Write the trading plan before the entry

From observation to conditional decision

Define the market, timeframe, observation time and confirmation rule in plain language. Distinguish a price touching a level from a closed bar confirming it. Specify the assumed execution process and the maximum acceptable entry price; otherwise a gap can silently change both the risk and the original idea.

Choose the invalidation point from the hypothesis, then calculate size from the allowed loss and estimated costs. Include aggregate open-position risk, relevant event dates and a review condition. An attractive target-to-risk ratio is only a scenario: it does not tell you how likely the target is to be reached.

Worked example: size is 83 shares

For a fictional $25,000 account, suppose a written exercise allows $125 of planned loss, or 0.5%. The idea requires a daily close above $40, an assumed entry no higher than $40.20 and invalidation at $38.80. Price risk is $1.40 per share.

Allowing another $0.10 per share for hypothetical costs gives $1.50 per share, so size is rounded down to 83 shares. Planned loss is $124.50. If the next session opens at $41, the maximum-entry condition cancels this version of the plan. Recalculating or chasing would be a new decision requiring a new written scenario.

Precision does not establish an edge

A precise plan can still describe an unprofitable method. Stops can slip, assumed costs can be wrong and no position size guarantees a loss ceiling. The plan should also state which information would justify a review; changing rules after every disappointing outcome prevents meaningful learning.

Preserve the plan before later bars appear

Use available closed daily, weekly or monthly bars to record the observation and confirmation before examining later bars. Keep a dated copy of the hypothetical plan with the chart reference. Student Wyckoff Pro supports available closed-bar analysis; placing orders, maintaining account risk and enforcing the plan are separate responsibilities.

Primary sources

Sources explain the mechanics and limitations; the editorial examples use invented numbers rather than market quotations.

• Building a Trade Plan
• Stop Orders: Factors to Consider During Volatile Markets

Sources checked: 2026-10-23