How to Build a Trading Plan: The Institutional Template

A trading plan is the most over-promised and under-built document in retail trading. The version FXEmpire and the rest hand you is a checklist of goals: a return target, a risk-reward number, a line about discipline, a paragraph of mindset. None of that decides anything when the market is moving. A trading plan is not a goals list. It is a written, conditional operating document that tells you what to do before the screen has a chance to tempt you out of it.

This guide is the template a desk actually writes. Five parts, each conditional rather than predictive, each connected to the weekly preparation that produces it and the risk rules that constrain it.

By Ken Chigbo, Founder, KenMacro. 18-plus years in markets, London trading floor and institutional FX. The desk writes and reviews its plan every week inside the MACRO MASTERY desk.

What a trading plan is, and what it is not

A plan is not a forecast. It does not say where the market will go. It says what you will do if specific things happen and what proves you wrong. That single distinction, conditional rather than predictive, separates an operating document from a wish list. The retail template fails because it is predictive and aspirational: a target, a feeling, a number. None of it survives contact with a live tape because none of it tells you what to do at a price.

A plan is also not a strategy. The strategy is the repeatable pattern you trade. The plan is the document that decides when that pattern is allowed to run, on what, at what risk, and against what invalidation, under the regime in front of you. You can hold a sound strategy and still lose with no plan, because the plan governs sizing, correlation, the events you stand aside for, and the honest review afterwards.

Part one: the regime thesis, in one sentence

Before any chart, write one sentence on what the market is actually trading right now. Not a prediction. A description of the dominant driver. A policy divergence between two central banks. A risk-on or risk-off rotation. A dollar trend feeding everything. One sentence, because if it takes a paragraph you do not have a thesis, you have noise.

The regime sentence is the filter. Every setup that follows must be consistent with it or it does not go in the plan. This is the line that connects the plan to the weekly preparation routine, because the regime is what the week’s preparation is for. Get this sentence wrong and every conditional below it inherits the error.

Part two: the universe, deliberately small

The universe is the short list of instruments you are allowed to trade this week. Not everything you can see. The two or three things where a catalyst you can name meets a structure you understand. A catalyst with no structure is a guess. A structure with no catalyst is a chart you like the look of. The plan only admits the intersection.

Keeping the universe small is a risk decision disguised as a focus decision. A short universe makes correlation netting tractable and stops the account from holding five versions of the same bet. If the list is long, the plan is not selective, and a plan that is not selective is not doing its job.

Part three: the conditional setups

This is the core, and it is where retail plans collapse. Each setup is written as a conditional, four parts, no exceptions.

• The level: the specific structure that matters on the instrument.
• The catalyst: the named event or condition that would make that level matter now rather than someday.
• The read: what the move means if the level gives way on that catalyst, expressed in the regime’s direction.
• The invalidation: the specific price that, if traded, means the read was wrong and the position is closed. Written down, in advance, in numbers.

The invalidation is the part the retail template never includes, and its absence is why most plans fail. A setup with no written invalidation is not a plan, it is a hope with an entry. Once price is moving, an unwritten stop becomes a negotiation, and the negotiation always favours the position. Writing the invalidation before the trade is the entire point of writing anything down at all.

Part four: the risk envelope

The setups say what to trade. The risk envelope says how much, and when not to. It is fixed before the week starts and it does not move because a setup looks especially good. Conviction belongs in selection, never in sizing.

• Fixed risk per trade: one predetermined percentage of the account on every position, the same number regardless of how attractive the setup feels.
• Maximum open risk: a hard ceiling on total risk live at once, so a cluster of correlated setups cannot quietly become one oversized bet.
• Correlation netting: two highly correlated positions counted as close to one, not two, so the book is not long the same theme three times under different tickers.
• The sit-out list: the data releases, the policy events, and the hours where you do not have an edge and therefore do not trade. Written in advance, because the discipline to skip is built before the event, not during it.

The risk envelope is where the plan connects to risk management proper. The setups are opinions. The envelope is the constraint that keeps any single opinion from ending the account.

