Why a written plan specifically
The gap between "I have a plan in my head" and "I have a written plan" is not cosmetic. A mental decision can be reinterpreted under pressure: the stop becomes "I will wait a little", and the risk percentage becomes "this setup is obvious, let us double". Written text is not renegotiated as easily, which is why its real value appears in exactly the moments when your judgement is worst rather than best.
The second benefit is diagnostic: a written plan makes review possible. After a losing streak the useful question is not "what went wrong?" but "did I break a specific rule, or is the rule itself weak?" — and that cannot be answered without prior text to compare against. Diagnosing from a journal is covered in forex trading mistakes.
The seven elements and how to fill them
| Element | The question it answers | Where the answer comes from |
|---|---|---|
| Instrument | What do I trade? | One instrument whose behaviour you know |
| Time window | When do I trade? | Session clock |
| Entry condition | What makes me enter? | One verifiable sentence |
| Stop rule | Where do I admit I am wrong? | ATR or a level that invalidates the idea |
| Exit rule | When do I take profit? | A real level and an acceptable reward ratio |
| Risk and daily limit | How much, and when do I stop? | Risk management |
| When I stay out | When do I not trade? | News, and after consecutive losses |
The last element is the most skipped and the most valuable: deciding when to stay out is half the plan. Most plans describe how to enter and never describe when not to, leaving the worst decisions ungoverned.
Once the rules are written, check they are mathematically viable before applying real money: the strategy viability assistant computes the win rate your numbers demand, and the position size calculator turns your risk percentage into a lot size per trade.