The 9-Step Recipe for a Successful Investing/Trading Plan (Let’s Create One Together) 

In order to be successful in the stock market, it’s important to have a plan.

That may sound simple enough, but many people don’t take the time to develop a plan before they start trading. Instead, they just jump in and hope for the best.

While there’s nothing wrong with that approach, it’s generally not the best way to make money in the stock market. After all, as the saying goes, “If you fail to plan, you’re planning to fail.”

Without a plan, you’re likely to make poor decisions that can cost you money.

To help address that, I’ll be sharing with you the recipe for a successful investing/trading plan and as part of that, we’ll be discussing what an investing/trading plan looks like, and the 10 questions to answer when putting together a trading plan.

What Exactly Is an Investing/Trading Plan?

So, what exactly is an investing/trading plan?

Simply put, an investing and trading plan is a document that details:

  • your mission and purpose for trading and investing,
  • your goals, your daily routine and actions,
  • your risk management criteria and position sizing rules,
  • your trading and investment systems and your market analysis

Let’s Start Creating Your Investing/Trading Plan Together…

Essentially, there are 9 questions that you need to answer:

1. What is your mission and purpose for trading and investing? 

What is your ‘Why’?

If you don’t know this, you run the risk of quitting when things don’t go according to plan, which is a very common scenario given you are dealing with unpredictable markets.

When I began, my big ‘Why’ was to be able to create the financial, time and location freedom, free from the daily 9-5 grind of full-time employment. That drove me and whenever I hit a pothole during my journey to this dream, I kept on going no matter what.

Without having had my ‘Why’, I would have easily quit or gone off on a tangent.

So your first mission is to figure out your why.

2. What are your investing/trading goals? 

Most people mistake their mission and purpose for their goals. They’re not the same.

Think of it this way- your mission and purpose is your ‘Why’ and your goals are your shorter-term targets.

For example, when you first begin, rather than aim for ridiculously high returns and place all that pressure on yourself, it may be to complete an investing/trading course to learn all you can, then your next goal may be to then begin investing and trading.

It is by taking these little steps that you will eventually achieve your ultimate purpose.

Your shorter-term goals will constantly evolve as you achieve them, and it’s for that reason that your trading plan will never stay the same.

3. What is your current skill level and love?

I know – this sounds like an odd title, especially with the word ‘love’ added into it.

Well, the purpose of skill assessment is to do an honest assessment of your trading and investment skills as it stands. Don’t ever be too proud to admit that you don’t know something because you are better off acknowledging this and then going out to learn it, rather than pretending you do and making a big financial mistake after the fact.

When I refer to love, I mean love for the markets in which you are interested.

There are a wide variety of markets out there, but it is best you define your affiliation with one, stick to it and be good at it than trying to tackle all at once.

In the end, you will find love / a strong preference for one market compared to another.

For me, it was stocks. Although I’d learned about Forex, Futures, and Bonds, I felt very comfortable with stocks because I could physically see each stock as a business of providing products and services for people and I could, therefore, affiliate with them from a business point of view.

4. What are the daily rituals and actions you would like to have in place?

This is a very important one as it forms the basis for your success. I use the word rituals not from a religious point of view but from a discipline point of view.

If you look at those who are successful in life, you will find that they have a regular set of behaviours or actions that work towards the completion of their goals and the achievement of their purpose – actions that have become so familiar, that they’ve become automatic.

Everyone’s daily rituals and actions are different. So you will need to find what works for you to best enable you to effortlessly trade.

For me, I start my day with water hydration and weight or cardio workouts to get my mind and body ready for the day. I then spend my day analysing the markets to prepare for the day’s trades when the markets are closed. I will then visualise myself completing the trades as if it has already happened and when the markets open, it is very easy to just execute my plan since I have already lived through the process once.

Find what works best for you and this will make your trading effortless.

Related Post: How Staying Fit and Healthy Can Help You Trade More Effortlessly

5. What are your risk management parameters including diversification, positions sizing, and stop losses?

Most people pay more attention to returns rather than risk.

However, my philosophy is to look after the risks and the returns will then look after itself – because it does.

Before you enter the markets, you must always know the maximum risk you have set for your entire portfolio and for each individual trade since all the individuals add up to the whole. If the combination of individual trades all go wrong together and adds up to a blow out the risk you deem unacceptable, then you are in effect taking on too much risk on each position.

This is the concept of position sizing. It answers the question, how much to invest into each opportunity, and when these all add up, how much risk is my portfolio undertaking at any point in time, also known as ‘portfolio heat’.

Ask yourself “What is your maximum combined risk for your total portfolio and your individual trades?”

It is vital to know this before you set foot in the market.

➜ Related Post: Position Sizing: How I Sleep Like a Baby at Night with my Stock Portfolio Intact

6. What are your investing/trading system entry and exit rules? 

I haven’t mentioned entries and exits up to this point because without mastering risk management, entries and exits are a moot point.

