Direct answer
A forex trading plan is a written set of rules that explains: (1) how you decide when a trade is worth considering, (2) how you enter and manage it while limiting exposure, and (3) how you evaluate whether the plan is working. In the context of Last Look in forex, a good plan also states what you assume about order handling and fill conditions, because those conditions can affect actual execution versus your expectations.
What a forex trading plan typically includes
Below is a practical, concept-focused checklist of components a plan usually contains.
1) Goal and scope (without outcome promises)
Write the purpose of the plan in operational terms, such as “use predefined criteria to decide whether to place orders” and “use position sizing to cap exposure.” Avoid statements that imply guaranteed outcomes. The plan should describe what instruments and market sessions it covers, and the timeframe used for decisions.
2) Entry criteria (decision rules)
Entry criteria are objective triggers expressed as rules. For example, you can specify the kinds of signals you consider, the timeframe you use to evaluate them, and what would disqualify a trade (for instance, specific market conditions you want to avoid). The key is that the rules are written so another person could apply them consistently.
3) Execution and order approach
Execution rules explain how orders are handled in practice: order type choices, timing constraints, and whether you place orders as limit versus other forms. This is also where you describe your assumptions about how your broker or counterparty processes requests.
4) Risk management (what you control)
Risk management translates “exposure limits” into concrete rules. Typical elements include position sizing logic, maximum loss per trade, maximum loss per day or week, and what action you take when limits are reached. The plan should distinguish between conditions that are controllable (your sizing and stop logic) and conditions you cannot fully control (market moves after execution).
5) Monitoring and review
Your plan should define how you record decisions and results, and how you review them. The review should focus on whether the rules were followed and whether the outcomes remain consistent with prior expectations, recognizing that past performance does not guarantee future performance.
Example format and checks (what to verify)
A simple structure can be presented as “If X, then Y” rules plus verification steps.
Example checks you can include:
- Rule adherence: keep a log showing which entry criteria were met and which were not.
- Risk caps: confirm that position sizing and exposure limits were respected.
- Execution assumptions: document what you expected about fills and compare it to what occurred.
- Results evaluation: run reviews that focus on uncertainty—e.g., whether performance varies significantly across time periods.
In a Last Look context, one important independent check is whether your measured fills and outcomes align with your plan’s assumptions about order handling. If they do not, the plan needs updated assumptions or clarified limitations, not predicted certainty.
Relevant limitations and risks
- Uncertainty: Market conditions change; a plan cannot guarantee future results.
- Execution difference: Actual fills can differ from modeled expectations due to order handling and market liquidity.
- Last Look impact: Because Last Look can affect whether and when orders receive execution, the plan’s performance depends on execution conditions that may not be stable.
- Verification required: Backtests, paper rules, and expectations are uncertain until observed in real execution conditions.
If you want deeper grounding on the Last Look concept itself, consider reviewing an explainer on “last look in forex” and how it can relate to execution outcomes at a conceptual level.