The worst time to decide how much to risk is while a position is moving against you. The best time is an hour earlier, with nothing on. Rules written before the open exist to move decisions from the first moment to the second.
Why before
During a session, attention is taken up by price. Decisions made then lean on whatever just happened: the last tick, the last loss, the last headline. Decisions made beforehand lean on the whole picture, because nothing is pulling at you yet. The rules are the same person’s judgment, taken at a calmer time.
Writing matters as much as timing. A rule held in the head bends under pressure. A rule on paper is either followed or visibly broken, and that visibility is most of its force.
The if-then form
Useful rules are conditional. If price is above this level at this time, then I look for this. If it reaches that level, I am wrong and I am out. If I have lost this amount, I stop for the day. Each one names a condition that can be observed and an action that is already chosen.
Vague rules fail the test. “Be careful near resistance” names no condition and no action. If a rule cannot be checked afterward as kept or broken, it is a mood.
What the rules should cover
At minimum: what qualifies as a setup today, how much is risked on one idea, where each idea is wrong, how much total loss ends the day, and what happens when the data is missing or stale. The last one is often forgotten, and what a system does when the data is missing is about that rule alone.
Exits belong here as much as entries. Pre-committed exits explains why an exit chosen in advance is easier to honor than one chosen with a position open.
What goes into them
The rules use the morning’s readings. Where the index sits against its dealer levels. What the expected move is. What happened overnight, and on a Monday, what the index perps did over the weekend. The readings change daily. The structure of the rules mostly does not. Building a pre-market routine walks through gathering them.
Rules for not trading
Some of the most valuable lines are the ones that say when to do nothing. No trades in the first minutes after the bell. No new positions ahead of a scheduled release. No trades when none of the day’s conditions are met. These get broken most, because doing nothing feels like missing something.
After the close
The rules earn their keep in review. With them written down, the day can be judged on one question: did I follow them. That is separate from whether the day made money. A day that followed the rules and lost is a normal cost. A day that broke them and won is a problem that has not shown up yet. Process versus outcome covers the distinction.
Trader supplies the readings the rules refer to: dealer positioning on SPY, QQQ and IWM, the expected move, and the index perps while the cash market is shut. The rules themselves are the trader’s own.