Who this is for — Readers who know POC, Value Area and initiating/responsive and want the operational «game plan»: how Steidlmayer closes *Markets and Market Logic* (1986, ch. 14) linking market understanding, personal discipline and repeatable rules.
Source: Steidlmayer & Koy, Markets and Market Logic (1986), Section III, ch. 14.
Prerequisites
Market Logic principles, Operational POC and Value Area, Initiating vs responsive.
Why a written strategy
Few operators sustain «predict + stop» without a plan. Steidlmayer defines strategy as the modus operandi chosen before trading, built on real frailties (ch. 13), not an ideal self-image.
| Without strategy | With solid strategy |
|---|---|
| Every trade is an emotional experiment | Every decision has reason from market understanding |
| Small samples distort judgment | Isolated mistakes do not break the large sample |
| Always at capacity limit | Scale size only after regular profits |
Factory metaphor — Start with minimum size like a new production line: flatten the learning curve, then increase volume. Chronic over-capacity creates stress and emotional decisions.
Seven rules for a solid strategy
- Every entry/exit has a reason from auction understanding — never random clicks.
- Opportunities differ — instrument and size reflect this situation's assessment.
- Strategy includes you — current understanding, recent performance, comfort, total financial condition.
- You can be wrong on one trade (or a small series) without ruin — position must not create extreme emotional/monetary discomfort.
- Understand the tool's principle — in uncertain markets everything works ~50% by chance; real edge only beyond 50-50 and in the right conditions.
- Every tool has favourable phases — when regime shifts, setup utility shifts.
- Beware small samples — a mistake that luckily wins does not validate the approach: avoid it anyway.
Trade weighting and visualisation
Steidlmayer introduces weighting trades (small / medium / maximum size) based on:
- scenario clarity (balance vs clear imbalance),
- alignment with initiating or responsive activity,
- distance from accepted value (POC / Value Area).
Replace prediction with visualisation: map possible scenarios (return to value, extension, failure) and conditional actions — aligned with playbook and scenario in Cyclepedia.
Risk mythology (three myths)
| Myth | Operational reality |
|---|---|
| «Risk is fixed per trade» | Risk is a function of understanding + size + mental state |
| «More leverage = more opportunity» | Leverage amplifies value misjudgment errors |
| «I must recover immediately» | Strategy survives losing streaks when size is calibrated |
Links
- CTI2 — commercial activity (previous)
- Soybean 1991 case (next)
- Steidlmayer tradition