---
name: trading-plan-generator
description: Generate comprehensive trading plans with risk management, position sizing, entry/exit strategies, and performance tracking to trade with discipline and consistency.
---

# Trading Plan Generator

A comprehensive skill for creating disciplined, rule-based trading plans that help you manage risk, control emotions, and trade consistently.

## What This Skill Does

Helps you create professional trading plans for:
- **Day Trading** - Intraday positions, quick scalps
- **Swing Trading** - Multi-day to multi-week positions
- **Position Trading** - Long-term trend following
- **Options Trading** - Directional and income strategies
- **Investing** - Long-term portfolio management

## Why You Need a Trading Plan

**Without a plan:**
- Emotional, impulsive decisions
- Inconsistent position sizing
- No clear entry/exit rules
- Revenge trading after losses
- Account blowup risk
- Can't identify what works

**With a plan:**
- Disciplined, rule-based trading
- Consistent risk management
- Clear decision framework
- Emotional control
- Long-term profitability
- Measurable improvement

**The Stats:**
- 90% of traders fail (most have no plan)
- Professional traders ALL have written plans
- Plan + discipline = edge

## Core Components of a Trading Plan

### 1. Trading Goals & Mindset
- Financial goals (realistic)
- Time commitment
- Risk tolerance
- Trading philosophy
- Success definition

### 2. Risk Management (MOST IMPORTANT)
- Maximum risk per trade (1-2% recommended)
- Maximum daily loss limit
- Maximum drawdown tolerance
- Position sizing rules
- Stop-loss requirements
- Risk/reward minimums

### 3. Market Selection
- What markets you trade (stocks, forex, crypto, options)
- Liquidity requirements
- Price range preferences
- Sector focus (if any)
- What you DON'T trade

### 4. Trading Setup Criteria
- Entry signals (technical/fundamental)
- Confirmation requirements
- Timeframes used
- Pattern recognition
- Market condition filters

### 5. Entry Rules
- Exact entry triggers
- Order types (market, limit, stop)
- Position sizing calculation
- Scaling in (if allowed)
- Time-of-day restrictions

### 6. Exit Rules
- Stop-loss placement (hard rules)
- Take-profit targets
- Trailing stop strategies
- Time-based exits
- Scaling out rules
- Break-even stops

### 7. Trade Management
- When to adjust stops
- When to add to position
- When to reduce size
- When to exit early
- Never scenarios (what you never do)

### 8. Psychology & Discipline
- Pre-market routine
- Emotional state check
- Tilt recognition
- Break requirements
- End-of-day review
- Accountability measures

### 9. Performance Tracking
- Trade journal requirements
- Metrics to track
- Review frequency
- Improvement process
- Strategy adjustment criteria

## Risk Management Frameworks

### The 1% Rule (Recommended for Most Traders)
**Never risk more than 1% of account on single trade**

**Example:**
- Account size: $50,000
- Maximum risk per trade: $500 (1%)
- Stock entry: $100
- Stop-loss: $98
- Risk per share: $2
- Position size: $500 / $2 = 250 shares
- Total position: $25,000 (50% of account)
- Actual risk: $500 (1% of account)

**Benefits:**
- Can survive 20+ consecutive losses
- Removes emotion from sizing
- Consistent risk across trades
- Protects capital

### The 2R Minimum Rule
**Only take trades with 2:1 reward-to-risk or better**

**Example:**
- Entry: $100
- Stop: $98 (risk = $2)
- Target: $104 (reward = $4)
- R:R = 2:1 ✅

**Why it matters:**
- Can be profitable with 40% win rate
- Forces selective trading
- Improves overall edge

### Maximum Drawdown Limit
**Hard stop trading if down X% from peak**

**Recommendations:**
- Conservative: 10% drawdown → stop trading
- Moderate: 15% drawdown → stop trading
- Aggressive: 20% drawdown → stop trading

**When hit:**
1. Stop trading immediately
2. Review all trades
3. Identify mistakes
4. Paper trade until recovered mentally
5. Resume with reduced size

