How does an observation become a plan?
Connect a chart idea to clear triggers, invalidation, position-size arithmetic, and realistic execution assumptions.
A recognizable pattern leaves several questions unanswered. Our practice plans put the entry reference, invalidation level, nearby obstacle, quantity, and costs into writing while the outcome is still unknown.
Questions to work through
What would invalidate the idea?
In the worksheet, define the price condition that would contradict the original observation. Record the distance from the candidate entry to that reference before calculating quantity. Changing the entry changes that distance.
How are distance and quantity connected?
Position-size arithmetic connects the chosen money-risk budget to the price distance and the instrument’s value per price unit. Our worked examples use invented budgets to explain the calculation; they do not prescribe an account-risk percentage. CME Group: Proper position size.
Will an order fill at the reference price?
A stock stop order becomes a market order when triggered, so the execution price can differ from the stop price. A stop-limit order restricts price but can remain unfilled. Check the rules for the specific instrument and provider before applying an example. FINRA: Order types.
Start with From a Candlestick Signal to a Trading Plan. Review the risks behind the chart. Examples explain the process and do not establish what a market will do next.
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