Creating a trading plan template

A trading strategy template is a set of defined rules and steps that a trader can follow for every trade that they place. 

Having a defined trading strategy in place and a template to follow for each trade can help to maintain consistency and ensure disciplined, organised trading. It also helps to take the emotion out of trading, so traders stay calm and relaxed and don't make unplanned decisions.

The familiar management speak cliché "if you fail to plan, then you plan to fail" may sound corny, but there is definitely some validity in this when it comes to the world of trading. Individuals who don't have a template for their trading strategy and prefer to just 'shoot from the hip' when it comes to making their buy or sell decisions may well have fun, but it's probably not going to be a profitable exercise for them.

Why use a trading strategy template? 

Having a strategy template can be a very useful part of the trading process, regardless of a trader's experience level. First of all, it can serve as a quick sanity check before placing a trade – a way for the trader to make sure that the opportunity fits in with their approach to the markets. Also, once the trade is closed, it can be constructive to review how it performed versus expectations. This can help to identify if there were mistakes made or are areas for improvement. 

How to create a trading strategy template

A trading plan doesn't have to be complicated, in fact the best trading plans often have some very simple principles at their core. A basic template may start with a few lines describing the overall trading strategy, followed by a checklist for each trade as to whether or not it meets the criteria.

Trading strategy template example

Let’s take a look at a sample trading template for someone who is using a simple trend-following approach, based on buying into short-term weakness, or selling into short-term strength within an overall bigger trend. In this example we’ll focus on the FTSE 100 index (CMC Markets’ equivalent instrument is called the ‘UK 100’). 

The first part of the template, assuming it will be used to both plan the trade and review performance, will simply be the date and the market.

Next should be the rationale for wanting to place a trade. Let’s say the major trend for the FTSE 100 has been up for the last week, but it has sold off so far today. This fits with the approach of buying a dip in an uptrend. 

Next, enter the levels. Where will we buy, get out if it goes wrong (stop-loss) and just how far do we think this trade could go (target)?

Next – and this is an important one –  think about the size of the position. The strategy may be to only risk losing £100 on any trading idea. So, to calculate the size for this trade, the trader will need to know how far away their stop-loss is from their entry point. Once this has been calculated they will easily know how much to invest in this particular opportunity. If spread betting, a stake of £2 a point would allow them to put their stop-loss 50 points  away from their entry point, giving them the acceptable £100 risk. 

The example above illustrates that a trading template really can be very straightforward. It's easy to get caught up in the excitement of trading, with prices changing rapidly and charts flipping up and down, but impulsive trading is seldom a long-term successful approach. Using a simple strategy template such as this gives traders a framework to check against before placing a trade. 

Recording trade performance

Many traders will use a similar template to log the performance of their trades. In fact, it's easy enough to add more columns to the table above to record where the trade was closed, what the profit or loss was and what could have been done differently. 

After using a strategy template before opening a position for a while, it really will become second nature. The business of trading is an ongoing learning process and recording the reasons for trades in this way – whether manually on paper, or using one of the many free spreadsheets available (eg Google Sheets) – is all part of taking a disciplined and professional approach to your own financial trading.  
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​See an overview of other trading strategies in our article on the most popular trading strategies.

Disclaimer

​CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

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