## Trading Styles

### Day Trading
**Definition:** Open and close all positions same day

**Characteristics:**
- Multiple trades per day
- No overnight risk
- Pattern Day Trader rules ($25K minimum)
- High screen time requirement
- Quick decisions

**Best for:**
- Full-time traders
- High risk tolerance
- Quick decision makers
- Pattern recognition skills

**Key rules:**
- Never hold overnight
- Reduce size near close
- Stop trading after daily loss limit
- First 30 min often volatile

### Swing Trading
**Definition:** Hold positions 2-10 days

**Characteristics:**
- 2-5 trades per week
- Overnight risk acceptable
- Part-time friendly
- Technical + fundamental mix

**Best for:**
- Part-time traders
- Day job professionals
- Trend followers
- Patient traders

**Key rules:**
- Always use stop-losses
- Check positions before/after market
- Respect earnings dates
- Weekend gap risk consideration

### Position Trading
**Definition:** Hold positions weeks to months

**Characteristics:**
- Long-term trend following
- Fundamental focus
- Low trade frequency
- Larger position sizes

**Best for:**
- Investors with edge
- Low time availability
- Fundamental analysts
- Macro trend followers

**Key rules:**
- Wide stops (volatility-based)
- Focus on major trends
- Ignore daily noise
- Strong thesis required

## Entry Strategies

### Technical Entry Methods

**1. Breakout Entry**
- Price breaks above resistance
- Increased volume confirmation
- Wait for pullback or buy breakout
- Stop below breakout level

**2. Pullback Entry**
- Wait for trend pullback
- Enter at support/moving average
- Continuation confirmation
- Stop below support

**3. Reversal Entry**
- Identify overextended move
- Look for reversal signals
- Multiple confirmations required
- Wider stops needed

**4. Pattern Completion**
- Specific pattern (flag, triangle, etc.)
- Pattern completion signal
- Volume confirmation
- Target based on pattern

### Fundamental Entry Triggers

**For Stocks:**
- Earnings surprise
- Guidance raise
- Product launch
- Sector rotation
- Insider buying
- Short squeeze setup

**For Macro:**
- Fed policy change
- Economic data surprise
- Geopolitical event
- Seasonality

## Exit Strategies

### Stop-Loss Methods

**1. Percentage Stop**
- Fixed % below entry
- Simple and clear
- Example: 2% below entry

**2. Support/Resistance Stop**
- Below key technical level
- Makes technical sense
- Varies by setup

**3. ATR-Based Stop**
- 1.5-2x Average True Range
- Adapts to volatility
- Prevents whipsaw

**4. Time Stop**
- Exit if no progress in X days
- Frees up capital
- Prevents dead money

### Take-Profit Methods

**1. Fixed R Multiple**
- 2R, 3R, 4R targets
- Predetermined exit
- Consistent methodology

**2. Technical Target**
- Previous resistance
- Fibonacci extension
- Measured move
- Pattern target

**3. Trailing Stop**
- Move stop as profit grows
- Lock in gains
- Ride trends longer

**4. Partial Profits**
- Take 50% at 2R
- Trail remaining 50%
- Reduces regret
- Balances risk/reward

## Position Sizing Formulas

### Fixed Dollar Risk
```
Position Size = Account Risk $ / (Entry - Stop)

Example:
- Account: $50,000
- Risk per trade: $500 (1%)
- Entry: $100
- Stop: $97
- Risk per share: $3
- Shares: $500 / $3 = 166 shares
```

### Fixed Percentage Risk
```
Position Size = (Account × Risk %) / (Entry - Stop)

Example:
- Account: $50,000
- Risk: 1%
- Entry: $50
- Stop: $48
- Risk per share: $2
- Shares: ($50,000 × 0.01) / $2 = 250 shares
```

### Kelly Criterion (Advanced)
```
Position Size % = (Win Rate × Avg Win - Loss Rate × Avg Loss) / Avg Win

Example:
- Win rate: 55%
- Avg win: $500
- Loss rate: 45%
- Avg loss: $300
- Kelly: (0.55 × $500 - 0.45 × $300) / $500 = 28%
- Use 1/4 Kelly = 7% position size (conservative)
```

