Writing the Plan Down
A plan that exists only in your head changes to accommodate whatever you want to do. Writing it down is what makes it a constraint rather than a preference.
MadStockAlerts Research · Updated August 28, 2026
What to take away
- Decisions made before a position exists are made without pressure.
- An unwritten plan is revised silently and without being noticed.
- The plan should specify entry, exit, size and the conditions for each.
- Account-level rules matter as much as per-trade ones.
- A written plan is what makes review possible at all.
MAD Academy Training Video · 0:44
Decide Before It Costs You Anything
A written plan is not bureaucracy. It is a decision made while you are calm, to be executed while you are not.
This lesson is part of a Stock Alerts + Tools plan.
Why writing changes anything
An intention held in memory adjusts to circumstances without announcing itself. A position that violates a written rule is visibly a violation, which is uncomfortable, and the discomfort is the mechanism.
The value is not that writing improves the decision. It is that the decision becomes a fixed reference that a later, more emotional version of you cannot quietly rewrite.
What a plan specifies
- What conditions qualify a situation for consideration at all.
- Where entry occurs and what confirms it.
- Where the exit sits if the idea is wrong, decided before entry.
- How position sizing follows from that exit.
- What would cause the position to be exited early, and what would justify adding.
- What is explicitly not traded, which is as useful as what is.
The last item is the one most often omitted and the one that does the most work. A plan that says nothing about what is out of scope permits everything, and a bad week is usually a week spent trading things the plan never contemplated.
Rules for the account, not the trade
Alongside per-position rules, most written plans carry account-level limits: maximum total exposure, maximum exposure to correlated positions, and a loss level at which activity stops for the day or the week.
The last is the one most often skipped and the one that addresses the specific failure of trying to recover a loss immediately, which is where a bad day becomes a bad month. It is also the only rule in a plan that is enforced by stopping rather than by choosing.
It only works with review
A written plan that is never compared against what actually happened is a document rather than a process. The comparison is what surfaces the gap between the method and its execution, and that gap is usually where the losses are.
Splitting results into trades that followed the plan and trades that did not is the single most informative cut available, and it requires nothing but the plan and a record.
- 1The rule as written
- 2The trade as takenIncluding the times it was not followed
- 3The recordWritten at the time, not from memory afterwards
- 4Review at a fixed intervalOn a schedule, not after a bad run
- 5Amend the rule, once
- and back to the start
What a plan cannot do
A written plan is a commitment device, and it is worth being precise about the limits of one. It does not make a method work, it does not reduce the variance of the outcomes, and it does not prevent the decision to override it. What it does is make the override visible, which is the entire mechanism.
Without a written rule, a departure from it is not a departure from anything; it is simply what was done, and it will be remembered as what was always intended. With one, the departure is a recorded event that can be counted, and the count is the finding.
This is why the useful metric from a plan is the proportion of trades that followed it, rather than the performance of the trades that did. A rule followed sixty percent of the time is not a rule, and the record of the other forty percent describes what is actually being done.
The related limit is that a plan amended after every loss is a plan that describes the recent past. Amendment on a fixed schedule and on the basis of an aggregate rather than an incident is what separates a document that improves from one that simply tracks whatever most recently went wrong.
What a plan specifies about the account
Most written plans specify how to handle a trade and say nothing about how to handle the account, which is where the decisions with the largest consequences live. Trade-level rules govern individual outcomes; account-level rules govern whether the process survives a bad stretch.
| Account-level rule | The question it answers in advance |
|---|---|
| Maximum total exposure | How much of the account can be at risk across everything at once |
| Maximum in one theme | What counts as one bet, when several positions share an exposure |
| A drawdown level that reduces size | What happens after a run of losses, decided before the run |
| A drawdown level that stops trading | When to stop entirely, and what has to be true to resume |
| Rules for adding capital | Whether a deposit after a loss is a plan or a reaction |
The fourth row is the one that is almost never written and matters most. A rule that halves position size after a defined drawdown is a mechanical response to a condition, decided while nothing is at stake. Without it, the response is decided during the drawdown, which is the least favourable moment to decide anything and the moment at which the pull is toward trading larger rather than smaller.