Trading Psychology
Trading Without Gambling: Develop a Game Plan for Ultimate Trading Success
Link's argument is that a written plan is the only thing separating a trader from a gambler, and he splits that plan in two: a standing trading plan, and a daily game plan rebuilt every session. He gives you the outline of both, fills in neither, and his own risk numbers contradict each other.
The one idea
Most trading books hand you a signal. This one hands you a filing system. Link says you need two documents, not one, and that confusing them is why people with decent strategies still lose. The trading plan is the standing document: which markets you trade, how you enter, how you exit, where stops go, how big you size, your money management limits, your holding times, how you back test, how you review. It changes maybe a few times a year. The game plan is today's sheet: which of those setups are actually live this morning, at what price, in what size, with what target and what stop, and what you will do if the market does something else entirely. It changes every single day because the market does.
His picture for this is a pitcher. The pitcher's main plan is his arsenal, his conditioning, his mechanics, all built in the off season. His game plan is what he throws to this batter, in this count, tonight. A great arsenal with no game plan is a pitcher who does not know when to throw the curve. A great game plan with no arsenal is a pitcher who decides he needs a knuckleball and realizes he never learned one. The trading version is the same shape, and the payoff is a rule that sounds obvious and almost nobody follows: every decision gets made while the market is closed. During market hours your only two jobs are timing and execution.
The gambling frame in the title is not a metaphor about recklessness. It is about the professional gambler, who Link says is not really gambling at all. A poker player who knows he has an 8 to 1 chance of hitting his card only puts money in when the pot is paying better than that, and he knows what stakes his bankroll can survive before he sits down. Link's trading version is a filter you run before every trade: your historical win rate multiplied by the reward-to-risk on this specific setup. If the product is too low you do not take the trade, no matter how good it looks. Everything else in the book, the discipline, the journaling, the position limits, exists to make that one calculation possible and to make you honor it.
What it actually teaches
The system is one standing setup and then a loop you repeat every trading day, and the loop starts at the close, not the open.
WRITE THE STANDING TRADING PLAN
Link lists ten parameters it must account for: entering a trade, exiting a trade, stop placement, position sizing, money management parameters, what to trade, trading time frames, back testing, performance review, and risk versus reward. The smallest thing that qualifies as a system inside it is three rules (one to get you in, one to get you out of a loser, one to get you out of a winner) plus a fourth rule that sets size. His test for whether yours is finished is to imagine raising outside money: a commodity trading advisor's disclosure document is a trading plan with a lawyer attached, and it states objective, strategy, risk, costs, and expected returns. If you cannot say what returns are reasonable, whether that includes trading costs, how much can be lost at worst, and what unexpected variable could wipe you out, you do not have a plan yet. It does not have to be mechanical. A discretionary approach counts as long as you follow the same rules every time and you have tested them, by software or by hand on printed charts, with commissions and slippage subtracted.
SET THE MONEY LIMITS BEFORE THE STRATEGY
He is explicit that money management outranks trade selection, and he builds it as a cascade. Take your total capital, carve out the part dedicated to trading (total risk capital), keep about half of that out of the market at all times, then break the working half into slices you allow yourself to have exposed at once (20 to 33 percent of it, or 10 percent of total risk capital if you are new, on his stated assumption that you are going to lose it anyway). Then set risk per trade. His own written limits, from the rule list in Chapter 16: never more than 5 percent on one trade and preferably 2 percent, never more than 50 percent of capital at risk, never more than 20 percent at risk at once, stay at least 20 percent below total margin requirement, no more than six positions, and never add to a loser. See the failure notes before you use any of these percentages, because the book gives you three different answers and one worked example that contradicts all of them.
SIZE FROM THE STOP, NEVER THE REVERSE
This is the mechanical heart of it and the one place his numbers are clean. Decide where the market proves you wrong, price that distance per contract or per share, then divide your per-trade dollar risk by it. His example: $2,000 of allowed risk, $400 of risk per contract, so you trade five. He names the reverse order (pick the size you feel like trading, then park the stop wherever the money runs out) as the single most common reason people get stopped out of trades that were right, because a stop placed by your wallet lands inside the market's normal daily range. Stops go into the market as live orders, not mental notes. The only exception he allows is a thin market where the floor can hunt them.
