Four-Part Trading Plan
Pre-commit the company, risk, prices, and actions before entering a trade
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 4
- Confidence
- 98%
The Four-Part Trading Plan turns a trade idea into a pre-committed decision. First choose a company that is suitable for active trading rather than reacting to whatever is popular. Next define risk, including position size, maximum loss, and the relationship between likely reward and likely downside. Then use the stock chart to identify a defensible entry, a downside exit, and a profit target. Finally, record the actions attached to those prices and place protective orders where appropriate. The mechanism removes decisions from the emotional period after money is at risk. Instead of staring at the market and improvising as fear or greed rises, the trader follows a checklist created while calm and can reject any setup that does not satisfy it.
Origin
Teri Ijeoma described four capabilities taught in her trading approach: company selection, risk management, charting, and a trading plan that removes emotion.
Core principles
- 01A good setup starts with the right company
- 02Risk must be defined before money is exposed
- 03Charts should determine entry and exit prices
- 04A written plan reduces emotional improvisation
How to run it
- 1
Choose the company
Screen for a company appropriate to the strategy and time horizon. Reject a trade before charting it if the underlying company fails the selection criteria.
Pro tip Start with a small, familiar watch list rather than chasing every new ticker.
Watch out A polished plan cannot rescue the wrong company.
- 2
Define the risk
Set the maximum loss, position size, and minimum acceptable reward-to-risk ratio before entering. Make the downside tolerable in cash terms.
Pro tip Calculate the loss for the full share quantity, not just one share.
Watch out Leverage magnifies mistakes as well as gains.
- 3
Read the chart
Use price behaviour to mark the planned entry, downside invalidation point, and realistic upside target. Let the setup determine the holding period rather than choosing one arbitrarily.
Pro tip Look for visible areas where buying or selling changed direction.
Watch out A strong company can still be entered at the wrong time.
- 4
Write the actions
Record what you will do at the entry, stop, and target. Place a stop-loss order when appropriate so the downside decision can execute without fresh debate.
Pro tip Review the plan before the market session while you are calm.
Watch out Do not move a target or stop merely because the live trade triggers greed or fear.
In the wild
A trader screens a liquid company from a familiar watch list, marks an entry at $50, a stop at $48, and a target at $56. The $6 potential reward is three times the $2 risk. She chooses a share quantity that keeps the total possible loss within budget, records both exits, and only enters if price reaches the planned level.
→ The trade has defined downside, upside, and actions before emotion can influence it.
Common mistakes
Entering before planning
Buying first leaves the trader to invent risk limits and exits while already emotionally exposed.
Planning only the upside
A target without a downside exit leaves no rule for when the original thesis is wrong.
Changing rules mid-trade
Moving stops or targets reactively restores the emotion the plan was meant to remove.
Is it for you?
Best for
It is best for active traders who use charts and need a repeatable routine before placing an order.
Not ideal for
It is not ideal for passive investors who do not intend to time entries or manage short-term exits.
From the transcript
“one you have to be good at picking the right companies”
“what about checking your reward to risk ratio in advance”
“if you have a checklist which i give all my students it's a trading plan then you can take the nerves away”
From the episode
Teri Ijeoma: Start Trading Today
Teri Ijeoma