Before Knowing
This is a companion to The Knowing Problem. That book examines why traders fail despite understanding what they should do. This framework provides the structural response.
The entries here cover market foundations, strategy development, execution systems, and risk architecture. Each addresses a specific concept: what it is, why it matters, and how to implement it. They are reference material, not reading material. Return to them when you need them.
There are no predictions here. No secret indicators. No shortcuts. What you will find is the unglamorous work that keeps traders in the game long enough for edge to compound. Position sizing formulas. Pre-trade checklists. Circuit breakers. Daily loss limits. The structural elements that execute when discipline fails.
If you have read the book, you understand why this structure matters. If you have not, the entries still stand alone. But know that the framework exists because knowledge is not enough. Knowing what to do and doing it are separated by a gap that only structure can bridge.
Market Foundations
- The Auction Process Markets are continuous auctions. Price discovery happens through the interaction of bids and offers.
- Participant Types Different participants have different objectives, constraints, and footprints.
- Liquidity The ability to transact size without moving price. It varies, evaporates, and matters.
- Session Structure The trading day has phases. Open, mid-day, and close behave differently.
- Volatility Regimes Markets alternate between compression and expansion. Strategy must match regime.
- Correlation Dynamics Correlations spike during stress when diversification matters most.
Strategy & Edge
- Defining Edge Positive expected value over a sufficient sample. Arithmetic, not intuition.
- Entry Criteria Specific, pre-defined conditions. If you cannot write them down, they are vibes.
- Exit Architecture The complete system of rules for closing positions. It exists before entry.
- Position Sizing Capital allocation calculated by formula, not by feel.
- Backtesting Principles Estimating edge from historical data. Done poorly, it lies convincingly.
- Strategy Documentation The written record of what, why, and how. If it is not documented, it drifts.
Execution Systems
- Pre-Trade Protocol A structured checklist completed before every trade. Friction against impulsive entries.
- Order Types Instructions about execution. Each trades off price certainty against fill certainty.
- Position Management What happens between entry and exit. Rules for adjustment defined in advance.
- The Trading Journal Contemporaneous record of actions, reasoning, and state.
- Review Protocols Scheduled examination of performance and process. Experience into improvement.
Risk Architecture
- The Risk Unit Standardized amount risked on each trade. Foundation of consistent sizing.
- Daily Loss Limits Maximum permitted loss in a single day. When reached, trading stops.
- Drawdown Protocols Rules that change parameters when equity falls. Graduated responses.
- Circuit Breakers Rules that halt trading when conditions are met. Execute automatically.
- Recovery Process Structured return after significant damage. Psychological recovery first.
- Portfolio Heat Aggregate risk across all positions. Accounts for correlation.
Trading Styles
Trade Planner
Structure every trade before you take it. Thesis, sizing, risk, and exit architecture in one place.