SMB capital how to build trading rules to combat human psyschology weakness based on their published videos on youtube

 To combat human psychology weaknesses, SMB Capital advises building rules that remove emotional decision-making. Key strategies include setting a fixed dollar risk before every trade, using pre-flight checklists to gauge mental readiness, enforcing a strict "three strikes" rule for losing symbols, and journaling to prevent recency bias. [1, 2, 3]

1. Use Fixed Dollar Risk to Eliminate Emotional Sizing

At SMB Capital, traders are taught to determine a fixed dollar risk before looking at charts or trade setups. This combats the psychological trap of sizing up during "hot streaks" or hesitating during drawdowns, ensuring your process is driven by data rather than emotion. [1]

2. Implement the "Three Strikes" Rule

To prevent spiraling into overtrading, use the "three strikes and you're out" rule. If you experience three consecutive losing trades on the exact same symbol, stop trading that specific asset for the rest of the day. [1]

3. Assess Your Mental Readiness

Perform a morning pre-flight checklist to gauge your psychological preparedness before the market opens. Evaluate your sleep, diet, stress levels, and general energy out of 10. If your score is low, automatically reduce your position sizes to protect both your mental and financial capital. [1]

For practical tips on how to implement these strategies and master your trading psychology:

4. Adopt the "Make It Stop Me Out" Mindset

When trades go red, humans are wired to hold on in the hope of a turnaround. SMB Capital's top traders practice a strict protocol called "Make it stop me out". You must define your stop-loss and targets before entering the trade, allowing the system to work without negotiating with the chart in the middle of the action. [1, 2]

5. Combat Recency Bias via Journaling

The human brain is prone to recency bias—giving too much weight to the outcome of your last trade while forgetting the hundreds of trades that define your statistical edge. Documenting every trade in a trading journal allows you to evaluate your performance over a large sample size, keeping you focused on probabilities rather than your last emotional win or loss. [1]

If you would like, I can:

• Detail the exact steps to build your own SMB-style Playbook.
• Provide specific criteria for your pre-flight checklist.
• Break down how to manage your daily loss limits.

Let me know how you'd like to refine your trading rules.