What It Contains
- Max risk per trade (% of equity)
- Max daily loss
- Max weekly loss
- Max open trades
- Correlation limits
- Rules for adding to positions
- Rules for reducing after losses / adding after wins
- News handling
- Position sizing formula
Why It Comes First
Without a plan, any single bad day can end your trading career. With one, you can survive drawdowns that many others cannot.
Reviewing the Plan
- Monthly at minimum
- After every drawdown greater than X%
- When market regime changes (e.g., low-vol → high-vol)
Common Mistakes
- Skipping the daily loss limit
- Increasing size on tilt
- Adjusting rules mid-trade
Key Takeaways
- The plan should be written before you trade, and revised only outside the market.
- Small controlled losses are the fuel of long-term returns.
- Consistency of rule-following is more valuable than optimising the rules.