From the desk · Execution discipline
Executing for a Bank-Bills Trader
A large bank-bills trader recruited me to execute his trades. What stayed with me was the importance of knowing the risk before the trade, while there was still time to decide calmly.
One of the most formative parts of my market education came from executing for a large bank-bills trader. He recruited me to handle his trades, and I had the opportunity to watch how he approached decisions.
The impression that stayed was calmness and process. Entry, exit and size belonged together. Risk was something to understand before the trade, rather than a question to postpone until the price moved against it.
Execution is its own responsibility
A decision to take a position still has to become a transaction. Side, size, instrument and conditions matter. The difference between an intended trade and the actual fill can change the risk. Separating the market view from execution makes both easier to question. Why own the exposure? Then: what exactly is the exposure, and how will it be entered and managed? For a private investor those questions may sit with the same person. They still deserve separate attention. Confidence in the first answer can otherwise obscure a mistake in the second.
From the desk
The recurring lesson from that relationship was to know the risk before taking the trade. The point was the order of decisions: think about the possible loss while choosing the position, not while trying to explain it afterwards.
Make the disagreement manageable
- What exposure is intended, and how is it measured?
- What price, event or time condition would trigger a review or exit?
- What loss is planned under ordinary execution?
- What changes if the exit is worse, liquidity falls, or related positions move together?
For an active trade these questions can lead to an explicit exit process. For a diversified long-term policy they might instead define allocation bands, spending reserves and review triggers. The lesson is not to attach an intraday stop to everything you own.
A level and a size have to be read together
Hypothetical example
At a planned loss of 50 cents per share, 1,000 shares imply $500 before costs. At a planned loss of $1 per share, the same quantity implies $1,000. Maintaining the original $500 planned loss would imply 500 shares, subject to the other constraints. None of these calculations guarantees the eventual exit price.
Changing the exit condition without reconsidering size changes the planned risk. Changing size without reconsidering liquidity can change execution. A wider stop is not inherently more patient. It can simply be more money at risk if the size remains unchanged.
What to do with this
Before the next planned transaction, write its quantity, review or exit condition, planned loss and worse-execution case. If one cannot be explained, record it as an unresolved question rather than fill the gap with confidence.