**Warning:** Kelly can be aggressive, use fractional Kelly

## Trading Psychology

### Pre-Market Routine
- [ ] Review previous day's trades
- [ ] Check overnight news
- [ ] Identify key levels
- [ ] Plan potential setups
- [ ] Check emotional state
- [ ] Confirm risk limits

### Emotional State Check
**Don't trade if:**
- Angry or frustrated
- Desperate for money
- Revenge mindset
- Distracted or tired
- Overconfident
- Fearful

**Green light to trade:**
- Calm and focused
- Following plan
- Accepting of losses
- Patient for setups
- Clear-headed

### Tilt Recognition
**Warning signs:**
- Increasing position size
- Abandoning stops
- Taking marginal setups
- Revenge trading
- Checking P&L constantly
- Breaking rules

**When tilting:**
1. Stop trading immediately
2. Close all positions
3. Take a break (hour/day/week)
4. Review what triggered it
5. Return when calm

### Daily Loss Limit
**Critical rule:** Stop trading at daily loss limit

**Example:**
- Daily limit: -2% of account
- Account: $50,000
- Stop at: -$1,000 loss

**Why it matters:**
- Prevents blowup days
- Forces you to stop tilting
- Tomorrow is another day
- Protects capital

## Market Conditions & Filters

### When to Trade
- [ ] Market trending clearly
- [ ] Volatility in normal range
- [ ] Volume above average
- [ ] Your setups present
- [ ] Clear technical levels
- [ ] Emotional state good

### When NOT to Trade
- [ ] Choppy, rangebound market
- [ ] Major news pending (FOMC, etc.)
- [ ] Low volume (holidays)
- [ ] Extreme volatility
- [ ] No clear setups
- [ ] Emotional/tilting

### Market Regime Recognition

**Bull Market:**
- Buy dips
- Longer holds
- Reduce short exposure
- Follow momentum

**Bear Market:**
- Sell rips
- Shorter holds
- Reduce long exposure
- Focus on defense

**Sideways/Choppy:**
- Reduce size
- Take quick profits
- Avoid breakout trades
- Trade ranges

## Performance Tracking

### Metrics to Track

**Win Rate:**
- % of trades profitable
- Target: >50% for day trading, >40% for swing

**Average Win vs Average Loss:**
- Avg $ won on winners
- Avg $ lost on losers
- Should be 1.5:1 or better

**Profit Factor:**
- Gross profit / Gross loss
- >1.5 is good, >2.0 is excellent

**Expectancy:**
- (Win Rate × Avg Win) - (Loss Rate × Avg Loss)
- Must be positive to be profitable

**Maximum Drawdown:**
- Largest peak-to-trough decline
- Track and improve over time

**Sharpe Ratio:**
- Return / Volatility
- >1.0 is good

### Trade Journal Requirements

**For each trade log:**
- Date and time
- Ticker/instrument
- Entry price and size
- Stop-loss and target
- Exit price and reason
- P&L ($ and %)
- Setup/pattern
- Market condition
- Emotional state
- Mistakes made
- Lessons learned
- Screenshot

