Table of Contents
Trading psychology coach Pat Bailouni sits down for a straight-talk interview on how real traders actually perform: clear rules, expectation-free execution, and a mindset built to survive hype, prop-firm swings, and YouTube fantasies. He’s worked with traders worldwide and distilled years of observations into practical laws that make decision-making calmer and more consistent—exactly what beginners need and pros re-learn.
In this piece, you’ll learn Bailouni’s roadmap: start with a profitable edge, codify it into a mechanical trading plan, and then manage fear and greed so you can actually follow it. We’ll unpack his AIM framework (Awareness, Intention, Momentum), why process beats outcome for compounding skill, how to stay expectation-free on each trade, and why diversification—not guru worship—keeps you in the game. If you’re trying to bridge the gap between “knowing” and “doing,” this strategy primer translates Pat Bailouni’s best psychology rules into steps you can apply today.
Pat Bailouni Playbook & Strategy: How He Actually Trades
Core Edge: Simple Setup, Repeatable Context
Your edge should be boring, visible, and easy to execute under pressure. Pat focuses on a small number of patterns, traded the same way every time, so the psychology load stays light and the results stay measurable.
- Define one primary setup you can spot in under 3 seconds (e.g., pullback to 20EMA in trend or NY session opening range break).
- Trade it on only 1–2 instruments you understand well to reduce variables.
- Decide your market state filter up front (trend, range, or news-driven) and only trade the setup in the state where it historically wins.
- Pre-label A+ conditions (time-of-day, volatility band, location vs. prior day high/low) and skip everything else.
- Write the edge on one page: pattern, context, risk, management, and exit. If it doesn’t fit, it’s too complicated.
Risk First: Position Sizing and Hard Limits
The account survives before it thrives. Pat’s risk framing makes decisions easier because the loss is contained before the trade exists.
- Standardize risk per trade at 0.25%–0.50% of equity; never exceed 1% under any circumstance.
- Daily loss cap = 1.5× your average daily win; hit it and you’re done for the day.
- Use a hard stop at the invalidation level of the setup (not a round number); place it immediately after entry.
- If spread/volatility widens, cut size in half; if it doubles, do not trade.
- Never add to losers. Only add to winners after partial profits lock break-even or better.
Entry Triggers: Mechanical, Not Magical
Entries are mechanical confirmations layered on top of context. This prevents “hunting” for trades and reduces fear-of-missing-out decisions.
- Trade only during your pre-defined session windows (e.g., first 90 minutes of NY).
- For momentum breaks, require both: (1) close beyond the level and (2) next candle holds above/below the level.
- For pullbacks, require a rejection wick plus a close back in trend direction; no wick, no trade.
- If a setup requires more than two conditions to confirm, it’s not your setup.
- Maximum two attempts per level per session; if both fail, the level is “done” for the day.
Trade Management: Let Winners Breathe, Muzzle the Losers
Management rules remove mid-trade second-guessing. The goal is small, frequent paper cuts and the occasional meaningful run.
- After entry, set a first target at 1R to pay yourself 30%–50%; move stop to break-even only after that print.
- Trail remaining size behind recent swing structure or last confirmed higher-low/lower-high; do not trail on the same timeframe as entry if it causes whipsaw.
- If price stalls for N candles (choose 5–8) without progress, scratch at break-even or small green.
- Never widen stops. If invalidated, accept the loss and re-center.
- If a news spike triggers you in, manage on rules, not headlines—either be flat or be systematic.
Psychology in Practice: From Emotional to Process-Driven
You don’t need zero emotions; you need rules that still work when emotions show up. Process thinking makes performance repeatable.
- Pre-market routine (10–15 minutes): mark key levels, write your primary scenario, alternate, and “no-trade” conditions.
- During trade: read rules out loud (or on-screen checklist) before clicking; if you can’t tick every box, pass.
- Post-trade: rate execution (A/B/C) separate from P&L. A losing A-execution is a win; a winning C-execution is a problem.
- If you feel heat (tilt, FOMO), enforce a 10-minute timer before the next trade.
- End-of-day: journal only what you will reuse tomorrow—setup quality, context match, rule drift, and one improvement.
Data Feedback Loop: Measure, Don’t Guess
The account grows when your rules evolve from facts, not feelings. Keep stats that tell you what to trade more and what to delete.
- Track per-setup metrics: win rate, average R, expectancy, and max adverse excursion.
- Segment results by session time, volatility regime, and day of week to find your real edge window.
