Pre-Trade Protocol

Accepting risk is different from taking risk

Mark Douglas separates two things: setting a stop means taking risk. Accepting the loss beforehand, internally, as already done, means accepting risk. Only the second step lets you trade from the plan instead of from fear.

Seneca's praemeditatio malorum gives you the tool: you picture the maximum loss concretely and accept it in advance. 'This trade can cost me 10 USDT, I can live with that.' Then the trade loses its emotional power.

The order: stop first, size next, leverage last

A clean pre-trade protocol has a fixed, non-negotiable order. Kovner: position size is determined by the stop. Pick the leverage first and squeeze the stop to fit, and you build in fragility.

• Market climate: only in the direction of the higher BTC trend.
• Entry, stop and invalidation on the chart, 1x to 2x ATR, never on a round number.
• Dollar risk 1 percent, on correlated positions 0.5 percent.
• Risk and stop distance give you the size, and from that the leverage.
• Correlation check, 6 percent check, reward-to-risk at least 2R to 3R.

Pre-mortem: why does this trade die in the worst case?

Before you click, imagine the trade is already at its maximum loss, and ask by what: slippage, funding, a wick through the stop, a weekend gap. That forces the over-optimistic System 1 to name concrete failure paths.

The last step is always the same: the hard stop goes into the market immediately, never as a mental stop in your head. Do not trade when tired, hungry or after a losing streak.