Five Trade Plan Fields Are Settled Before the Order, Five Only After

A trade plan is testable in one way that has nothing to do with whether the trade works. Hand the document to somebody who has never seen the chart and ask them to place the order. If they can do it without asking a single question, the plan is a plan. If they have to ask what price, how many shares, or when to get out, the document was a description of an opinion.

That test sorts the contents of a plan into two piles, and the sorting line is a specific moment: the instant the order leaves the platform. Everything on one side of that line can be written down in advance, in ink, with no reference to the market's cooperation. Everything on the other side arrives later and cannot be negotiated. Most of the disagreement about what belongs in a trading plan disappears once the two piles are kept separate.

What follows is a document structure, not a strategy. It says nothing about which setups are worth taking or what risk fraction is appropriate. It answers a narrower question: given that a trade is going to be taken, which fields can be filled in before the order goes in, and what determines their values.

The Line Runs Through the Order Ticket

Five fields can be settled before the order exists. Five more only exist afterwards. The plan document holds the first five. The journal holds the second five. A document that mixes them, or that contains only the second set, is a record of what happened rather than a set of instructions for what to do.

The pre-order fields are the only ones subject to any control. The rest are outputs. A plan cannot specify a fill price; it can only specify what happens conditional on the fill, and that conditional structure is the entire content of the document.

The Share Count Is Not a Decision

Of the five pre-order fields, position size is the one most often treated as a judgment call, and it is the one that is least available for judgment. Once three inputs are fixed, the share count follows by arithmetic and there is nothing left to decide.

The three inputs are account equity, the fraction of that equity a single trade is permitted to lose, and the distance from the entry price to the stop price. The relation is:

shares = floor( ( account equity × risk fraction ) ÷ stop distance per share )

The floor is not cosmetic. Whole shares mean the realised exposure lands at or just below the budget rather than exactly on it. With a $250 budget and a $2.00 stop distance, 125 shares put $250.00 at risk. With a $125 budget and the same $2.00 stop, 62 shares put $124.00 at risk, not $125.00, because 62.5 shares cannot be bought.

Hold account equity at $50,000 and vary the other two inputs. The table below is computed from the formula above and nothing else.

Stop distance per share	Shares at 0.25% ($125)	Shares at 0.50% ($250)	Shares at 1.00% ($500)	Capital at $40, 1.00% column
$0.25	500	1,000	2,000	$80,000
$0.50	250	500	1,000	$40,000
$1.00	125	250	500	$20,000
$2.00	62	125	250	$10,000
$4.00	31	62	125	$5,000

Read down any column and halving the stop distance doubles the share count. Read across any row and the risk fraction does the same. Plotted on logarithmic axes the three series are parallel straight lines, which is what a pure inverse relationship looks like.

Two consequences follow, and neither is intuitive when position size is chosen by feel.

First, conviction has no entry point in the formula. A trade that feels compelling and a trade that feels marginal produce identical share counts if their stop distances match. Conviction can change whether a trade is taken, or which risk tier applies if the plan defines tiers in advance, but it cannot change the arithmetic once the inputs are set.

Second, the tightest stop produces the largest position. This is the reverse of the instinct that a tight stop is the cautious choice. At a $0.25 stop distance and a 1.00% budget the formula returns 2,000 shares. That is a large position by every measure except the one the formula is tracking, and it is unusually likely to be stopped out by ordinary intraday noise.

Where Capital, Not Risk, Sets the Ceiling

The risk budget is one constraint. Available capital is a second, independent one, and the plan needs to record which of the two binds.

Take the same $50,000 account and a reference price of $40 per share. The 2,000-share line in the table represents $80,000 of stock. In a cash account that position cannot be established at all, because $50,000 divided by $40 is 1,250 shares. The dashed line on the chart marks that ceiling. Two of the fifteen cells in the table sit above it.

In a margin account the ceiling moves. Regulation T sets the required margin for a margin equity security at "50 percent of the current market value of the security or the percentage set by the regulatory authority where the trade occurs, whichever is greater" (12 CFR 220.12(a)). Fifty percent initial margin on $50,000 of equity supports roughly $100,000 of stock, or 2,500 shares at $40, so the 2,000-share position fits. FINRA's maintenance requirement then applies continuously afterwards, at a minimum equity level of 25 percent of the current market value of long margin-eligible equity securities.

The plan field is therefore not a single number. It is the smaller of two numbers: the count the risk formula returns, and the count the account can finance. Writing only the first one produces a plan that cannot be executed on some of its own rows.

Settlement timing belongs in the same field. Under 17 CFR 240.15c6-1(a) a broker or dealer may not effect or enter into a contract for the purchase or sale of a security that provides for payment and delivery later than the first business day after the date of the contract, unless the parties expressly agree otherwise. The standard cycle has been T+1 since the compliance date of May 28, 2024. In a cash account, that is when proceeds from a sale become available capital for the next position, and a plan written on the assumption that the money is there the same afternoon is wrong by one business day.

The Records the Firm Makes Whether You Do or Not

The fifth pre-order field is the one most easily skipped: deciding, before the trade, which values will be recorded afterwards. The reason to fix it in advance is that a journal designed after seeing the outcome tends to collect the fields that make the outcome look reasonable.

Some of those values do not have to be reconstructed from memory, because federal rule requires a broker-dealer to create them. The memorandum of each brokerage order under 17 CFR 240.17a-3(a)(6)(i) must show the terms and conditions of the order or instructions and of any modification or cancellation, the account for which entered, the time the order was received, the time of entry, the price at which executed, the identity of any associated person responsible for the account, and, to the extent feasible, the time of execution or cancellation.

