Writing a trading plan (India)

🎯 In 30 seconds: A trading plan is a short written document that answers, in advance, every decision you would otherwise make in the heat of the moment: what you trade, when you trade, how you enter, where you exit, how much you risk, and when you stop. It turns trading from a string of guesses into a process you can measure and improve. One or two pages is enough. The template at the end of this chapter is ready to copy, with an example filled in for a part-time swing trader with ₹2 lakh.

Why write it down

A good home cook making biryani for twenty guests does not decide the spice quantities while the oil is smoking. They decide before the stove goes on. Once the cooking starts, there is no time to think, only to follow the steps.

Trading is the same. Without a written plan, every trade is a fresh decision made under pressure. That is exactly when the habits in Trading psychology take over: moving stops, chasing a stock that hit the upper circuit, acting on a message in a group, revenge trading.

A written plan also makes improvement possible. If you trade the same way each time, your journal tells you whether that way works. If you trade differently each time, your results tell you nothing.

Part 1: goals and money

Goals. Use process goals, not money goals. "Follow my entry and stop rules on 95% of trades" is something you control. "Make ₹10,000 a month" is not, and chasing it pushes you to oversize.

A reasonable first-year goal for most beginners: learn, keep losses small, build a journal of 100 or more trades, and find out whether you have an edge after all charges.

Money. Trade only money you can afford to lose without changing your life. That means after an emergency fund is in place, after health insurance, and not with money meant for fees, rent, a wedding or an EMI. Never trade with borrowed money while you are learning: no personal loans, no credit cards and no Margin Trading Facility (MTF). Many people keep most of their savings in a long-term index fund SIP and trade a small slice; A plan for a young person explains that setup.

Part 2: what, when and how you trade

Markets and instruments. For example: "Shares in the normal EQ series on NSE, and Nifty index ETFs, for delivery only. No F&O, no MTF, no intraday short selling in year one." See Reading a stock quote for series codes.
Filters. Rules that keep you out of bad conditions. Examples: share price above ₹50; average daily traded value above ₹10 crore; no stocks in a 2% or 5% price band; no stocks under the exchanges' surveillance frameworks (ASM and GSM) or in the trade-to-trade segment; no SME platform stocks; no new trades in the week before a company's results. Thin, cheap and tightly banded stocks are where gaps, frozen circuits and pump-and-dump schemes happen. The rules every Indian trader runs into explains the frameworks.
Time frame and schedule. Intraday, swing or position trading (see Investing vs trading). Also when you will look at markets. The normal session runs from 9:15 a.m. to 3:30 p.m. IST. If you have college or a job in those hours, a swing plan with orders placed the evening before is more realistic than watching screens all day. Intraday trading is not a part-time activity.
Setups. One to three specific, written patterns you will trade, each with a checklist. "Stock above its rising 50-day moving average, pulls back to it, then closes back above the prior day's high." If you cannot describe a setup so another person could spot it, it is not a setup yet. Ideas are in Classic setups.

Part 3: entries, exits and sizing

Entry rule: exactly what triggers the order and what order type you use. For example: "Buy SL order with the trigger ₹0.50 above the setup day's high and the limit 1% above the trigger, placed when the market opens at 9:15 (or the evening before as an after-market order, if your broker allows that for SL orders), valid for the day. If it does not trigger, it lapses." (Exchange orders in India are day orders; there is no good-till-cancelled order at the exchange.)

Stop rule: where the initial stop goes, such as "below the setup day's low or 2 x ATR, whichever is closer to a real support level", the order type (SL with a limit 1% below the trigger), how you keep it alive (re-entered every morning, or a broker GTT), and the rule that it only ever moves in the trade's favour. See Stop losses.

Exit rules for winners: a target (for example 2R), a trailing stop, a time stop, or a combination. Decide which before entry.

Sizing: shares = (account x risk% - estimated charges) / (entry - stop), rounded down, with a maximum position size. See Position sizing.

Part 4: risk limits

Risk limits are your own circuit breakers. They stop a bad day from becoming a bad month. Here is a common structure, using a hypothetical ₹2,00,000 account:

Each limit has a rupee figure and an action. The action matters more than the number: when a limit is hit, you stop. You do not negotiate with yourself.

Limit	Example	On ₹2,00,000	What happens when hit
Per trade	1% of account, including charges	₹2,000	Size every trade so a stop-out costs this
Open risk (heat)	5% of account	₹10,000	No new trades until risk comes down
Per sector or business group	2% of account	₹4,000	No new trades in that sector or group
Per day	3% of account, or 3 losses in a row	₹6,000	Log out of the trading app for the day
Per week	6% of account	₹12,000	No new trades until the weekly review
Per month	10% from the month's start	₹20,000	Pause, cut size in half, full review
Total drawdown	20% from the account's high	₹40,000	Stop live trading; go back to practice and rework the plan

These are example numbers, not rules handed down from anywhere. Pick numbers that fit your risk tolerance, then keep them fixed until a scheduled review.

Why the drawdown limit matters: at 1% risk per trade, it takes a long losing run to fall 20%. If you get there, something is wrong with the method, the market has changed, or the rules are not being followed. Drawdowns and losing streaks shows how large normal drawdowns are.

The trap to avoid

Changing the plan mid-trade or mid-day. "This setup is different, I'll widen the stop." "I'm down, so one quick option trade won't hurt." Every one of those edits is made at the worst possible time. Put plan changes on a fixed schedule, such as the weekly review, and make them in writing.