SET THE CUTOFFS THAT STOP THE DAY
A cutoff is a loss number that ends trading, and he gives four ways to pick one. A flat dollar amount ($2,000 a day, $10,000 a week). A straight percentage of capital, which he concedes forces small accounts up to 10 or 20 percent to be tradeable at all, and he flags that as carrying more risk rather than less. A fixed dollar figure per equity band, so 5 percent of $30,000 is $600 a day and you only recalculate when you fall below $25,000, at which point it drops to $500. Or a ratio against your own good days: average your best 10 percent of days, then set the cutoff at a third of that, so a $6,000 good day means a $2,000 stop-trading level. Add a give-back cutoff, because a day that went from up $4,000 at lunch to up $34 at the close does more damage than a clean loss. And add a slower circuit breaker for taking a real break: down 20 percent in the account, or seven consecutive losing days, or ten consecutive losing trades.
RUN EVERY TRADE THROUGH THE EDGE FILTER
This is the one formula in the book. W is your win percentage, wins divided by total trades. R is the risk ratio, potential win divided by potential loss. Multiply them. His example: a system right 50 percent of the time, risking 300 Dow points to make 900, gives W of 0.50 and R of 3, so W times R is 1.50. He says do not take a trade below 0.50 and that he wants at least 1.50. Separately he will not enter below 3 to 1 reward-to-risk, dropping to 2 to 1 only on a setup he considers particularly strong. He puts his own discretionary hit rate at 40 to 50 percent. Note what the formula forces regardless of its arithmetic: you cannot compute R without already knowing your stop and your target, so the exit gets decided before the entry. That is its real value. The 0.50 floor itself is broken, and the failure notes explain why.
REVIEW AFTER THE CLOSE, OPEN POSITIONS FIRST
Start with what you still own, because that is tomorrow's exposure. For each one: is the reason you put it on still true, has it reached or neared its target, should you add or cut, is it simply not working, is your money better used elsewhere, is it near a stop, did you ignore a stop, has volatility changed. Then the losers, and his ordering here is deliberate. He reviews the losses he exited correctly and small before anything else, because that is the behavior he is trying to reinforce, and he says he is prouder of a small loss taken well than of a winner. Then the trades he handled badly regardless of whether they made money. Winners last. Then the journal questions, which are blunt: why did I make the trade, did I trade too aggressively, did I overstay my welcome, did I follow my game plan, did I risk too much, was I lucky or smart.
REBUILD IN THE MORNING AND BRANCH THE SCENARIOS
The night's work is a draft; the morning refreshes it against reality. Check the economic release calendar you built, check overseas markets, get the opening call, then walk every open position and justify it out loud against where it will actually open rather than where it closed. Anything that gapped through a stop overnight gets decided now, and his default is to take the loss rather than hope. Then hunt new setups across 5-minute, 60-minute, daily and weekly charts, using a deliberately small toolkit: moving averages, RSI, MACD, stochastics, average true range, trend lines, Fibonacci retracements. Then branch the what-ifs: if it gaps lower and keeps going, if it gaps lower and rallies, if it fills the gap and fails, if it fills the gap and runs. Every branch has to resolve into one of exactly four size decisions: do nothing, exit the whole thing, add, reduce. His trick for a position you have become attached to is to ask what you would do if you were flat.
WRITE THE DAY'S SHEET ON PAPER
Fifteen minutes, on paper, not in your head, because you are more likely to follow something you can see. One line per instrument: entry requirement, share or contract count, target, and the price you exit at if you are wrong. He prints charts and draws the levels on them. His own exit rules are harsher than most of what he recommends elsewhere, and they sit three lines apart in the same list: exit losers 30 minutes after the open, and exit bad trades within 45 minutes. He also checks risk and stop levels five times a day: before the open, after entering anything, midday, late afternoon, and after the close.
What it looks like Monday morning
You stop deciding anything during market hours. Before Monday you write the standing document once, and it needs five numbers in it that you can say out loud without looking: maximum risk per trade, maximum total risk on at once, the daily loss that ends the session, the maximum number of open positions, and the reward-to-risk floor below which you do not enter. Then every night after that, you go through open positions before you look at anything new, and you write tomorrow's list on paper with a price to get in, a size, a target, and a price to get out if you are wrong.
