How to Build a Solid Trading Plan

A trading plan is a roadmap for your trading activities. It outlines your objectives, strategies & risk management techniques.

Put differently, it is the predetermined set of rules and guidelines a trader follows when making decisions about buying or selling financial assets.

It helps you stay organised, helps you make informed choices, and most importantly, it helps you control your emotions.

To be successful in prop trading, you must have pre trading guides.

Let’s look at the how to create/build a this guideline:

Step 1: Define your trading objectives

Before you start trading, it’s important to define your trading objectives. What are your financial goals? What risk tolerance do you have? What time frame are you trading in?

Answering these questions can help you determine the best trading strategy for you and set realistic expectations for your performance.

If you have a low risk tolerance and a short time frame, for example, you may want to focus more on short-term trading strategies like scalping or day trading.

And if you have a higher risk tolerance and a longer time frame, you decide to focus on long-term trading strategies such as swing trading or position trading.

Step 2: Choose a trading strategy

Once you have a clear understanding of your trading objectives, it’s time to choose a trading strategy.

There are many different trading strategies available, and each one has its own strengths and weaknesses.

Some popular strategies include trend following, mean reversion, and range trading.

Note that when choosing a trading strategy, it’s necessary to consider your risk tolerance, time frame, and market conditions.

Some strategies are better suited to certain market conditions than others. So choose a strategy that aligns with your trading objectives and the current market environment.

Step 3: Develop a trading plan

Now that you have a trading strategy, the next thing you want to do is develop a trading plan.

Your plan should outline your entry and exit criteria, risk management techniques, and trade management protocols.

It should also include details on how you plan to monitor and adjust your trading activities.

For example, your trading plan may include the following elements:
Entry criteria: specific conditions that must be met before you enter a trade (e.g. price movement, technical indicators, news events).

Exit criteria: specific conditions that must be met before you exit a trade (e.g. profit target, stop-loss, change in market conditions).

Risk management: techniques for managing your risk, such as position sizing, stop-loss orders, and diversification.

Trade management: protocols for managing your trades once they are entered, such as monitoring and adjusting your positions as needed.

Step 4: Set risk management parameters

Without proper risk management, you expose yourself to unnecessary risk & jeopardize your chances of growth. To set risk management parameters, you need to consider your risk tolerance, account size, and trading activities.

You can choose to set the following parameters:
Position size: the amount of capital you allocate to each trade, based on your risk tolerance and account size.

Stop-loss orders: the price level at which you automatically exit a trade if it moves against you.

Diversification: the practice of spreading your risk across multiple assets or markets to minimize your exposure to any one risk.

Step 5: Choose a trading platform and tools

Your trading platform should be easy to use, have the technical indicators and charting capabilities you need, and be compatible with your trading strategy. Some popular trading platforms include RF-Trader (integrated with TradingView chart) and MetaTrader.

Step 6: Practice and refine your trading skills

Before you start trading, it is important to practice and refine your skills. This can involve using a demo account or paper trading to simulate trading conditions and test your strategies.

It can also involve learning from other traders and analyzing your own performance to identify areas for improvement.

Once you feel confident in your abilities, you can begin trading with a proprietary trading firm. This can involve opening an account, funding it with capital, and starting to trade.

It’s important to remember that trading with a prop firm is a serious commitment, and you should only do so if you are prepared to follow their rules and protocols.


By following these steps, you can establish a strong foundation for your trading activities and set yourself up for long-term success.