Stop Trading The Headline. Start Trading Your Process.

*Bob Iaccino, Chief Market Strategist and Co-Founder of Path Trading Partners, joins us live every Thursday from 11am ET, as our risk management educator. With 30 years' experience working as an active investor in equities, commodities, futures and FX there are few better to talk on the subject of risk management.

Bob has developed a method for breaking down his key fundamentals of risk management, in a way that he thinks retail traders can understand and use to get actionable insights to bring into their own trading. Below are some excerpts of Bob’s thoughts from a recent live session. If you’d like to save your seat to watch and participate in the next session, register here.

A sharp move in the market has a predictable side effect.

It compresses time.

Your brain feels like it has to decide faster than usual, because price is changing faster than usual. That is exactly when traders start reaching for the two most dangerous crutches in the business:

• A story (the headline)
• A prediction (what price “should” do next)

This blog is about removing both.

Not because fundamentals and macro do not matter, but because in the moment of a fast move, most traders are not doing analysis. They are doing emotional triage. And if you let that dynamic run the show, you end up with the same pattern every time:

• Chasing
• Late entries
• Over-sizing
• Tight stops in obvious places
• Targets that assume a “perfect” move
• Regret if it reverses, FOMO if it works

That cycle is not a market problem. It is a process problem.

Let’s break it down.

One of the biggest psychological traps in trading is the difference between:

• Living through a move (candle-by-candle)
• Reviewing a move (after the fact)

When you are living through it, your brain interprets speed as significance. It is not being irrational. It is doing what brains do: treating rapid change as a threat.

But markets do this all the time.

A 1% to 2% intraday move can feel like a crisis in real time. Later, it often looks like a normal down day on a daily chart.

Practical consequence:

• If you treat common volatility as an emergency, you will execute emergency trades.
• Emergency trades are rarely well planned.

Better framing:

• “This is not necessarily unusual. This is a market expressing liquidity and positioning.”
• “My job is not to react fast. My job is to react correctly.”

Traders love the word “why” because it feels like control.

Why is it dropping? Why did buyers step in? Why did that level break?

Here is the hard truth:

Most “why” answers are not actionable.

Even if you identify the headline, you still cannot reliably quantify:

• How far the move should go
• When it should reverse
• What the second-order reaction will be
• How positioning and liquidity will amplify or mute it

If “why” does not change your entry, stop, target, or position size in a repeatable way, it is not edge. It is narration.

A better question set than “why”

When volatility spikes, replace “why” with questions that force structure:

• Where is my invalidation? (What price level proves me wrong?)
• What is the trigger? (What must occur before I take the trade?)
• What is the expected path? (Not the outcome, the path: where is friction likely?)
• What is the risk unit? (How much am I willing to lose if I am wrong?)
• What is my exit logic? (Not “hope,” but rules.)

This is the dividing line between trading and reacting.

If you want to reduce emotional trading, eliminate one word from your internal monologue:

Should.

It appears in two disguises:

A) “Should” as prediction

• “We should bounce here.”
• “This should reverse.”
• “This shouldn’t be happening.”

This is where traders confuse opinion with probability.

B) “Should” as self-judgment

• “I should have sized bigger.”
• “I should have cut sooner.”
• “I shouldn’t have taken that.”

This is where traders confuse outcome with process.

The result is the same either way: you stop evaluating decisions and start evaluating yourself.

And that matters because self-judgment creates overcorrection:

• You press after wins
• You hesitate after losses
• You change rules midstream

A cleaner mental model

Replace “should” with “if-then.”

• Not: “We should bounce at support.”
• Instead: “If price closes back above this level and holds, then I will take the long with this stop and this target.”

That one shift forces you to build a decision tree instead of a wish.

A good question came up in the conversation: how do you mentally prepare for sudden moves?

You do not prepare by predicting the catalyst.

You prepare by validating your strategy across enough history that “surprise days” are already in your sample.

That is what serious strategy work looks like:

• Back testing: Does the idea work across different regimes?
• Forward testing: Does it hold up in live conditions without curve fitting?
• Monte Carlo: What does distribution of outcomes look like when sequence risk is randomized?
• Scenario stress: What happens around gaps, whipsaws, high volatility opens?