The two changes with immediate teeth are these. First, the sizing order reverses. Stop deciding how many shares you want and then finding somewhere to put the stop. Read the stop off the chart, price it, and let the arithmetic hand you the size. Some setups will come back as one contract or zero, which is the point. Second, the stop goes into the market as a live order the moment you are filled, and you do not enter at all until you have computed both exits, because his ratio cannot be calculated without them. If you do only those two things and ignore the rest of the book, you have taken most of what it has to give.
| Layer | His rule | In his example |
|---|---|---|
| Capital available | Whatever you actually have | $400,000, from selling a house |
| Total risk capital | Only the part you have written off | $100,000 |
| At risk at all | About 50 percent of risk capital, the rest earns interest | $50,000 |
| At risk at one time | 20 to 33 percent of the working half | The rule gives $10,000 to $16,500. He uses $20,000 |
| Risk on one trade | 2 to 10 percent, with 2 to 5 percent best | $1,000, which he calls 5 percent. That is 5 percent of the $20,000 and 1 percent of the $100,000 he named as risk capital |
| Resulting position | Stop distance sets the share count, not the reverse | 300 shares of a $50 stock with a $3 stop, so $15,000 of stock |
The cascade stops reconciling at row four and the label on row five is off by a factor of five against the base he defined, so treat the shape as the lesson and rebuild the numbers yourself.
I believe more money can be made by being properly prepared for the market than by actually trading it.Marcel Link, Trading Without Gambling
Where it fails
- The edge formula is wrong for anyone winning less than half their trades. Link's filter says take the trade when win rate times reward-to-risk exceeds 0.50. Run his own numbers against it. In Chapter 15 he calls a 30 percent win rate 'a more typical ratio' for a real system. Take W of 0.30 with a 2 to 1 payoff: W times R is 0.60, which clears his floor. Actual expectancy is 0.30 times 2 minus 0.70 times 1, which is negative 0.10 per unit risked. That system bleeds out, and his filter waves it through. Breakeven is W times R equal to 1 minus W, not a constant 0.50, and 0.50 happens to be correct only at exactly a 50 percent win rate. This is Chapter 10 of the 2009 first edition and it was never corrected. Use the ratio for what it actually does well, which is forcing you to define the exit before the entry, and use expectancy for the go or no-go.
- The money cascade stops reconciling halfway down, and the per-trade label is off by a factor of five. Chapter 15 builds the ladder: $100,000 of total risk capital, keep 50 percent of it out of the market, then expose 20 to 33 percent of the working half at any one time. That arithmetic gives $10,000 to $16,500. One page later he writes 'say you decided that $20,000 would be your maximum exposure at any given time (this is out of a $100,000 total risk capital)', which does not come from the ladder he just built. He then says 'assume you are willing to risk 5 percent of your risk capital on any given trade ($1,000)'. But $1,000 is 1 percent of the $100,000 he defined as risk capital. It is 5 percent of the $20,000. A reader who trusts the label rather than checking the arithmetic sizes five times too large. This is the same defect a reviewer found in High Probability Trading, and it lands harder here because the entire book argues that money management outranks trade selection.
- The per-trade percentage changes three times and his position limits change three times. Chapter 2 offers, as its worked example of a money management parameter, risking no more than 4 percent of total capital per trade. Chapter 15 says the acceptable band is 2 to 10 percent with 2 to 5 percent best. Chapter 16 says never more than 5 percent and preferably 2 percent, and Rule 15 of his Top 25 repeats 5 percent while noting he has also seen 1 and 2 percent quoted. A span from 2 to 10 percent is not a rule, it is a shrug, and the gap is not cosmetic: a thirty-trade losing stretch costs about 45 percent of the account at 2 percent per trade and about 96 percent at 10 percent. Position counts fare no better. Chapter 14: 'I have a clause in my trading plan that limits me to having up to $50,000 at risk and no more than three unrelated positions.' Chapter 15: three commodity positions and five stocks, so eight, at $20,000 at risk. Chapter 16: do not trade more than six positions at once. Three, six, or eight; $20,000 or $50,000. The same Chapter 15 plan caps per-trade risk at $5,000 and then sets the per-position exit trigger at $6,000.
- His showcase trade breaks his own reward-to-risk floor without comment. Chapter 12, January 2008. He shorts Dow futures at roughly 12,050 with the stop above congestion at 12,220 and the target 400 points lower, and writes 'I'm currently risking 200 to make 400 and I'm going with the major trend so I like this trade.' That is 2 to 1, against a stated 3 to 1 minimum that he says drops to 2 to 1 only for a particularly strong setup. The stop is also 170 points, not 200. Run it through his own filter at his own stated 40 to 50 percent hit rate and it scores 0.8 to 1.0, well under the 1.50 he says he wants. The featured trade fails the featured screen and he does not notice.