- Kill or rework any setup that shows negative expectancy over 30+ occurrences.
- Create a “Do More” and “Do Less” list weekly; move one item to each based on the data.
- Rebuild size only after 20 trade samples at 55%+ execution quality (as you scored it), not after one good day.
Timeframes & Instruments: Align the Lens
Clarity comes from a consistent lens. Pick a top-down pair that keeps you aligned and cuts noise.
- Use one higher timeframe for context (e.g., 1H/4H) and one execution timeframe (e.g., 5m/15m); don’t hop around.
- Trade a maximum of two instruments concurrently; if you’re learning, make it one.
- If the higher timeframe is choppy (no directional bias), reduce size by 50% or skip trend-following entries.
- Only change instruments or timeframes after a monthly review, never mid-week.
News & Volatility: Pre-Plan the Risk Spikes
Volatility is both an opportunity and a danger. Treat news as a scheduled weather event, not a surprise.
- Maintain a daily calendar for tier-1 events in your market; if you can’t name today’s risk events, you don’t trade today.
- Flat 2–5 minutes before a major release, unless this is a specific strategy you’ve tested.
- If already in a trade pre-news, pre-define: take partials, reduce size, or flatten—then do it every time.
- On extreme volatility days (ATR > 1.5× 20-day average), halve size and widen the first target to 1.5R.
Scaling and Diversification: Smooth the Equity Curve
Diversification isn’t trading everything; it’s mixing uncorrelated edges or time windows so your P&L is less lumpy.
- Add a second setup only when the first shows 100+ trades with positive expectancy.
- Choose a second setup that works in the opposite regime (e.g., mean reversion in ranges vs. momentum in trends).
- Cap concurrent risk across all open trades at 1%–1.25% of equity.
- If two instruments are highly correlated, treat them as one risk bucket.
Prop-Firm & Rule Constraints: Build Around the Box
Many traders operate under rule-based drawdowns and daily limits. Design your plan so those constraints become allies, not enemies.
- Hard daily stop at 0.8× the firm’s daily loss cap; end the day if hit—no appeals.
- Start each evaluation in “conservative mode” (half size) until +3% equity, then normalize.
- Avoid trading near equity trailing-drawdown edges; if within 1R of breach, stand down for the day.
- Record every prop-rule breach attempt in your journal; the goal is zero infractions, not just passing.
Recovery Protocol: When the Wheels Wobble
Bad days happen. What matters is the speed and cleanliness of recovery, not hero trades.
- After two consecutive rule breaks or three losing days, enforce a one-day timeout.
- Next session: trade micro size (≤0.10% risk) and aim for A-execution, not P&L.
- Rewrite the specific rule you broke in “if–then” language and pin it to your screen.
- Resume normal risk only after two clean A-execution days.
Daily Template: What to Do, Step by Step
Consistency loves checklists. This is the day in a box—follow it and most of your decisions are already made.
- Pre-market (15 min): mark levels, define bias, list A+ conditions, note news times.
- Trade window: take only A+ setups; two attempts per level; log entries in real time.
- Midday: if flat and no A+ conditions, stop scanning—review morning trades instead.
- Close: export stats, grade execution, write one improvement for tomorrow, shut the platform.
Mindset: Expectation-Free, Rule-Full
You can’t control outcomes—only behavior. That’s the shift that turns emotional trading into professional execution.
- Set process goals (followed plan, risk respected, A+ only) rather than P&L goals.
- After any big win, cut the next day’s size by 25% to counter euphoria.
- After any big loss (but within risk rules), run the playbook exactly—no “make-back” trades.
- Speak your rules before you click. If it feels silly, good—you’ll click less and keep more.
Size small, survive long: fixed risk per trade beats ego.
Pat Bailouni hammers home that consistent risk is the adult supervision of your trading. Fix a percentage—say 0.25% to 0.5% per trade—and make it non-negotiable so one impulse can’t wreck months of work. When your stop lives where the setup is invalidated—not where your account “hopes”—you stop bargaining with losses and start measuring an edge. Small, fixed risk forces you to think in R multiples, not dollars, which steadies emotions and makes post-trade review honest.
Bailouni’s point is simple: survival compounds; heroics don’t. If volatility spikes, you reduce size automatically to keep the same account risk, avoiding the trap of trading big when markets are wild. A daily loss cap closes the casino door before tilt walks in, and no averaging down means one bad read stays one loss. With fixed risk, your winners are allowed to scale with opportunity, but your losers never scale with ego—exactly how Pat Bailouni wants you to play it.
