If-Then Trading Rules: A Plan You Can Follow

Most traders have a plan for the entry and none for the bad moments: the third stop in a row, the move you missed, a win that makes you feel invincible. Those moments are where results are lost. Psychology has a tested technique for exactly this gap: if-then plans.

What the research found

In psychology, “implementation intentions” are plans of the form “if situation Y is encountered, then I will initiate goal-directed behavior X”. Gollwitzer and Sheeran reviewed the evidence. Their starting point: “holding a strong goal intention … does not guarantee goal achievement, because people may fail to deal effectively with self-regulatory problems during goal striving.” Their finding: “from 94 independent tests”, implementation intentions “had a positive effect of medium-to-large magnitude (d = .65) on goal attainment”.¹

They were effective at four things the abstract lists: “promoting the initiation of goal striving, the shielding of ongoing goal pursuit from unwanted influences, disengagement from failing courses of action, and conservation of capability for future goal striving”.¹

Map those onto trading. Initiation is taking the planned trade. Shielding is ignoring the chat and the news. Disengaging from failing action is accepting the stop and closing the day. Conserving capability is not burning your capital and attention on weak trades.

What the research does not show

The meta-analysis covers goals across many areas of life, not trading performance. It does not show that if-then rules make a strategy profitable. A rule can make you follow a bad plan more reliably. The point is narrower and still valuable: if your plan is sound, writing the hard moments as if-then rules helps you execute it.

How to write a trading rule

A rule has a trigger you can observe and an action you can do. Compare:

• weak: “I will try not to revenge trade”;
• strong: “If I hit a stop-out, then I close the chart for 30 minutes and take no entry before the timer ends”.

Good rules are specific, countable and short. They name a number (R, minutes, trades), not a feeling.

Ten if-then rules to adapt

These are examples to adapt, not research results:

1. If the day’s loss reaches 2R, then I stop trading until tomorrow.
2. If a trade is stopped out, then I take a 30-minute break before the next entry.
3. If I want to enlarge a position after a loss, then I use the planned size anyway.
4. If I have taken 3 trades today, then the session is over.
5. If a setup is not on my written list, then I do not enter.
6. If the price has moved more than my entry zone, then I wait for a pullback order or skip it.
7. If I feel the urge to move my stop, then I may only move it in the direction of reducing risk.
8. If I have three winning trades in a row, then I check that the next size is still the planned one.
9. If I am tired, ill or upset, then I trade at half size or not at all.
10. If the market is much more volatile than usual, then I reduce size so that the risk in money stays the same.

Several of these answer problems we cover separately: revenge trading, overtrading, FOMO and stress.

From rules to practice

1. Write the rules down and put them where you trade.
2. Make each rule testable. After a week, count how often the trigger happened and how often you followed the action.
3. Check the size of risk. The risk simulator shows how deep a drawdown can get at different risk per trade, so your loss limit is not a guess.
4. Use the plan page. Session and plan lets you enter a daily loss limit, a pause after stops, a maximum number of trades and your setup list. It blocks the entry form when you reach a limit, and logs it if you enter a trade anyway.
5. Review weekly. Which rules did you break? That is the list to work on.

If you keep breaking the same rule, the problem is usually not the rule. Try broke your own rules: how to return to the system. Your data stays in your browser.

Questions traders ask

What is an if-then plan in trading? A rule in the form “if (trigger), then (action)”, written before the situation happens.

How many rules should I have? Few enough that you can remember them. Start with three: a daily loss limit, a pause after a stop, and a trade cap.

Do if-then rules guarantee discipline? No. The meta-analysis found an average effect, not a guarantee, and it covers goals in general. Test your rules and keep a record.

Educational material, not investment advice. More in the Trading psychology category.