10. The Playbook
Every chapter so far has looked at what already happened. The Playbook is about what you will do next.
Most investors have a method, even if it is not written anywhere: a point at which they cut a loss, a point at which they take some profit, the signs that make them add to a winner. Kept in the head, such a method bends. On a day the market falls, the loss you meant to cut looks as if it might turn round; on a day it rises, the profit you meant to take looks as if it might grow. Written down beforehand, the method stays as you meant it.
The Playbook is where you write it down, in a form Tradestory can check. You describe your method as rules, gather rules into strategies, and apply a strategy to your positions. From then on, every position under a strategy is checked against its rules, and the Dashboard shows the action your rules call for, with the reason.
Tradestory forms no view on any stock. Every action it shows comes from rules you wrote, and every decision stays yours.
The Playbook has four parts, which we take in turn:
- primitives, the measures a rule can test,
- rules, each a condition and an action,
- strategies, sets of rules you apply to positions,
- and guardrails, rules that apply to every position at once.
At the end of the chapter, we use Replay to set a strategy's rules against the trades you actually made.
The rules and strategies in this chapter are illustrations, built for this book to show what the Playbook can express. They are one way of writing rules among many, and none of them is a recommendation. Your own rules should come from your own method.
Let's begin with primitives.