Week 12: The Small-Account Survival Rulebook

The closing lecture doesn’t introduce new mechanics — it asks what to do with all of the previous eleven weeks, each of which introduced another way a small account can lose capital or be forced to stop trading. It walks through what a survival rulebook needs to cover (instrument choice, position sizing, invalidation, leverage limits, and a rule for when to stop trading altogether) and previews the shape of the Personal Market Rulebook assessment.

The question this week answers#

Of every way this semester showed a small account losing capital or being forced out of a position, what would actually survive being turned into a rule you’d follow with real money on the line?

By the end of this lecture#

• revisit every instrument covered this semester with a stated personal stance on each
• write a risk rule specific enough to be checked, not just aspirational
• identify a style or instrument that isn’t a good fit for yourself, and say why
• structure a personal rulebook, ready to turn into the Personal Market Rulebook assessment

Key ideas#

A rulebook, in the sense this course uses the word, is not a summary of what was taught — it’s a set of decisions: which instruments from Weeks 1–11 you’d actually use (and which you’d restrict or avoid), how you’d size a position (Week 5’s method still applies unchanged, regardless of instrument), what maximum leverage you’d allow yourself on the instruments that carry it (Weeks 8–11), what would invalidate a position, and under what conditions you’d stop trading altogether, even temporarily. A rule that can’t be checked against a specific situation isn’t finished yet.

Rules also need to work together, not just individually — a risk budget usually caps total risk across every open position at once, not just risk per trade, because several individually-reasonable position sizes can add up to an account-level risk nobody actually intended.

A worked example#

A simulated trader with a $20,000 account sets a per-trade risk cap of 1% ($200) and a separate account-level cap of 2% ($400) across everything open at once. They hold a stock swing position risking $150 and a futures position (Week 9) risking $100 simultaneously.

The numbers#

150 + 100 = $250

$250 < 400$ — the combined risk sits under the account-level cap, so both positions can be held together under this trader’s own rule. If a third, $200-risk position were added:

250 + 200 = $450

$450 > 400$ — the account-level cap would be breached, meaning the rule requires closing or resizing something before opening the third position, regardless of how good any individual setup looks.

What a diagram would show#

A comparison table listing every instrument covered this semester — stocks, margin/short positions, futures, options, cryptocurrency — with columns for typical leverage, maximum loss profile, and a blank “personal rule” column, left for a student to fill in rather than pre-filled with an answer.

Try it yourself#

The takeaway#

A rulebook’s value is in being specific enough to fail — a rule that can never be checked against a real situation isn’t a rule yet, just a good intention. The Personal Market Rulebook assessment is where this gets written down properly, instrument by instrument, for the whole semester at once.