For Business

Risk & Money Management

How to Set Rules for a Bad Day

A rule for a bad day is a decision made on a good day and wired to a number, so that on the bad day the number decides and the trader does not have to. This paper shows you four example rules, each with its trigger and its action; the idea as the safety card in an aeroplane's seat pocket, read before take-off because it cannot be read in the smoke; one example day on the clock where two rules fired and the day ended at 15:10; the rules as switches that a feeling has no hand on; and the two things on your platform that serve them, the day's count on the History tab and the Bulk Operations menu that closes everything at once.

Difficulty
Advanced
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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Four rules, each with a number

A rule for a bad day is written on a good one, and it is a number and an action. In example figures: a day's loss reaching 300 dollars ends the day; three losses in a row halve the size until a win; a trade placed outside the plan closes the platform for an hour; nothing new is opened after 16:00. None of the four asks how the trader feels. Each asks for a number that the History tab or the clock already has, and the number decides. A rule that needs the trader's judgement on the day is not a rule for a bad day, because the bad day is the day the judgement is worst.

The safety card in the seat pocket

Picture the safety card in the seat pocket of an aeroplane. It is read before take-off, in the calm, because it cannot be read in the smoke; and it is written in pictures with no sentences, so that it can be followed without thinking by someone who is not thinking well. Rules for a bad day are that card. They are written on a good day, when the trader is calm and the reasons are clear, and on the bad day they are not re-read or re-argued. They are followed. The card does not say whether there will be smoke. It says what the hands do if there is, and that is all a rule can say.

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