Part 5: daily routine and review

A plan is a loop. Each trade feeds the journal, and the journal feeds the weekly review, which is the only place the written plan changes.

The evening before, or by 9:00 a.m.: look at your open positions and their stops; check the corporate announcements on NSE and BSE for results dates, board meetings and other news on stocks you hold or plan to buy; note scheduled events such as an RBI policy announcement or the Union Budget; check global cues (see Why prices move); confirm you are under every risk limit.

At 9:15: place or re-enter stop orders for delivery positions (or check that your GTTs are active), and place any planned entry orders. Some brokers let you queue these the evening before as after-market orders; check whether yours accepts SL orders that way.

During the session: only trade setups on the list. Size each one from the formula. Enter the stop right after the fill. Do not act on tips.

After 3:30: check the contract note your broker sends for every trade day, and match the prices and charges against your own record. Then log every trade in your trading journal: date, setup, entry, stop, exit, result in rupees and R after charges, whether you followed the plan, and your mood.

Weekly review (30 minutes): count plan violations, look at each loss bigger than 1R, check open risk and sector totals.

Monthly review: compute win rate, average win and loss in R, total charges paid, and expectancy after charges (see Risk/reward and expectancy). Compare each setup separately.

Quarterly: decide what to change, if anything. Change one thing at a time so you can tell what helped.

Part 6: records and tax

Plan for tax from the first trade. Delivery-based investing, intraday share trading and F&O are taxed in different ways in India, and losses from one kind cannot always be set against gains from another. The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026. Taxes for traders and investors explains the current treatment. If you trade actively, talk to a chartered accountant before the first year ends, not after.

What the plan should say about records:

Download your broker's tradebook, P&L statement and ledger every month, and keep the contract notes.
Keep intraday, delivery and F&O results in separate columns in your journal.
Set aside part of every profitable month for tax, so a good year does not end with a bill you cannot pay.

A practical habit

Print your plan, or keep it pinned on your phone's home screen, and read the risk limits section before every session. It takes one minute and is the cheapest risk control there is.

The fill-in template

Copy this into a document or a notebook and fill in every line. The right column shows a hypothetical example for a part-time swing trader.

Section	Your answer	Example
Goal for the next 6 months		100 recorded trades, 95% plan adherence, no month worse than -6%
Account size and source		₹2,00,000 from savings; six months' expenses already in an emergency fund; monthly SIP continues separately
Markets		NSE EQ series shares and Nifty ETFs, delivery only; price above ₹50; average daily traded value above ₹10 crore
Not allowed		F&O, MTF, intraday, short selling, SME stocks, 2% and 5% band stocks, ASM/GSM stocks, holding through results, any tip from a group or channel
Time frame		Swing trades, 3 to 15 trading days
Schedule		Scan and plan 8 p.m. to 9 p.m. on weekdays; place and check orders 9:15 a.m. to 9:30 a.m.
Setup 1		Pullback to a rising 50-day average in an uptrend
Setup 2		Breakout above a 3-month range on volume at least 1.5x average
Entry rule		Buy SL order above the setup day's high, limit 1% above trigger, day order
Initial stop		Below the setup day's low or the range, whichever is lower; SL order with limit 1% below trigger, re-entered daily or kept as a GTT
Exits		Half at 2R, rest on a trailing stop at 2 x ATR; time stop 15 trading days
Risk per trade		1% (₹2,000) including about ₹150 of charges
Max position size		25% of account (₹50,000)
Max open risk		5%, and no more than 2% in one sector or business group
Daily / weekly / monthly stop		3% / 6% / 10%
Drawdown stop		20% from high: back to practice trades
Journal fields		Date, setup, entry, stop, exit, ₹ and R after charges, charges paid, followed plan?, mood, idea source
Records		Tradebook, P&L and contract notes downloaded on the 1st of each month
Review schedule		Sunday weekly review; first weekend of the month for stats
How rules change		Only at the quarterly review, one change at a time, written here with the date

Try it

Fill in the template for yourself today, even if you have never placed a trade. Then run it for four weeks as practice trades in a notebook or spreadsheet, using real prices from the NSE website, with your stop levels written down before each entry and a journal line for each trade. Use your broker's charges calculator, or the rates in What trading really costs, to include charges in every result. At the end of four weeks, count how many trades followed the plan exactly. That number, not the profit, is your first score.

Check yourself

Why does the chapter prefer process goals to money goals? Answer: You control a process goal, such as "follow my entry and stop rules on 95% of trades". You do not control "make ₹10,000 a month", and chasing it pushes you to oversize.
In the example risk limits for a ₹2,00,000 account, what is the daily limit and what happens when you hit it? Answer: 3% of the account (₹6,000) or 3 losses in a row. You log out of the trading app for the day.
Your plan holds swing trades overnight. What has to happen to your stop orders each morning, and why? Answer: They have to be re-entered each trading day (or kept as a broker GTT), because exchange orders in India are valid for the day only.
Your ₹2,00,000 account falls 20% from its high. What does the example plan say to do? Answer: Stop live trading, go back to practice trades and rework the plan.
Name three kinds of stocks the example plan filters out, and why. Answer: Any three of: stocks in 2% or 5% bands, ASM/GSM stocks, trade-to-trade stocks, SME platform stocks, shares under ₹50 or with low traded value. They are the most prone to gaps, frozen circuits and manipulation.

📋 Writing a trading plan: a fill-in template