- The book promises a game plan and never produces one. The subtitle says develop a game plan. There is no completed game plan in the book, no filled-in trading plan, no template, no worked sheet for a single trading day. Chapter 16 comes closest, with 40 one-line rules under four headings, and then he writes 'I will not get into the nitty-gritty of my actual trading and money management strategies,' and later abandons the exercise mid-chapter because, in his words, it is 4:30 in the morning and he is tired. You finish the book knowing what belongs in the document and with no example of the document.
- He insists on back testing and shows zero results. 'Back testing your systems is so critical it can't be overstated' is his line, and there is not one backtest in the book. No equity curve, no win rate, no trade log, no track record. His own W, the input his own formula cannot run without, is a guess he admits to: he does not have an exact ratio for his setups but knows from experience he is right about 40 to 50 percent of the time. A reader following the book exactly cannot execute the edge filter, because the number it needs is the number the book never teaches you to produce and never produces itself.
- It is the compressed thesis of his first book, and he says so on page one. 'If you took everything from the first book, put it into a funnel and strained out the fluff, the key things would all boil down to one basic concept and that is the importance of making a trading and game plan.' This book expands that one concept. It would be fine if the expansion were self-contained, but it is not: Chapter 2 sends you back to High Probability Trading for the ideas that go into a trading plan, Chapter 5 declines to teach back testing properly, and Chapter 15 calls real position-sizing math beyond the scope of the book. He also tells you outright in the introduction that this is 'not about how to pick market bottoms or giving you great trading systems.' The sample plan in Chapter 2 is followed immediately by 'this is a trading plan I just made up, and I have no idea if it works.' If you own the first book you are buying a longer restatement of its central chapter with the technical content still living in the book you already have.
- A large share of the page count is not about trading. Every chapter opens with a joke. There is a sidebar on the Latin origin of the phrase 'a grain of salt,' a sidebar listing joke alternate titles for the book, tangents about the Manhattan bar he owns, a ski season in Park City, his son's preschool tuition, a toddler eating a crayon, and roughly a page in Chapter 16 arguing with a bad Amazon review of his first book. He renames chapters inside the text, cancels a promised chapter ('Have a Reason for Every Trade') mid-book, and writes 'later in the book I'll go over money management plans in detail, I'm not sure which chapter it is yet, just look in the table of contents.' He wrote it across 18 months during which, by his own account, he had largely stopped day trading. Strip the padding and the argument is about 60 pages.
- The specifics are frozen in early 2008, and the routine assumes a market that closes. The live examples are the January 2008 selloff, the Fed's emergency 75 basis point cut, and crude going from $40 to near $100. Margins are stale: he quotes $4,000 for an E-mini S&P contract and $2,000 to day trade it, both now multiples higher, and the micro futures that would actually suit his small-account readers did not exist until 2019. Risk is scaled in 300-point Dow swings against a Dow near 12,000. The proprietary day-trading-firm world he keeps referencing, with computer-imposed lockouts and buying power handed to new hires, has largely disappeared. And his whole loop is built around an after-close review and a pre-open rebuild, at a time when index futures effectively trade around the clock. The process survives all of this. The parameters do not, and he never separates the two.
- It quietly does not work for anyone with a job. The worked accounts are $100,000, $200,000, and $400,000. The routine is an hour after the close, a rebuild before the open, and five risk checks during the session, every day. Link concedes the problem without solving it: he warns that if you are 'busy changing diapers, writing a book' or opening a restaurant your trading will suffer, and his own answer was to quit day trading and stretch his holding period. He never builds the compressed version for someone with twenty minutes and a phone, which is most of the people who will pick this up.
Who it is for
Buy it if
You already have a strategy that makes money and you keep undoing it with trades you cannot explain the next morning: bored entries, moved stops, size you did not plan. You want a document to produce rather than a mindset to adopt, and you have an hour a day outside market hours to run the loop. Among the psychology titles on this shelf it is the only one that treats the problem as paperwork instead of self-knowledge, and paperwork is easier to check.
Skip it if
You are looking for entries, exits, or a system. Link says outright the book contains none and points back to High Probability Trading for the mechanics, which makes owning both largely redundant. Skip it if you already journal, trade off a written risk limit, and place live stops, because those three habits are most of what it installs. And skip it if you want numbers you can lift: these do not agree with each other, and checking them takes longer than deriving your own.
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