The customer-facing document is the confirmation. Rule 10b-10(a) requires written notification, at or before completion of the transaction, disclosing the date and time of the transaction — or the fact that the time will be furnished upon written request — along with the identity, price, and number of shares or units, whether the firm acted as agent or principal, and the remuneration received. The phrase about written request is the useful part: execution time is obtainable even when it is not printed on the confirmation.

Retention is fixed too. Under 17 CFR 240.17a-4(b)(1), order memoranda are preserved for not less than three years, the first two in an easily accessible place. The blotters and ledgers under 17a-3(a)(1) through (3) fall under 17a-4(a) and are kept for not less than six years, again with the first two easily accessible.

None of this obliges a firm to hand a trader a formatted journal. It does mean the raw timestamps and prices exist for a defined period, so journal fields chosen in advance can be filled with retrieved values rather than remembered ones. The plan line itself has no such backing. It exists only if it was written before the order and kept.

What the Journal Catches That the Plan Cannot

The post-order fields are worth naming precisely, because the gap between them and the planned values is the only feedback the document produces.

• Fill price against intended entry. The difference between where the order was meant to go in and where it went in.
• Exit price against the stop level. A stop order becomes a market order when the stop price is reached. The SEC's own guidance states that "the stop price is not the guaranteed execution price for a stop order" and that the execution price "can deviate significantly from the stop price due to the prices of available liquidity when the market order executes." A stop-limit order removes that exposure and replaces it with a different one, since a limit order may not be executed if the price moves away from the limit.
• Time in the trade. Recorded from the timestamps, not estimated.
• Which exit condition fired. Target, stop, time limit — or a discretionary order that was not in the plan at all. This field is the one that reveals whether the plan was followed.
• Realised result against planned risk. Not the profit or loss on its own, but the ratio of what was lost or made to the amount the sizing formula had budgeted.

The fourth item deserves the most attention. A plan can be well constructed and still be irrelevant if the exits executed were not the exits written. That failure mode is invisible in a profit-and-loss statement and obvious in a journal that has a column for it.

What Would Invalidate This

The framework rests on assumptions that do not always hold, and the plan should say which ones it depends on.

The stop distance has to be knowable at entry. The arithmetic assumes a stop level that can be stated as a price. For instruments where the exit is defined by a condition rather than a level — a volatility band, an event outcome, a spread relationship — there is no stop distance to divide by, and the position must be sized some other way. The formula does not degrade gracefully here; it simply does not apply.

The stop distance is not the maximum loss. It is the loss if the exit fills where it was triggered. Overnight gaps, halts, and fast markets can all produce fills well past the stop, and the SEC language quoted above is explicit about this. Treating the risk budget as a hard cap rather than a planning figure will understate exposure, particularly for positions held through scheduled events.

Account constraints are not permanent. The margin framework that governs how much of the risk-based share count can be financed changed recently. FINRA Regulatory Notice 26-10 announced an effective date of June 4, 2026 for new intraday margin requirements that replace the day trading margin provisions, eliminating the "pattern day trader" designation, the day-trading buying power calculation, and the $25,000 minimum equity requirement that had applied to those accounts. Members may phase in the change over eighteen months, through October 20, 2027. During that window the constraint that binds a given account depends on which framework the carrying firm has implemented, so the capital ceiling in a plan written today is a number to verify with the broker rather than to assume.

A fixed risk fraction is an assumption, not a result. The percentages used above are inputs chosen to show how the arithmetic behaves across a range. Nothing here establishes that any particular fraction is appropriate for any particular account, and no such figure is recommended. What the arithmetic does establish is that once a fraction is chosen and a stop is placed, the share count is determined.

A complete document does not make a trade sound. Every field can be filled in correctly on a strategy with no edge. The structure described here makes a plan executable and auditable. Whether the plan is worth executing is a question the document cannot answer about itself.

Concrete Framework

A one-page plan line, filled in before the order is sent.

1. Write the trigger as a condition. A statement that is true or false when checked, with the price or level that makes it so. If it needs a paragraph of context to evaluate, it is not a trigger yet.
2. Place the stop and record why that level. The price, and the one-line reason that reaching it means the setup failed. Both, not just the price.
3. Compute the stop distance. Entry price minus stop price, in dollars per share. Write the number down before the next step.
4. Run the sizing formula. Account equity multiplied by the risk fraction, divided by the stop distance, rounded down to whole shares. Record the resulting dollar risk as well as the share count — 62 shares at a $2.00 stop is $124.00, not $125.00.
5. Check the capital ceiling separately. Shares multiplied by entry price. Compare against settled cash in a cash account, or against the initial margin requirement of at least 50 percent under 12 CFR 220.12(a) in a margin account. Take the smaller of the two share counts, and note which constraint bound.
6. Confirm the funds are available on the date needed. Under 17 CFR 240.15c6-1(a) the standard cycle is the first business day after the trade date. Proceeds from a sale are not capital for the next entry until then.
7. Write all three exits. Target level, time limit, and the invalidation event that closes the position before either. A plan with a stop and no time limit has an open-ended field.
8. Fix the journal columns now. Planned entry, planned stop, planned size, planned exits — then blank columns for fill price, exit fill, timestamps, which exit fired, and realised risk against budget. Create them before there is a result.
9. After the close, fill the blanks from records, not memory. The confirmation carries date and time, identity, price, quantity and capacity under Rule 10b-10(a), and execution time is available on written request if it is not printed. Order memoranda are held for not less than three years under 17 CFR 240.17a-4(b)(1), the first two in an easily accessible place.
10. Review the exit column before the profit column. Count how often the exit that fired was one of the three that were written. That ratio measures the plan. The profit column measures the market.

A plan built this way will not be right more often. It will be executable more often, and it will produce a record that can be examined afterwards without relying on what anyone remembers.