Trading Business Plan Template

A trading business plan defines how the trading business operates: the strategy, risk rules, capital allocation, operational processes, and performance metrics by which the business is judged. Without a written plan, the trader makes discretionary decisions in a vacuum; with one, every decision is evaluated against a defined standard.

Why a written plan

A plan that exists only in the trader's head is a memory, not a plan. Under stress, memory is unreliable and rationalization is persuasive. A written plan forces specificity, survives stress, and provides the audit standard for execution. It also forces the trader to articulate assumptions that would otherwise remain implicit — and implicit assumptions are what destroy accounts.

Structure of the plan

1. Executive summary — markets traded, strategy type, time horizon, and goal in one paragraph.
2. Markets and instruments — specific instruments traded, with liquidity, session hours, and the trader's information edge in each.
3. Strategy — complete specification of the edge: entry conditions, exit conditions, position sizing rule, holding period, and the statistical basis for positive expected value.
4. Risk management — concrete numbers: maximum risk per position (e.g., 1% of equity), maximum portfolio risk (e.g., 5%), maximum daily loss before halting (e.g., 3%), maximum drawdown before suspending (e.g., 20%).
5. Capital allocation — how capital is divided across strategies, asset classes, and cash reserves, with the rebalancing rule.
6. Operations — infrastructure and daily routine: pre-market preparation, data sources, execution platform, record-keeping, post-trade review.
7. Performance measurement — metrics tracked (Sharpe, Sortino, Calmar, win rate, payoff ratio, drawdown, cost ratio) and reporting cadence (daily log, weekly review, monthly report, quarterly review).
8. Costs — recurring costs (commissions, data, software, research, office, accounting) with annual totals and target ratio to gross profit.
9. Review and revision — schedule for plan review. Quarterly review with cold judgment is the standard.
10. Failure conditions — explicit conditions for suspending or closing the business: drawdown beyond a defined level, undiagnosed strategy decay, capital below a viability threshold.

Using the plan

The plan is a working document, read weekly and consulted before material decisions. Every proposed change — a new market, larger position size, modified entry rule — is evaluated against the plan: does it fit the strategy, respect the risk rules, and serve the goal?

The plan is also the audit standard. At each review, compare actual execution to the plan: were positions within size limits? Were exits taken as specified? Were costs within budget? The gap between plan and execution is the gap to close, and the most reliable indicator of process quality. The plan exists to be obeyed when obedience is hardest — and that is precisely when it matters most.