Building Your Trading Plan
Lesson by Uvin Vindula
A Trading Plan Is Your Business Blueprint
Would you open a restaurant without a business plan? Of course not. Yet most people enter the crypto market without any plan at all — and wonder why they lose money. A trading plan is a written document that defines your entire approach to the market. It removes emotion from decision-making and provides a framework for consistent action.
Components of a Complete Trading Plan
1. Trading Goals
Define specific, measurable goals:
- Bad goal: "Make a lot of money trading crypto"
- Good goal: "Generate a 3% monthly return on my LKR 200,000 trading account using spot swing trading on BTC and ETH, while limiting monthly drawdown to 6%"
Your goals should specify: the return target, the time frame, the assets you will trade, the strategies you will use, and your maximum acceptable loss.
2. Market Selection
Do not try to trade everything. Define your universe:
- Beginner: BTC and ETH only (most liquid, most analyzed, most predictable)
- Intermediate: Add 3–5 large-cap altcoins (SOL, BNB, ADA, XRP, AVAX)
- Advanced: Sector-specific opportunities (DeFi tokens, L2 tokens, memecoins for short-term momentum)
More assets = more noise. Focus beats diversification in active trading.
3. Time Frame and Style
| Style | Holding Period | Trades per Week | Time Required | Best For |
|---|---|---|---|---|
| Scalping | Minutes | 50+ | Full-time | Experienced traders only |
| Day trading | Hours | 10-30 | 4-8 hours/day | Those with time and experience |
| Swing trading | Days to weeks | 2-5 | 1-2 hours/day | Most retail traders |
| Position trading | Weeks to months | 1-2 | 30 min/day | Those with day jobs |
For most Sri Lankans with day jobs, swing trading or position trading is the realistic choice. Day trading and scalping require full-time attention and are unsuitable for people with other responsibilities.
4. Entry and Exit Rules
Define exact conditions for entering and exiting trades. Example for a swing trading plan:
- Entry conditions (all must be met):
- BTC is above its 200-day moving average (overall uptrend)
- Price pulls back to a support level or the 50-day moving average
- RSI (Relative Strength Index) is below 40 (oversold)
- Risk-reward ratio is at least 1:2
- Exit conditions:
- Take-profit: at the next resistance level or when RSI exceeds 70 (overbought)
- Stop-loss: 5% below entry or below the support level that triggered entry
- Time stop: if the trade has not moved in 2 weeks, exit at break-even
5. Risk Management Rules
Embed your risk rules into the plan:
- Maximum 2% risk per trade
- Maximum 3 open positions at any time
- Maximum 6% total portfolio risk at any time (3 positions x 2% each)
- Daily loss limit: 4% — stop trading if hit
- Weekly loss limit: 8% — stop trading for the rest of the week
- Monthly drawdown limit: 15% — stop trading for the month and reassess
6. Trading Schedule
Define when you trade and when you analyze. Example for a Sri Lankan swing trader:
- 7:00 AM: Review overnight price action and news (15 minutes)
- 7:15 AM: Check open positions and adjust stop-losses if needed (10 minutes)
- 8:00 PM: Evening analysis — scan for new setups, update journal (30 minutes)
- Weekend: Review weekly performance, update trading journal, plan next week (1 hour)
7. Review and Improvement Process
Schedule regular reviews:
- Weekly: Review all trades from the week. What worked? What did not? Did you follow your plan?
- Monthly: Calculate your win rate, average R:R, and total return. Compare against your goals.
- Quarterly: Deep review of your strategy. Is it working in current market conditions? Do you need to adjust?
Sample Trading Plan Template
Here is a condensed template you can adapt:
| Element | My Plan |
|---|---|
| Capital | LKR 200,000 (trading only — separate from savings) |
| Goal | 3% monthly return, max 15% monthly drawdown |
| Assets | BTC and ETH spot only |
| Style | Swing trading (hold 3-14 days) |
| Risk per trade | 2% of capital (LKR 4,000) |
| Max open positions | 3 |
| Min risk-reward | 1:2 |
| Daily loss limit | 4% |
| Analysis time | 7 AM and 8 PM daily, 1 hour Saturday |
Key Takeaways
- •A trading plan is a written document defining goals, assets, strategies, risk rules, schedule, and review process — removing emotion from decisions
- •Goals must be specific and measurable: target return, time frame, assets, strategies, and maximum acceptable loss
- •Swing trading (holding days to weeks, 1-2 hours/day) is the most realistic style for Sri Lankans with day jobs
- •Entry rules should require multiple conditions to be met simultaneously — never enter on a single signal
- •Embed cascading loss limits: 2% per trade, 4% daily, 8% weekly, 15% monthly — each triggers a stop-trading period
- •Schedule regular reviews (weekly, monthly, quarterly) to track performance against goals and adjust strategy
Quick Quiz
Question 1 of 3
0 correct so far
Which trading style is most realistic for a Sri Lankan with a full-time job?