |
| US (New York) | 8 AM – 5 PM | USD pairs, high volatility |
| London/NY Overlap | 8 AM – 12 PM | Highest volume period—optimal for day trading[^34] |
3. Strategy Rules Write exact, unambiguous rules for:
- How you identify the trend (market structure criteria).
- What zones/levels you trade from (supply/demand, support/resistance).
- What confirmation you need to enter (candlestick patterns, indicator signals).
- Where your stop-loss goes.
- Where your take-profit goes.
- Minimum risk-to-reward ratio.[^33][^11]
4. Risk Parameters
- Maximum risk per trade (1% recommended).
- Maximum daily loss (2-3%).
- Maximum number of trades per day.
- Maximum number of correlated positions open simultaneously.
5. Pre-Market Routine
- Check the economic calendar for high-impact news events.
- Review the daily/4H charts for trend direction and key zones.
- Build a watchlist of instruments showing potential setups.
- Set alerts at key levels.[^36]
6. Post-Market Routine
- Journal every trade (see Module 14).
- Review what worked and what didn't.
- Plan for the next session.
Checkpoint Quiz
Quick self-check to lock in the concepts from this module.
Quiz coming soon.