When risk management is in place, the pressure to have a perfect entry and exit on every individual trade is relieved.

Most people make the mistake of focusing on the entry, but ignore the time and place to exit.

I, on the other hand, focus on exit first.

I will always know when I will be exiting before I even think about the entry – because without a solid exit plan and rules, entry should not even be on the agenda.

So set out your strict exit and entry rules hard on paper while markets are closed. Never ever change these in mid-flight when the markets are open because you are then subject to trading on emotions rather than rationality.

These strict rules will be your guiding light when the pressure is on and the markets are open.

If you’d like some help with this, I talk about my market entry and exit system in our FREE 90-minute online Masterclass.

7. How will you assess your daily and/or weekly market risks?

Another mistake novice traders make is focusing on just the stock they are about to get into, but ignoring the general market environment.

Always look at the big picture – this is what separates the professionals from the amateurs.

It takes time to get the hang of it, as it is part art and part science. When people talk about intuition, it is usually because they have traded for years (generally a full market cycle of 10-15 years – a whole market cycle) and have deeply embedded within themselves a good feel of the markets. The so-called 10,000-hour rule‘.

But that doesn’t mean you can’t get a good idea of the market as a newbie.

When you first begin, it is best to stick with the science of strict market analysis criteria that you have set up to gauge where the market is.

It can be a combination of fundamental factors as well as technical factors. I personally like fundamentals like employment data, consumer confidence, other economic numbers like inflation etc. and market volatility.

These combine to give me a feel of the market risk level and tell me if I should stand aside and if I do participate, how much to invest in each opportunity based on current market risk.

If you’re new to this and unsure of where to start, a good starting point is our 10 Must-Have Stock Criteria Checklistit’s free to download here.

8. How will you keep records of your executed trades?

Good investors and traders always want to know why and how they win or lose a trade. Keeping good records helps you recognize what goes into a successful trade. They also prevent you from repeating mistakes. Your trading records should contain the following information:

  • The stock code
  • Date of entry and exit
  • Entry price of each investment/trade
  • Exit price of each investment/trade
  • Your position size
  • How many positions you’ve taken
  • Dividends received (if applicable)
  • Where the market opened and closed for the day
  • Notes about each investment/trade and what you learned

Your trading records need to include as much detail as possible so you can analyze the information you recorded about each investment/trade. This report lets you evaluate the profit and loss for a particular system, average time per trade (important for calculating trade efficiency), draw-downs (amounts lost per trade based on a trading system), and other factors that help you see the overall picture of your trade so you can compare your information to a buy-and-hold strategy. Think of this report as you doing accounting for your business.

9. When and how will you review your daily trading executions and plans for continual improvement?

This last step is one of the most important parts of trading – the end of the day.

Here’s where you have the opportunity to see how much you were able to stick to your plan and rules of execution with each trade.

It does take time, but these are the elements that will ultimately lead to your success as a trader.

Even to this day, there are times when I forget to visualise because ‘I am in a bit of a rush or I don’t do my post-trade analysis just as well as I should, but at least I am aware of this which allows me to do better the next time. There is always room to improve my performance.

So even having been involved with the markets for two decades, I, like you, am still learning and will likely never stop learning.

This is what keeps me excited every day and I hope it does the same for you too.

Your Investing/Trading Plan Will Evolve Over Time

Your trading plan, like everything else in life, will evolve over time as you become a better investor and trader.

It is never a final document.

Where most people go wrong (including myself) is trying too hard to perfect your plan thinking this will be the ultimate end document throughout my whole trading career. It will not be.

I made that mistake and it held up my progress for months.

So don’t get bogged down into all the nitty-gritty details, as this will only slow down your progress of actually placing real funds into the market, which is the ultimate teacher of all.

Want Help with your Investing/Trading Plan?

For most people, answering the first 3-4 questions of the trading plan is quite straightforward, especially if you are an avid reader of self-help books and are already attuned to life goal setting and understanding your goals from a big-picture standpoint.

For most people, however, questions 5, 6 and 7 is where they are the most stuck.

And yes, while there are many books and seminars available on those topics out there, if you were to try to read and apply them all, you would end up very confused.

That’s why, I’d like to invite you to attend my FREE 90-minute online masterclass, during which I’ll show you:

  • how you can anticipate the potential future of the market and make preparations ahead of time
  • how you can figure out when to time your stock market entry and exit (using my straightforward ‘traffic light’ process)
  • and how to analyze stocks using the 4 financial figures that matter the most in less than 5 minutes

It’s a highly interactive class complete with your own downloadable workbook, and I guarantee you’ll walk out of the Masterclass with a completely different lens of the trading and investing world.

The best part of it is, you won’t just be sitting there absorbing information – I’ll be getting you to apply what you learn on the spot so you can leave the class with newfound confidence in your trading and investing strategy.

If you’d like to join me, book your spot here, and I’ll see you on the other side.


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