Constructing a pre-trade stop and review procedure

A written trading plan is treated as both the start and the constraint of the process. It records goals, money-management rules, allowed market conditions, and explicit times not to trade. Those records feed a checklist-process: a written sequence that turns rule inputs, market state, and execution constraints into a single enter, pass, or later-review signal over the system holding period.

The trading-psychology-process is that same sequence. Entry, exit, and abstention stay testable because the rules, rather than mood, produce the signal.

Start from the written plan

Nothing in the later scan rewrites the plan. Allowed conditions and the listed times not to trade remain in force before a chart is opened. Money-management rules stay attached to the plan so size, loss limits, and the stop decision have a fixed source.

Scan with a setup picture

Candidate selection is reduced to a setup-picture, a reduced visual of the plan’s entry criteria used to scan charts without inventing a trade from unmatched structure. Unmatched charts are set aside. Setup criteria are not rewritten to fit whatever appears on the screen.

Chart names and a preconceived market-direction view are withheld during the scan so opposite-direction setups that still match the picture are not discarded.

Keep the shortlist comparable

After the first pass, remaining setups are ranked with a point system keyed to the plan’s setup criteria so the shortlist stays comparable. The rank does not replace the plan. It only orders candidates that already match the picture.

Use the reward-to-risk gate

Target and stop levels are taken from the chart, converted into a reward-to-risk ratio, and accepted only if that ratio meets the plan. Otherwise the trade is discarded. That check is the reward-to-risk-gate: a comparison of chart-derived target distance to stop distance against a plan threshold that either admits or discards the candidate.

Relative strength versus the broader market or sector, and the path or session timing into the trigger, can still force a pass after the setup and ratio have already qualified.

Size from a fixed dollar loss

Share size is derived from a fixed dollar loss at the planned stop, with plan-level caps on one-trade and one-day loss, so size expands only when stop distance allows it. That computation is equalized-risk-size: position size set so a stop hit costs a standardized dollar amount rather than a gut-chosen share count.

The stop-loss is a pre-entry bound on loss and exposure, set from account equity, stop distance, and intended risk, then left in force for the life of the position.

Wait for the planned target or stop

Once a valid trade is open, default action is to wait for the planned target or stop. Early exits are limited to predefined cases such as severe news, an objective reversal of the assumed market direction, or a time-stop measured in bars. A time-stop closes the trade after a set number of bars if neither the target nor the protective stop has been reached. The stop itself is not to be ignored.

Review the procedure after every trade

Every completed trade is reviewed against the same prior steps. Losing trades are retained as the primary source of procedure errors rather than discarded. That check is the post-trade-review: a scheduled check of whether the checklist, stop, and size rules were followed, used to revise the plan rather than to relive the outcome.