- A trade should have a reason, time horizon, position size, entry method, exit rule, and review point before the order is sent.
- Market orders prioritize execution; limit orders prioritize price control but may not fill.
- Shorter holding periods increase the importance of spreads, liquidity, slippage, settlement, and execution discipline.
- A trading plan does not make a trade profitable; it makes the decision reviewable and limits improvisation under stress.
Rules, fees, tax treatment, plan features, market structure, and product terms can change. Use this material as general context, then confirm current official documents and provider terms before acting.
Define the trade before execution
What observable condition creates the trade idea?
What price or event makes the trade actionable?
What invalidates the thesis and how much can be lost?
How will profit, loss, time, and new information change the position?
Match the order type to the execution objective
| Order | Primary priority | Main trade-off |
|---|---|---|
| Market | Execution | Final price can differ from the last quote, especially in fast or thin markets. |
| Limit | Price control | The order may not execute. |
| Stop / stop-limit | Conditional action | Trigger and execution behavior differ; gaps can matter. |
Position size connects the trade to the portfolio
A good idea can still create a bad portfolio outcome if the position is too large. Size the trade from the amount of capital the investor is willing to put at risk, the distance to the invalidation point, liquidity, and the possibility of gaps or volatility beyond the expected range.
Execution is not finished when the order fills
After execution, confirm the fill, commissions or fees, settlement date, cash impact, tax lot, and any restrictions created by cash or margin rules. Reconcile the trade confirmation with the original plan.
Use a trading journal to separate process from outcome
Setup, entry, size, risk, exit.
Order behavior, liquidity, slippage, changes.
Result, fees, settlement, rule adherence.
Was the process repeatable even if the outcome was poor?