Position inventory rules into surprise geopolitical headline

[LondonScalper]

Headlines don't come with a calendar entry, which is the whole problem. You can be flat into NFP. You can't be flat into something nobody saw coming.

So what I control is inventory: how much I'm holding at any moment, and what happens to it if the market gaps 40 pips in the next minute. My rules are built around that.

Rule one is a hard cap on total open risk. Across all positions, no more than 1% of account equity can be at risk at once, measured to the stops. As a scalper I'm rarely near it, but when I run two or three correlated positions it bites.

Rule two is about correlation. Long EURUSD, long GBPUSD and short USDCHF are all the same bet on the dollar, so for the cap they count as one trade at their combined size.

Rule three is that every position has a server-side stop. Always. A headline can come out while my internet is down or while I'm making tea.

Rule four is what I do when something hits. If the headline is clearly risk-off and I'm long risk, I close at market. I don't wait to see if the stop does the job, because in a gap the stop can fill much further away than where I set it.

Rule five: after a surprise headline I'm flat for 30 minutes on every affected pair, even if I think I understand it. I usually don't, not that quickly.