The page
Folder 5 made five promises. This lesson collects them onto a single page — because a rule you cannot see while you are trading is a rule you will renegotiate while you are trading. The page has six lines, and every one of them is a number or a sentence short enough to fit:
1 · My vehicle (Lesson 17’s capstone: the instrument that fits your capital, schedule, and temperament). 2 · Risk per trade (Lesson 18: a percent, and its dollar value on today’s account). 3 · Maximum position (the largest single position the plan permits, whatever the formula says — Lesson 19’s sizing formula runs into this cap and stops). 4 · My stop rule (Lesson 20, in one sentence: exits are set by the level, on a close, never moved away). 5 · Daily and weekly loss limits (derived below). 6 · My drawdown line (Lesson 21: the account depth at which risk steps down and trading pauses for review).
Where the limits come from
The two lines this folder has not yet numbered are the daily and weekly loss limits, and they are not new rules — they are Lesson 18’s streak arithmetic wearing a clock. At 1% risk per trade, three losing trades in a day cost about 3% of the account — precisely 2.97%, because each loss is charged on the balance the previous loss left behind (0.99 × 0.99 × 0.99), the same shrinking-balance compounding as Lesson 18’s streak table. That is a sensible place to stop for the day: not because the fourth trade would be worse — it is statistically identical — but because the trader after three losses is not. Revenge is a position size. The limit exists to retire the operator before the operator meets the account.
The weekly limit follows the same shape: five losing trades — 4.90% once each loss compounds on the shrinking balance, not a flat 5% — ends the week’s trading; what remains of the week is for review (a habit the next folder builds into a ritual). And the drawdown line uses Lesson 21’s table directly: at a 10% account drawdown, many plans halve their risk fraction until the peak is recovered — because the recovery column at −10% is a friendly 11%, and the plan’s whole religion is keeping it that way.
The plan is a pre-commitment
Understand what this page is for. It is not a prediction and it is not a strategy. It is a pre-commitment: decisions made by the calmest version of you, binding on every other version. The plan does not negotiate at 10:47 in the morning, does not make exceptions for a trade that ‘looks different this time’, and does not attend the meeting where you explain that the level only broke a little. It sits next to the screen, already signed.
Can it change? Of course — on a schedule, in writing, never mid-session. Plans are revised on Sunday, with the week’s journal open (the next folder makes that a ritual), and a revision applies from Monday. A revision also needs evidence, not a feeling: the journal showing a run of trades executed exactly as planned, in which the rule itself — not one bad outcome, and not trades the plan never authorized — is what the record indicts. One painful loss is an anecdote; a documented pattern produced by following the plan is evidence. A plan edited during a drawdown is not a revision; it is the drawdown editing the plan. Print the page. The physical copy is the point: it is much harder to argue with paper than with a note you can silently retype.
What this page makes possible
With this page filled in, the core of the Market Path is complete — and something subtle has changed about what you are. Lessons 1 through 17 taught you to read the market; this folder taught you to survive it. You hold, now, the complete grammar the journal is written in (Folders 1–4) and the complete discipline it assumes in its readers (Folder 5). Nothing the editions print will be foreign to you: not the levels, not the Screened list, not the quiet way position size hides inside every table.
The path continues from here — deeper on the trading side, deeper on the investing side, and a final folder that moves into the journal itself, session by session. All of it stands on this page. However you proceed from the fork, the plan goes with you, unchanged: it is the one document every later lesson will assume you have already written.
Worked example: the filled page
The $25,000 account that has walked through this whole folder, its plan filled in:
| Line | The filled-in plan |
|---|---|
| Vehicle | Stocks — they wait while I am at work (Lesson 17) |
| Risk per trade | 1% — $250 at today’s balance (Lesson 18) |
| Maximum position | $6,250 (25% of the account), whatever the formula allows (Lesson 19) |
| Stop rule | Exit on a daily close through the level. Never moved away. (Lesson 20) |
| Daily / weekly limits | Stop after 3 losing trades in a day (about −2.97% compounded); stop after 5 losing trades in a week (about −4.90% compounded), then review |
| Drawdown line | At −10% from the peak, risk halves to 0.5% until the peak is recovered (this lesson) |
Check the page against the folder’s own arithmetic: Lesson 19’s $3,100 position sits comfortably under the $6,250 maximum; ten straight losses at 1% leave the account above the drawdown line’s neighborhood; every number on the page can be traced to the lesson that produced it. That traceability is what the checkpoint tests.
Practice
Build the page. Using a fictional $25,000 account and this folder’s hypothetical teaching inputs — planned risk of 1% a trade and a maximum position of a quarter of the account — write out all six lines of the plan from “The page” above: vehicle, risk per trade in percent and dollars, maximum position in dollars, your stop rule in one sentence, daily and weekly loss limits, and a drawdown line. Then answer, in writing: on what day may this plan be revised, with what open in front of you — and what counts as evidence for a change, as opposed to one painful loss?
Check your numbers: risk per trade is $250; the maximum position is $6,250; at 1% a trade, three compounded losses (−2.97%) end the day and five (−4.90%) end the week. Revisions happen on the scheduled day, with the week’s journal open — and the evidence is a documented pattern produced by following the plan, never a single loss and never a mid-drawdown edit.
The fork: choose your track
The foundation ends here, and the path splits. The Trade track (T1–T6) goes deeper on the trading side: earnings and catalysts, volatility, the short side, options in depth, sessions and execution, and the trader’s process. The Invest track (I1–I6) goes deeper on the ownership side: financial statements read in the owner’s order, bonds and rates, portfolio construction, retirement accounts, and the investor’s plan.
Choose the side you will actually practice. The six finishing lessons (Folder 6) wait on the far side of either track, and the certificate asks for one track — or both, for the Full Path. Start the Trade track or the Invest track.
Terms in this lesson: Position sizing · Stop level · Drawdown
From readers
Questions, answered
No questions answered here yet — yours could be the first.
Audio edition: this lesson, read aloud from the text on this page.