When you do this correctly, “today” stops being special. It becomes “another day in the distribution.”

That is how you keep your decision quality stable when the tape gets fast.

This is one of the most important professional principles:

• If you rush into a trade and it loses, you made a mistake.
• If you rush into a trade and it wins, you also made a mistake.

Because your process cannot scale if your method is “get lucky.”

The market rewards bad behavior all the time. That is what makes trading hard. A random win can train you into repeating a flawed entry.

Process is the only thing you can control. Outcomes are feedback, not validation.

We walked through a potential reversal pattern live. The important lessons were not about the pattern name. They were about structure and behavior.

A) Timeframe selection is a risk decision

• Lower timeframe charts give you more “signals.”
• Many of those signals are noise.

If you choose to trade very short timeframes:

• You must accept more false triggers
• You must keep stops and position sizing appropriate
• You must define exactly what confirms the move

Short timeframe trading is not “more precise.” It is more demanding.

B) A reversal pattern is not valid until it proves itself

In a double bottom style reversal, the key concept is the neckline / peak between the lows.

A lot of traders see two lows and decide the pattern is “there.” It is not.

What matters is:

• Buyers showing willingness to lift price through the peak
• Follow-through that holds above the break, not immediate failure

This is why triggers matter. They filter out the patterns that look good but do not behave well.

C) The market will test the breakout level

This is where most traders get emotionally compromised.

Here is the common sequence:

• Breakout occurs
• Late buyers chase
• Price pulls back to retest
• People panic because the move “failed”
• Retest holds, then it goes
• The panicked traders re-enter at worse prices

That is not just chart behavior. That is crowd behavior.

The retest is where discipline matters.

This is a foundational risk concept, and it is opposite of how many traders naturally behave.

The typical retail mistake

• Stops placed too tight at obvious levels
• Targets placed too far because of greed or “being right”

So the trade produces:

• Frequent stop-outs
• Rare full targets
• High emotional volatility

The better framework

Stops should be located where the market must violate meaningful structure to prove you wrong. That makes your stop “hard to reach” unless the trade is actually failing.

Targets should be located where price can reasonably get, even if the move is imperfect. That makes your target “easy to reach,” reinforcing consistency.

This is how you build a process that:

• Wins often enough to stay psychologically stable
• Captures enough reward to stay economically viable

We also touched on something traders do not talk about enough: irritation.

Missing a target by a few cents can make traders feel like the market “robbed” them.

It did not.

That is variance.

If your process depends on perfect fills, perfect extensions, and perfect symmetry, it will regularly disappoint you.

A mature process accepts:

• Slippage
• Near misses
• Retests
• Imperfect structure

And it designs exits that do not require perfection.

When a big thematic cycle ramps up, most traders rush to the most obvious names.

Another approach is to look for the infrastructure side:

• Companies that supply components needed for power generation and distribution
• Firms tied to industrial systems that scale alongside data-intensive computing
• Providers of equipment and services that benefit from increased electricity demand

The key is to treat themes as a watchlist generator, not a trading plan.

Theme does not replace:

• Entry logic
• Stop logic
• Target logic
• Position sizing
• Risk limits

If you cannot define those, you do not have a trade. You have a story.

A practical “fast tape” checklist

When the market moves quickly, here is the exact process filter I like:

Before you trade

• What is my timeframe?
• What is my trigger?
• Where am I wrong (invalidation)?
• What is my position size based on that risk?
• Where is the first friction point (likely resistance/support)?
• What is the most probable target, not the most exciting one?

While you are in the trade

• Am I following rules or watching candles emotionally?
• If price retests the breakout, is that expected?
• Am I reacting to PnL or to structure?

After the trade

• Did I follow the process?
• If not, what rule did I violate?
• If yes, what can I improve without changing the core logic?

This Blog (hereafter referred to as the “Content”) is produced by TradeZero. The Content may include the views and opinions of TradeZero and a third-party participant, Bob Iaccino. Bob Iaccino is compensated by TradeZero for participating in the Content. Mr. Iaccino’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero is not responsible for and neither affirms nor endorses any of Mr. Iaccino’s views or opinions expressed in the Content. TradeZero makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security.

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