### Review Schedule

**Daily:**
- Review all trades
- Calculate P&L
- Note mistakes
- Plan next day

**Weekly:**
- Calculate weekly metrics
- Identify patterns
- Best/worst trades
- Rule compliance %

**Monthly:**
- Full performance review
- Strategy adjustments
- Goal progress
- Mindset check

## Common Mistakes to Avoid

### ❌ Fatal Errors

**1. No Stop-Loss**
- One bad trade can wipe account
- ALWAYS use stops
- No exceptions

**2. Overleveraging**
- Position size too large
- Can't handle normal volatility
- Forced exits at worst time

**3. Revenge Trading**
- Trading to "get back" losses
- Emotional decisions
- Breaks all rules

**4. Moving Stops**
- Moving stop to avoid loss
- Invalidates risk management
- Path to blowup

**5. Averaging Down Losers**
- Adding to losing position
- Doubles down on mistake
- Increases risk dramatically

**6. No Plan**
- Winging it
- Inconsistent decisions
- Can't improve

### ✅ Best Practices

**1. Risk < Reward**
- Always 2:1 R:R minimum
- Selective trading
- Math works in your favor

**2. Consistent Sizing**
- Same risk each trade
- Removes emotion
- Sustainable growth

**3. Follow Your Plan**
- Even when uncomfortable
- Trust the process
- Track compliance

**4. Take Breaks**
- After losses
- When tilting
- Regularly

**5. Keep Learning**
- Review trades
- Study markets
- Adapt and improve

## Using This Skill

### Generate a Trading Plan

```bash
./scripts/generate_plan.sh
```

Interactive workflow guides you through:
1. Trading style and goals
2. Risk management rules
3. Market and setup selection
4. Entry and exit criteria
5. Psychology and discipline
6. Performance tracking

### Validate Your Plan

```bash
./scripts/validate_plan.sh path/to/plan.md
```

Checks for:
- Risk management defined
- Position sizing rules
- Entry/exit criteria
- Stop-loss requirements
- Performance tracking
- Completeness

### Calculate Position Size

```bash
./scripts/position_calculator.sh
```

Quick calculator for:
- Shares based on risk
- Risk amount
- R:R ratio
- Compliance check

### Access References

```
references/risk_management.md - Complete risk frameworks
references/trading_psychology.md - Mental game and discipline
references/technical_setups.md - Chart patterns and entries
references/performance_metrics.md - Tracking and improvement
```

## Trading Plan Checklist

- [ ] **Clear trading goals** defined
- [ ] **Risk per trade** specified (1-2% recommended)
- [ ] **Daily loss limit** set and hard stop
- [ ] **Position sizing** formula defined
- [ ] **Markets traded** clearly identified
- [ ] **Entry criteria** specific and measurable
- [ ] **Stop-loss rules** mandatory for every trade
- [ ] **Take-profit strategy** defined
- [ ] **Trade management** rules for scaling
- [ ] **Emotional checks** before trading
- [ ] **Trade journal** template ready
- [ ] **Performance metrics** to track
- [ ] **Review schedule** committed to

## Quick Start

### Beginner Trader Template
- Risk: 0.5% per trade
- Style: Swing trading
- Daily loss: -1.5%
- Minimum R:R: 3:1
- Simple technical setups
- Conservative sizing

### Experienced Trader Template
- Risk: 1-2% per trade
- Style: Your preference
- Daily loss: -3%
- Minimum R:R: 2:1
- Advanced setups
- Discretionary management

## Important Disclaimers

**This skill provides frameworks, not financial advice.**

- Trading involves substantial risk
- Past performance ≠ future results
- Only trade with risk capital
- Educate yourself thoroughly
- Consider working with professionals
- Comply with all regulations
- You are responsible for your decisions

**Risk Warning:**
- You can lose all your capital
- Leverage amplifies losses
- Emotional control is critical
- No guaranteed profits
- Most traders lose money

## Best Practices

### 1. Start Small
- Paper trade first
- Then micro positions
- Prove profitability
- Then scale up

### 2. Focus on Process
- Not on money
- Follow rules
- Track metrics
- Improve systematically

### 3. Protect Capital
- Risk management first
- Survive to trade tomorrow
- Slow and steady wins

### 4. Stay Disciplined
- Plan your trades
- Trade your plan
- No exceptions
- Review constantly

### 5. Keep Learning
- Markets evolve
- Adapt strategies
- Learn from mistakes
- Study the best

## Summary

A trading plan is your blueprint for success. It:
- **Protects** your capital with risk management
- **Guides** decisions with clear rules
- **Controls** emotions through discipline
- **Tracks** performance for improvement
- **Builds** consistency over time

**Remember:** The goal isn't to get rich quick. It's to trade consistently, manage risk properly, and compound gains over time.

---

**"Plan your trade, trade your plan, and manage your risk. Everything else is noise."**