Part five: the review loop

The last part is the one almost no retail plan has, and it is what makes the other four improve. At a fixed cadence, usually weekly, you review every decision against the written plan, not against the profit and loss. The question is not did the trade make money. The question is did the trade follow the plan.

This matters because outcome and decision quality are different things. A trade can break every rule and win. A trade can follow every rule and lose. If you review on profit and loss you train yourself to keep the lucky bad processes and abandon the unlucky good ones, which is the exact opposite of what you want. Judge the decision against the plan. The outcomes take care of themselves over a large enough sample.

How the five parts connect

The regime sentence comes from the weekly preparation routine, which is where the plan is produced rather than improvised. The universe and the conditional setups sit under that sentence and must agree with it. The risk envelope constrains all of them and is the link to risk management. The review loop closes the circle by feeding next week’s preparation. A plan with four of the five is not eighty per cent of a plan, it has a structural hole, and the hole is usually the invalidation or the review.

The three mistakes that void a plan

First, a plan with no written invalidation. Every losing trade becomes a negotiation, and the position always wins the negotiation. Second, a goals or affirmations document mistaken for a plan. All targets and mindset, no conditional structure, no risk envelope, nothing that decides anything at a price. Third, never reviewing decisions against the plan, only against the result. That single habit quietly trains the worst possible reflexes. Avoid those three and the document starts doing the job it was supposed to do, which is making the decision before the screen does it for you.

Related reading

• The free macro framework (the five-lens regime read that produces the plan’s top line)
• How to plan your trading week (the weekly routine that writes the plan)
• Forex risk management and position sizing (the risk envelope in full)
• Why most forex traders lose money and trading psychology and discipline

Frequently asked questions

What should a trading plan include?

Five parts: a one-sentence regime thesis, a small defined universe, conditional setups written as if-then with explicit invalidation, a risk envelope (fixed risk per trade, total-open-risk cap, correlation netting, sit-out list), and a review loop that judges decisions against the plan rather than the outcome. Miss one and it is a wish list, not a plan.

How do I create a forex trading plan?

Start from the regime, not the chart. Write one sentence on what FX is actually trading now. Pick the two or three pairs where that theme meets a structure you understand. For each, write the level, the catalyst, the read, and the invalidation price. Attach fixed risk per trade, a total-risk cap, correlation netting, and the releases and sessions you sit out. Then review decision quality weekly, separate from profit and loss.

What is a trading plan example?

One setup unit, in structure: regime line (what the market is trading), instrument (where that theme is cleanest), condition (if a named level gives way on a named catalyst), read (continuation in the theme’s direction), invalidation (a specific price that closes it), and risk (the fixed percentage, netted against anything correlated). A plan is several of those units under one regime sentence and one risk envelope. Not a paragraph of goals.

Do professional traders have a trading plan?

Yes, but it is a written conditional operating document, not a motivational page or a return target. It states the regime, universe, conditional setups with invalidation, the risk envelope, and the review loop. It is conditional rather than predictive, connected to the weekly routine that produces it and the risk rules that constrain it. The decision is judged against the plan, which is the part most retail plans omit.

How detailed should a trading plan be?

Detailed enough that the decision is made before the screen tempts you, short enough that you read it. Written invalidation on every setup is non-negotiable. Specify the regime sentence, the universe, risk per trade, the total-open-risk cap, correlation netting, and the sit-out list. Everything else is noise. Too long and it goes unread; no invalidation and it is not a plan.

Why do most trading plans fail?

Three modes dominate. No written invalidation, so every loss becomes a negotiation. A goals or affirmations document mistaken for a plan, with no conditional structure or risk envelope. And never reviewing decisions against the plan, only against profit and loss, which trains you to keep lucky bad processes and drop unlucky good ones.

Educational analysis only, not financial advice. Past performance does not guarantee future results. Always manage risk and never risk more than you can afford to lose. This is macro education and scenario framework, never a signal or a recommendation to trade.