Trading plan and trading journal: what to write down

A trading plan is a written set of rules for what you trade, when you enter, when you exit and how much you risk. A trading journal is the record of what you actually did. The plan is the hypothesis; the journal is the evidence. Without both, it is impossible to tell whether results come from a method, from luck, or from decisions made in the moment that no method would have made.

This page describes what a plan typically contains, which fields are worth recording for every trade, and how to turn a journal into a handful of review numbers: win rate, average R, expectancy, profit factor and maximum drawdown. It is an educational outline. The example rules and numbers are illustrations of structure, not a recommended way to trade.

Why write anything down

Memory is a poor record keeper. People remember wins more vividly than losses, recall their reasons for a trade after they know how it ended, and underestimate how often they broke their own rules. A written plan fixes the rules before the outcome is known, and a journal captures what happened before hindsight edits it.

A written plan also makes decisions easier under pressure. When a position moves sharply, the question "what does the plan say?" has an answer. Without a plan, every fluctuation becomes a fresh decision made with money on the line.

What a trading plan contains

There is no official template, but most plans cover the same ground.

1. Purpose and constraints. Why you are trading, how much capital is set aside for it, and how much time you can give it. Capital for trading is normally money you can afford to lose without affecting essential goals.

2. Markets and instruments. Which stocks, ETFs or other instruments you trade, and any filters: minimum price, minimum average daily volume, exchange-listed only, no trades through earnings reports.

3. Setups. The specific conditions that make a trade a candidate, written precisely. "A close above the prior 20-day high on volume above its 50-day average" is a setup. "A stock that looks strong" is not.

4. Entry rules. The order type and timing: at the close, on the next open, with a limit order at a stated price.

5. Exit rules. Where the stop goes and how it moves; where the target is, if there is one; and any time stop. See Stop-loss placement: volatility, structure and time stops for common methods.

6. Position sizing. The risk per trade as a percentage of equity and the formula that turns it into shares, as in Position sizing: how many shares to buy for a set risk.

7. Risk limits. Rules above the individual trade:

• Daily or weekly loss limit. For example, stop trading for the day after losses of 2R, or for the week after 5R.
• Total open risk. The sum of every open position's planned loss, capped at, say, 5% of equity.
• Concentration. A cap on positions in one sector or in closely related stocks.

8. Costs and rules of the road. Commissions, spreads, margin interest, taxes and the account rules that apply to you. In the US, for example, short-term gains (on positions held one year or less) are taxed at ordinary income rates according to IRS Topic 409, and the wash-sale rule in IRS Publication 550 disallows a loss when substantially identical securities are bought within 30 days before or after the sale (as of 2026). FINRA publishes investor guidance on margin and frequent intraday trading.

9. Routine and review. When you scan for setups, when you place orders, and when you review the journal (for example, every 20 trades and every month-end).

What a trading journal records

A journal can be a spreadsheet, a notebook or an app. What matters is that every trade gets the same fields, filled in at the time:

• Before entry: date, symbol, setup, entry price, stop, target, shares, and 1R in dollars. Recording these first locks in the plan before the outcome is known.
• After exit: exit price and date, the reason for the exit (stop, target, time stop, discretionary), and P&L after costs in dollars and in R.
• Process: whether the plan was followed, and if not, which rule was broken.
• Context: market conditions, news, and a word on your state of mind: calm, rushed, bored, frustrated.
• One lesson: a sentence you will read at the next review.

Screenshots of the chart at entry and at exit are worth keeping too. They show what you saw, not what you remember seeing.

Reviewing the journal: the core numbers

A review turns rows into a handful of statistics. Each answers a different question.

Then split the same trades by the "followed the plan?" field. Suppose 17 trades followed the plan and 3 did not, and the three off-plan trades totaled −3.1R. The on-plan trades then totaled 5.8 + 3.1 = +8.9R, or about +0.52R each, while the off-plan trades averaged about −1.03R. Numbers like these, in a real journal, are the most direct evidence of what discipline is worth to a particular trader.

What else to look at

• Longest losing streak, in trades and in R. It tells you what to expect psychologically and whether the risk per trade is survivable.
• Average loss versus 1R. If the average loss is well above 1R, stops are being moved, gapped or ignored.
• Results by setup, by day of week, by holding period. A plan with three setups may be carried by one of them.
• Costs as a share of gross profit. High-frequency plans can lose most of their edge to spreads and commissions.

Common pitfalls

• Writing the plan after the trade. A rule invented to explain a trade isn't a rule.
• Vague rules. "Buy strength, sell weakness" can justify anything.
• Journaling only the winners, or only the interesting trades.
• Recording dollars but not R, which makes results across position sizes impossible to compare.
• Ignoring costs, so the journal shows a better result than the account.
• Changing several rules at once, so you can't tell which change mattered.

Plan, journal and review compared

How Finabase helps

Finabase is a research app; it doesn't hold brokerage accounts or execute orders. A few features slot into a plan-and-journal routine:

• Portfolios track your holdings, cost basis and gains at live prices, which is a convenient running record of open positions.
• A watchlist keeps the list of symbols your plan covers in one place.
• The backtester runs an indicator or candlestick rule over a year of real prices and lists every trade, the wins and losses and the account value. Each signal trades a fixed $10,000, so treat it as a test of signals rather than of your sizing rules.

Frequently asked questions

What should be in a trading plan?

A trading plan should state which markets you trade, the exact setups you take, how you enter and exit, how much you risk per trade, and limits on daily losses and total open risk. It should also say when you will review results.

What should I record in a trading journal?

Record the date, symbol, setup, entry, stop, target, share count and 1R before entry, then the exit, the reason, the result after costs in dollars and R, whether you followed the plan, and one lesson. Consistency across trades matters more than the exact list.

How do I calculate maximum drawdown?

Track the account's highest value so far, and at each point measure how far equity has fallen below that peak as a percentage. The largest such fall is the maximum drawdown: from a $53,100 peak to $49,800 is a 6.2% drawdown.

How many trades do I need before trusting my statistics?

There is no fixed number, but 20 or 30 trades is a small sample. Win rates and expectancy measured over that few trades can be far from the true values, so many traders wait for 100 or more trades before judging a plan.

Summary

A trading plan writes down the rules before the money is at risk; a trading journal writes down what happened; a review compares the two. The plan covers markets, setups, entries, exits, position size and loss limits. The journal records the planned 1R and the realized R of every trade, plus whether the rules were followed. Reviewed in batches with win rate, average R, expectancy, profit factor and drawdown, and split into on-plan and off-plan trades, the journal shows what a method actually does and what deviations from it cost.