Write a trading plan that fits your challenge limits

A trading plan is a short written document that settles, before the session starts, what you trade, when you trade and how much you are prepared to lose. On a challenge it has a second job: it keeps you far enough from the daily loss limit and the maximum loss that an ordinary losing streak cannot end the account.

What you will learn

• The six parts a written plan needs and what each one prevents.
• How to set your risk per trade and your daily stop from the Classic or Direct limits.
• How to fill in a plan you can copy and use from your next session.

What goes in a written plan

A plan answers six questions in advance: which markets you trade, which setups you take, how much you risk on each trade, when you stop for the day, how many trades you allow, and when you review. Anything you leave out gets decided in the moment, usually under the influence of the last trade.

Keep the market list short. CMC Funded offers forex, indices, commodities, shares, cryptocurrencies and prediction markets, and each symbol has its own trading hours, typical daily range and overnight holding cost. Two or three symbols are enough to start, because each one takes time to learn.

Write each setup precisely enough that another trader could find it on a chart. A usable setup names four things: the trend condition, the entry trigger, where the stop goes and where the target goes. For example: "1-hour chart, price above the 50-period moving average, enter on a bullish engulfing candle at a support level, stop below that candle's low, target at twice the stop distance." If you cannot describe a setup this clearly, it is not ready to trade. The support and resistance lesson covers how to mark those levels.

Set your risk from the account's limits

Work backwards from the two limits that can end the account. On a $10,000 Classic account the daily loss limit starts at $500 (5% of your equity at the start of each day, measured on equity) and the maximum loss floor is $9,000, which never moves. On a $10,000 Direct account the daily loss limit starts at $400 (4%) and the floor is $9,400.

Now count how many full losses each limit allows:

• Classic $10,000 at 0.5% risk ($50 a trade): 10 losses to the daily limit, 20 losses to the floor.
• Classic $10,000 at 1% risk ($100 a trade): 5 losses to the daily limit, 10 to the floor.
• Direct $10,000 at 0.5% risk ($50 a trade): 8 losses to the daily limit, 12 to the floor.
• Direct $10,000 at 0.4% risk ($40 a trade): 10 losses to the daily limit, 15 to the floor.

Then set a personal daily stop well below the firm's limit. The limit is measured on equity, so open positions count against it, and a stop order can fill worse than its price when the market gaps. Reaching the limit ends the account with no warning stage. A daily stop of 30% of the limit gives you that buffer: $150 on the Classic account above, which is three $50 losses, and $120 on Direct, three $40 losses.

Match your maximum number of trades to the daily stop. Three trades at $50 means your worst planned day is $150, the same as the stop, so the two rules back each other up. The position sizing lesson and the position size calculator turn the dollar risk into a lot size for each trade.

Leverage is chosen at purchase, from 1:10 up to 1:500. When you size every trade from your stop distance, leverage does not change how many dollars you lose if the stop is hit, but it does change how much margin each position ties up and how large a position you are able to open. Higher leverage magnifies both gains and losses.

A worked plan for a $10,000 Classic account

Classic Phase 1 has an 8% target, which is $800 on this account. At $50 risk per trade, that is 16R of net gains, where 1R is the amount you risk on one trade. Suppose your tested setup averages 0.3R per trade after costs (use your own figure from the risk-reward and expectancy lesson). Then 16R takes about 53 trades on average, and at no more than three trades a day that is at least 18 trading days.

There is no time limit on CMC Funded challenges, so a plan that needs 18 or 30 trading days is a workable plan. A plan that needs the target in a week usually ends up raising the risk per trade to get there.

Your plan, ready to copy

Copy this list into a notes app or notebook and replace each example with your own answer.

1. Account: route, size and leverage. Example: Classic, $10,000, 1:50.
2. Firm limits in dollars: daily loss limit, maximum loss floor and the current target. Example: $500, $9,000 and $800 for Phase 1.
3. Markets: no more than three. Example: two forex pairs and one index.
4. Trading hours: when you trade and when you do not. Example: 08:00 to 11:00 UK time only.
5. Setups: each one written as trend condition, trigger, stop and target.
6. Risk per trade: a percentage and its dollar amount. Example: 0.5%, which is $50.
7. Daily stop: the loss at which you finish for the day. Example: $150 or three losing trades, whichever comes first.
8. Maximum trades per day: a fixed number. Example: three.
9. News: news trading is allowed on CMC Funded, so decide your own rule. Example: no new trade in the 15 minutes either side of a scheduled high-impact release.
10. Overnight and weekends: holding is allowed and holding costs apply. Example: intraday trades closed by 16:00 UK time.
11. After a loss: what you do before the next trade. Example: a 15-minute break before the next trade.
12. Review: when you look back at your trades. Example: five minutes after each session, and 30 minutes every Friday with the journal.
13. Changes: the plan changes only at the weekly review, and every change is written down with the reason.

Check your understanding

1. On a $25,000 Classic account, what is the first day's daily loss limit, and what would a personal daily stop at 30% of it be?

The daily loss limit is 5% of $25,000, which is $1,250. A personal stop at 30% of that is $375.

2. Why should your daily stop sit well below the firm's daily loss limit?

The limit is measured on equity, so open positions count, and a gap can push a loss past its planned size. Reaching the limit ends the account immediately, so you need a buffer you control.

3. After two losses on a Wednesday you want to move your stops wider. What does the plan tell you to do?

Write the idea down and look at it at the weekly review. The plan changes only there, never in the middle of a session.

Key points

• A plan sets markets, setups, risk per trade, daily stop, maximum trades and a review routine before you trade.
• Work out risk per trade from the account's dollar limits: on a $10,000 Classic account, $50 a trade allows 10 losses before the $500 daily limit.
• Keep a personal daily stop well below the firm's limit, because the limit counts open positions and ends the account without warning.
• There is no time limit, so plan for as many trading days as your expectancy needs.

Next lesson: Control FOMO, revenge trading and tilt

All trading is simulated. Rewards are based on performance and are not guaranteed.