Decide once

Odysseus knew what was coming, and he knew that knowing wouldn't save him. So he didn't plan to be strong. He had his crew tie him to the mast while he still had a clear head, and told them not to untie him whatever he said later.

Economists call this a commitment device. You make the decision early, while you're thinking clearly, then arrange things so that it's hard to reverse.

What the research says

None of these studies involve trading, so treat them as evidence about people in general. They still point in a useful direction.

• Ashraf, Karlan and Yin offered Philippine bank clients a savings account that restricted their access to their own money. Some people chose it voluntarily, and the authors reported a lasting rise in savings among those offered it.
• Ariely and Wertenbroch found that people will set costly deadlines for themselves, and that those deadlines help, though not as much as deadlines set by someone else.
• Gollwitzer and Sheeran's review of 94 tests found a medium-to-large effect on reaching goals when people specified in advance what they'd do in a given situation.

Put those together and you get three practical lessons. People can bind themselves on purpose. Specific plans beat vague intentions. And a commitment held outside your own head tends to be stronger than one you enforce alone.

Step one: write the mandate

A fund gives each trader a written mandate. You can write your own in five minutes with the Trading Mandate template. It should answer four questions in numbers:

• What's the most I can lose in a day before I stop opening trades?
• What's my maximum size?
• How many trades can I take in a session?
• Which hours do I trade, and which don't I?

The numbers are yours to choose. We can't tell you what's right for your account. What matters is that you set them calmly, and in advance.

Step two: turn the mandate into if-then rules

"I'll stay disciplined" gives you nothing to act on. An if-then rule tells you exactly what happens next:

• If I'm stopped out, then I stand up and don't enter for ten minutes.
• If I lose twice in a row, then my next trade is normal size or smaller.
• If I hit my daily limit, then I close the platform and write my review.
• If I want to change a limit, then I wait until tomorrow.

Use the pattern you wrote down in Stage 1. Your rules should target your own weak moments, not somebody else's.

Step three: put the rule outside your head

This is where most plans stop too early. A rule you can break with one click is still a matter of willpower. Move it somewhere harder to reach:

• Use the loss limits and locks your platform or broker offers
• Show your mandate to someone who'll ask about it each week
• Make limits easy to tighten and slow to loosen

Whatever you choose, keep one exception: you must always be able to reduce risk. A rule should stop you from adding danger, never trap you in a position.

Next on the path: What calm actually is