Let volatility decide your size, not your feelings or hopes.
Pat Bailouni pushes a simple truth: position size should flex with the market’s mood, not yours. When the average true range expands, your dollar risk stays constant, but your contract size shrinks; when it contracts, you can scale up without changing account risk. This keeps every trade equal in danger, no matter how loud the tape feels. Pat Bailouni frames it as emotional insulation—volatility sets the thermostat so you don’t overheat.
He suggests predefining volatility bands and mapping them to fixed sizes before the session starts. If today’s band jumps a bracket, cut size automatically, and keep the stop at technical invalidation, not a random number. Reverse the logic in quiet regimes, but never exceed your max risk-per-trade rule. With this discipline, you stop guessing and start standardizing, letting volatility govern exposure while you focus on execution.
Diversify by setup, time window, and duration to smooth equity.
Pat Bailouni emphasizes that diversification isn’t trading everything—it’s mixing edges that win in different conditions. Pair a momentum continuation with a mean-reversion fade so one thrives when the other stalls. Add time-window diversification by focusing on your best sessions—maybe the NY open for momentum and the late lunch hour for fades—so your day doesn’t hinge on a single window. Stretch the duration mix too: keep a quick scalp playbook alongside a swing framework, letting slow trends carry weeks when intraday noise is messy.
Bailouni’s rule of thumb is to cap correlated exposure and treat similar instruments as one risk bucket. If two trades share the same catalyst or level, he counts them as a single decision, not two. He also recommends auditing results by setup, session, and hold time to see which combinations actually smooth the curve. With this approach, Pat Bailouni makes your P&L less lumpy, so you can stay consistent even when one style temporarily cools off.
Trade the mechanics, skip prediction: rules-first entries, exits, reviews.
Pat Bailouni wants you to stop forecasting and start following a script. Define your setup, confirmation, stop, and target before you open the platform, then execute exactly what’s written. If the candle closes where it should, you’re in; if it doesn’t, you’re flat—no “gut feel” exceptions. Two attempts per level per session keep you from turning one idea into a binge.
Your exit rules deserve the same rigidity as entries: partial at 1R, trail behind structure, never widen a stop. After the session, review execution first and P&L second—grade whether you followed rules, not whether you got lucky. Pat Bailouni’s bar is simple: if you can’t describe the trade in mechanical steps another trader could replicate, it wasn’t a trade—it was a guess.
Prefer defined-risk decisions; avoid undefined risk and revenge behavior.
Pat Bailouni draws a hard line between defined-risk trades and everything else. A defined-risk decision has a pre-mapped invalidation, fixed position size, and a maximum pain you accept before clicking. Undefined risk sneaks in as “I’ll let it breathe,” moving stops, averaging down, or doubling after a loss to “get back.” Bailouni’s test is blunt: if you can’t state the worst-case loss in one sentence before entry, you’re not trading—you’re gambling.
He also warns that revenge behavior disguises itself as “opportunity.” After a stop-out, the brain hunts for dopamine, not probability; that’s when rules get edited on the fly. Pat Bailouni recommends a cooling protocol—timer, water, quick walk—and a reset trade size so the next decision is small and clean. Keep the stop where the setup breaks, not where your P&L feels better, and end the session if you break a rule twice. Defined risk keeps every loss affordable and every win honest, which is exactly how you stay in the game long enough to compound.
Pat Bailouni’s message lands with refreshing clarity: build a life-proof trading process before you chase outcomes. Start with his AIM framework—get brutally honest about what your actions prove you value (Awareness), define a concrete destination like becoming a consistently funded trader (Intention), then earn it with daily, high-priority execution (Momentum). From there, do the boring work that actually pays: develop a real edge, codify it into a black-and-white mechanical plan, master fear and greed so you can follow that plan, and structure your days to execute it in a balanced state.
He also insists on expectation-free execution—trade what’s on the screen, not the fantasy in your head. That’s why Pat draws a line between intuition and impulse: unless you’ve truly mastered foundations, “intuition” is often just greed wearing a clever mask. For most traders, mechanical rules beat vibes; track whether any discretionary nudge actually improves results before you trust it.
Finally, Pat’s practical skepticism protects your capital outside the chart. Diversify broker risk, keep most funds in safer accounts, and balance the marketing hype by actively listing drawbacks and risks before you commit. It’s the same mindset that birthed his “48 Laws” project: durable psychological principles that lower stress, raise consistency, and keep you trading the plan when others chase wishes.
