How to Build a Trading Constitution Step by Step

A useful Trading Constitution is narrower than a complete trading plan. It does not need to encode every judgment. It should make a selected set of repeatable decisions explicit enough that the app can compare a manual position plan with them.

Build rules from observable inputs, not adjectives such as cautious, aggressive, or high conviction.

Step 1: Define one risk unit

TradeRegimen defines one configured R unit as account equity multiplied by the saved risk-per-trade percentage. The current input accepts 0.5% through 5%, and Quick Start offers 0.5%, 1%, and 2% choices. Those values describe the product range; they are not recommendations.

For a fictional $50,000 account with a selected 0.5% risk setting, one configured R unit is $250. A simple long-share calculation with a $50 planned entry and $47.50 stop has $2.50 of planned risk per share, so the risk-only result is 100 shares before other limits are applied.

Step 2: Add position and portfolio capacity

Risk to the stop is only one constraint. Add a maximum dollar value for one position, a maximum number of concurrent positions, and a maximum amount of total open risk in configured R units.

TradeRegimen calculates both shares-by-risk and shares-by-position-value, then applies the tighter result along with remaining portfolio risk and position slots. Price therefore still matters: an expensive stock can hit the dollar position cap before it uses the full risk budget.

Step 3: Define daily and weekly boundaries separately

Daily boundary

Choose how many recorded positions realizing -1R or worse should trigger the Daily Loss Limit state. The current setting accepts two through five. This is a count of qualifying trades, not cumulative daily R.

Weekly boundary

Choose a separate cumulative weekly R boundary. The current setting accepts -2R through -6R. When the recorded total reaches or falls below the saved value, a later supported manual entry shows a Rule Alert.

Select both values from your own strategy, frequency, account, financial circumstances, and tolerance for loss. No fixed pair is appropriate for every trader.

Step 4: Set the supported concentration limits

Use maximum position value, concurrent-position count, and portfolio R to define broad capacity. TradeRegimen also stores a Leveraged Sector Limit, which counts leveraged positions in the same canonical sector.

That last field is not a full portfolio-correlation model. The current manual entry request lacks proposed-sector context, so a leveraged ticker can return an unavailable warning. Do not treat that warning as evidence that the portfolio is diversified.

Step 5: Choose the Market Context rule

Market Context keeps the attributed model direction separate from the summarized SPY/QQQ tape. Choose whether no index, at least one index with neither opposing, or both indexes must confirm the planned direction.

Then choose the response when the rule conflicts:

• Keep normal size: show a warning without an automatic cap.
• Limit to half size: cap supported sizing at 50% and at most three open positions.
• Pause new positions: return zero-share guidance inside the TradeRegimen workflow.

The safe default requires one confirming index with neither opposing and limits the plan to half size on conflict. There is no automatic Bullish/Neutral/Bearish multiplier table, and no selection controls a brokerage order.

Step 6: Allocate scale-out checkpoints

Each configured tier pairs a percentage of the original position with a structural target slot and a positive-R fallback. The percentages must total 100%. The current suggested configuration assigns 50% to frozen T1 with a +2R fallback and 50% to frozen T2 with a +3R fallback. During onboarding, users can change the percentage allocation between those two rows. Coaching later reads the stored Constitution configuration rather than snapshotting the tiers with each position.

These are tracking checkpoints, not submitted exit orders. A moving-average trail, breakeven rule, thesis exit, or other stop method belongs in a separate written or broker plan because the current Constitution does not store those fields.

Step 7: Run a fictional plan through the checks

Use test data before relying on the workflow. For example, submit a fictional long plan with a known entry, protective stop below entry, and proposed share count. Confirm the six displayed rows:

1. Market Context Rule
2. Daily Loss Limit
3. Weekly Loss Limit
4. Leveraged Sector Limit
5. Sizing Compliance
6. Exposure Cap

Check the arithmetic, data freshness, and limiting factor. Then test a deliberate conflict so you can see how a warning, sizing cap, blocker, or acknowledged exception appears. Do not use a live order as the test.

Step 8: Keep broker controls in their own column

Write down which rules are only reminders, which are checked inside TradeRegimen, and which are implemented at the broker. Broker-native stops and account restrictions have separate behavior, availability, and failure modes. TradeRegimen does not place, block, cancel, or manage them.

Step 9: Review before amending

Review supported alerts and acknowledged exceptions by rule. Ask whether the input was accurate, the threshold still matched the strategy, and the planned response was usable. TradeRegimen's seven-day amendment cooldown adds distance from one live decision; it does not turn a default into a recommendation.

Start with the Constitution field guide if you want the current rule inventory. Use the portfolio-constrained sizing guide for the full share-count calculation.

Sources and limits

• FINRA's risk-tolerance guide explains why risk choices depend on personal financial circumstances.
• FINRA's stop-order overview covers execution-price and non-execution risks.
• Product behavior and validation ranges were reviewed against the current Constitution, sizing, Market Context, scale-out, and manual entry implementations on September 14, 2026. All numeric examples are hypothetical and educational.