Download the Schwab app from iTunes®Get the AppClose

Lou Mercer on the Importance of a Trade Plan

Learn how a trade plan can help you minimize losses and keep you on track with your trading strategy.

Click to show the transcript

Having a trade plan is extremely important to the success of your trading. Treat trading as a business, right? Have a trade plan, have a business plan on why you buy something and why you sell something. We encourage clients to have a set rulebook on why they're buying something and why they're selling something. Have things like, 'Am I trading in the direction of the trend? Am I buying stocks that are going up or am I shorting or avoiding stocks that are going down?' You might create different rules, where you only buy a stock if it's above a certain moving average or you don't buy something if it's below a certain moving average. You should have a set rule base, a set trade plan on when you buy and when you sell to keep you in control of the trade. Without a trade plan what will often happen is your little losses become big losses, you often get stuck in your losing positions, or you might trade too frequently trying to make back a big loss. It's extremely important to have a trade plan to keep you on track for your trading.

Schwab has tools to help you mentally prepare for trading

Learn more >

Talk trading with a Schwab specialist anytime.
Call 888-245-6864
M-F, 8:30am - 9:00pm EST

Get 500 Commission-Free Online Equity and Options Trades for Two Years

Learn More >

Important Disclosures

Past performance is no guarantee of future results.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

Short selling is an advanced trading strategy involving potentially unlimited risks, and must be done in a margin account. Margin trading increases your level of market risk. For more information please refer to your account agreement and the Margin Risk Disclosure Statement. 

Schwab does not recommend the use of technical analysis as a sole means of investment research.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Covered calls provide downside protection only to the extent of the premium received and limit upside potential to the strike price plus premium received. With long options, investors may lose 100% of funds invested. Multiple-leg options strategies will involve multiple commissions. Please read the Options Disclosure Document titled Characteristics and Risks of Standardized Options.

This discussion is provided for illustrative purposes only, and should not be considered an individualized recommendation or personalized investment advice. The strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction for his or her own particular situation.


Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.