A trading business plan, in Van Tharp's framework, is a private working manual that documents who you are as a trader, what you are trying to achieve, how you read the big picture, which strategies you will run in which market types, what your daily routines are, and what you will do when things go badly wrong. It is step 2 of his five-step path to consistent profits, and its purpose is not to impress anyone or raise money; it is to give you written rules, because without written rules you cannot even define what a mistake is. This is part 3 of Artha's 10-part series on Tharp's Super Trader (McGraw-Hill, 2009); concepts are his, the explanation and India framing are ours, and this is education, not advice. New readers can start with part 1, the five steps overview.
Chapter 1Why does a trader need a business plan at all?
Because trading money in markets is a business, and businesses without plans fail at famous rates. Tharp's observation from decades of coaching was that almost no struggling trader he met had a written plan, while the consistently profitable ones almost always did. The plan converts trading from a series of moods into a set of procedures: it tells you what to do each morning, what a valid trade looks like, how much to risk, and what to do when the unexpected arrives.
There is also a sharper reason, which connects to step 5 of the framework. Tharp defined a mistake as not following your written rules. No written rules means no standard, no standard means no feedback loop, and no feedback loop means the same errors repeat forever. The plan is the document that makes discipline measurable.
Chapter 2What goes into a trading business plan?
Tharp's version has more in common with a company's operating manual than with a startup pitch. The major sections:
- Self-assessment: your beliefs, strengths, weaknesses, resources, and psychological issues, the output of step 1's self-work.
- Mission and objectives: why you trade and what, precisely, you want.
- Big-picture view: your assessment of the market environment and how you will keep it current.
- Strategies: several, each mapped to the market types it works in.
- Position sizing: how you will size trades to meet your objectives.
- Business systems: data, record-keeping, cash flow, performance tracking, education.
- Daily procedures: your routines before, during, and after market hours.
- Worst-case contingency plan: written, specific, and mentally rehearsed.
Each section below expands the ones traders most often skip.
Chapter 3Why does your mission matter to your trading?
Because trading is hard enough that a thin reason will not survive the first serious drawdown. Tharp considered a mission statement behind your trading critical to success: a trader who is clear that the purpose is, say, long-term family financial independence behaves differently from one whose unstated mission is excitement or proving something. The excitement-seeker will find excitement, which in markets is usually expensive.
Honesty here changes design decisions downstream. If part of your truthful mission is enjoyment, Tharp's approach would have you acknowledge it and budget for it, perhaps a small separate account for discretionary trades, rather than let it silently corrupt the main account's discipline.
Chapter 4What are objectives, and why must they be written?
Objectives are the specific, numeric outcomes you want from your trading, and Tharp insisted they be explicit because position sizing, step 4, exists purely to meet them. "Make good returns" is not an objective. "Target 20% a year, never lose more than 15% from a peak, and accept lower returns to keep drawdowns small" is an objective set, and it implies a completely different position sizing method than "maximise returns and tolerate a 40% drawdown."
Tharp's workshop marble game made this vivid: participants receiving identical trade results produced wildly different equity outcomes because each was pursuing different unstated objectives with different sizing. The lesson: two traders with the same system should trade it differently if their objectives differ. Write yours down: annual return target, maximum tolerable drawdown, income needs if any, and what would make you stop trading entirely.
Chapter 5What is the "big picture" section?
It is your documented view of the large forces affecting your markets, plus a schedule for updating that view. Tharp's own big-picture checklist included the state of the domestic and world equity markets, the strongest and weakest regions for investment, the direction of his home currency, and the inflation or deflation outlook, each measured by indicators he defined in advance, reviewed monthly.
An Indian adaptation of the same idea might track the Nifty's long-term trend and volatility, RBI's policy rate cycle, the rupee-dollar trend, crude oil (a large driver of India's macro), and FII flows. The specific list matters less than the discipline: decide what forces you believe matter, decide how you will measure them, and put a recurring date in your calendar to update the assessment. The point, in Tharp's design, is to know when the environment has changed so you know when your strategies stop fitting, which is the subject of part 4 on market types.
Chapter 6What are daily procedures and business systems?
They are the unglamorous routines that make the trading repeatable: when you prepare, when you review positions, how you record trades, how you calculate your performance numbers, how you manage the household cash flow that trading must not touch. Tharp emphasised that a trading business contains many systems that are not trading systems, research, record-keeping, self-monitoring, even how you explain the business to your family, and that traders fail from neglecting these as surely as from bad entries.
Two routines earn special mention because they anchor step 5 later in the series: a brief morning mental rehearsal, asking what could go wrong today and how you will respond, and an end-of-day debrief, asking whether you followed your rules. Ten minutes a day, and they are the entire maintenance schedule for discipline.
Chapter 7What is a worst-case contingency plan?
It is a written answer to every catastrophic "what if" you can generate, prepared and rehearsed before any of them happens. Tharp reported that doing this thoroughly can take months, and he treated it as non-negotiable because markets reliably produce events nobody predicted. What happens to your open positions if your internet or broker app fails mid-session? If the market gaps 8% against you overnight? If you are hospitalised? If a family emergency pulls you away from open leveraged positions? If the exchange halts trading?
He paired the written plan with mental rehearsal: run each scenario in your head, repeatedly, until the response is automatic. One of his coaching stories involved a day trader who used mental stops rather than placed orders, rushed to a hospital after his girlfriend's accident, and returned to find a year's profits gone. The failure was not the emergency; it was the absence of a rehearsed procedure for emergencies.
How do strategies and position sizing fit into the plan?
The plan should contain several strategies, each documented with the market types it is designed for, its rules, and its measured performance numbers, plus a position sizing method for each strategy tied to your objectives. Those two sections are large enough that Tharp gave them their own steps in the framework, and this series does the same: market types in part 4, R-multiples in part 5, expectancy in part 6, and position sizing in part 7.
Chapter 9How do you actually start drafting one?
Start small and treat it as a living document; Tharp described the plan as a continual work in progress, not a one-time essay. A workable first pass: one page of honest self-assessment, one page of mission and numeric objectives, half a page on your big-picture view with an update schedule, one page describing the single strategy you know best and which market types it suits, a few lines fixing your per-trade risk, and one page of contingencies with your rehearsed responses. Ten pages of unread perfection are worth less than four pages you actually consult every week.
Then let the document grow from your trading records. Every mistake you log in your end-of-day debrief is a candidate for a new rule; every rule that proves useless is a candidate for deletion. The plan improves the way any business process improves, through iteration against reality.
How Nora helps
Nora can walk you through drafting each section inside the Artha app: it can turn your answers into a structured plan document, prompt you with contingency scenarios you have not considered, and quiz you on your own rules later, education and structure, never trade recommendations.
App · coming soonWhat this means for you
Tharp's second step turns trading from an activity into an institution with a memory. The written plan is what lets every later step function: it holds the objectives that position sizing serves, the strategy rules that define mistakes, and the contingency responses that protect you from the market's surprises. The next article tackles the plan's most market-facing section: how to classify what kind of market you are actually in.
Series credit: this series is based on concepts from Super Trader: Make Consistent Profits in Good and Bad Markets by Van K. Tharp, Ph.D. (McGraw-Hill, 2009). Full credit for the framework belongs to Dr. Tharp and the Van Tharp Institute.