Critique of decision states that break system rules

A missing downside is a process failure

The archive identifies opening a position without a predefined-downside as a decision-process failure. The predefined-downside is the loss limit that must be specified before a position is opened, so the exit is a rule rather than a later feeling.

Failing to execute either a planned loss or a planned profit is identified as a process failure. The mechanical-trading-system is a rules-only signal process whose inputs are rule values, market state, and execution constraints. Its horizon is the system holding period, and its use is to keep entry, exit, and abstention testable as one procedure.

Dangerous decision-states and execution defects

Revenge-driven entries and invincibility-driven entries are both classified as dangerous decision-states. A decision-state is the trader's mental condition at the moment of action, including clarity, anger, invincibility, and hesitation.

Hesitating when price reaches a precomputed level, or failing to act on an identified breakout, is treated as an execution defect. Lost focus on the opportunity set and an unclear decision-state are identified as failures of the trading process.

Barriers that block the rules

Keeping a prior belief after the market has already supplied the relevant information is identified as a barrier. That condition is belief-lock: holding a prior view after the market has already supplied contradictory information.

Acting on a tip that leaves the trader without control of the position is classified as a process failure. Preferring to be proven correct rather than following the system's monetary objective is identified as a barrier.

Consistency, capital, and abstention

Inconsistent application of a mechanical-trading-system is identified as a barrier, and an unused system is described as discardable. System-consistency means applying the mechanical rules on every qualifying signal, or treating the unused system as discarded.

Absence of a well-defined money-management program whose object is capital preservation is identified as a process gap. The capital-preservation-constraint is the money-management object of keeping the account intact so later signals can still be taken.

The checklist-process is a pre-trade signal process that uses the same rule inputs, market state, and execution constraints to make entry, exit, and abstention rules testable as one procedure over the system holding period. An abstention-rule is a checklist outcome that forbids entry when control, focus, or state of mind is missing. The trading-psychology-process turns those inputs into entry, exit, or abstention over the system holding period, so the trader's state can be tested as part of one procedure.