The framework integrates six connected areas: idea generation, fundamentals, technicals, sentiment, risk and psychology. Each stage builds on the last, moving from identifying an opportunity to managing the decision and the behaviour that governs it. The purpose is not to predict markets — it is to build a reasoned, testable thesis and then manage the risk of being wrong.
The framework does not guarantee successful trades. It is an educational structure for thinking about markets and decisions, not a formula for profit.
The stages interact, but the framework is not a rigid mechanical system. Depending on asset class, strategy, holding period, market regime, catalyst and trader methodology, some stages may carry greater weight than others. A discretionary macro trader and a technically led equity trader use the same framework, but they weight its stages differently.
Trade Idea Generation
Identify where a potentially attractive trading opportunity may exist — before deciding whether it deserves capital. An idea becomes stronger only after it survives further analysis.
Trade ideas can originate from many sources — macroeconomic developments, monetary-policy changes, economic data, earnings, corporate developments, valuation dislocations, yield differentials, commodity supply and demand, geopolitical events, technical breakouts, positioning extremes and sentiment shifts. Trade Idea Generation is not the same as deciding to enter a trade. It is the beginning of the analytical process — an idea becomes stronger only after it survives further analysis.
Fundamental Analysis
Understand why an asset may move. Isolate the economic, financial and structural drivers — macro environment, central-bank policy, earnings, yields, supply and demand — most relevant to the market in focus.
Fundamental analysis seeks to understand why an asset may move. It isolates the economic, financial and structural drivers behind the trade idea: the macroeconomic environment, central-bank policy and monetary-policy expectations, fiscal policy, inflation, employment, growth, interest rates, bond yields, earnings, revenue, margins, valuation, supply and demand, and geopolitical developments. The relevant fundamentals differ by asset class — the framework is not Forex-centric.
Technical Analysis
Understand how the market is behaving. Map market structure, trend, support, resistance, momentum and volatility to determine where and when the idea becomes actionable.
Technical analysis seeks to understand how the market is behaving. It maps market structure, trend, support and resistance, supply and demand areas, price action, momentum, volatility, and multi-timeframe structure to determine where and when the idea becomes actionable. Its purpose within the framework is not merely drawing lines on a chart — it helps convert an analytical view into a structured trading decision. Technical-only approaches are not invalid; this framework combines multiple forms of analysis because it is designed as a broad cross-asset decision-making process.
Sentiment Analysis
Understand what the market already expects. Assess positioning, consensus, flows, risk appetite and cross-asset confirmation to determine whether the thesis is already reflected in price.
Sentiment analysis seeks to understand what the market is already expecting. It assesses consensus expectations, speculative and institutional positioning, fund flows, options positioning, volatility pricing, risk appetite, fear and greed, market breadth, cross-asset confirmation, crowded trades and contrarian signals. The distinction between fundamentals (what the underlying environment suggests) and sentiment (what participants currently expect and have already priced) is central. The data matters; the gap between the data and expectations can matter more.
Risk Management
Define what can be lost and what would invalidate the idea. Position sizing, invalidation, stops, drawdown control and portfolio exposure — the discipline that governs whether the trade is worth taking.
Risk management determines whether the opportunity deserves capital and defines how much risk can be taken if the thesis is wrong. It includes position sizing, thesis invalidation, stop placement, monetary and percentage risk, volatility, liquidity, slippage, leverage, correlation, concentration, portfolio exposure, drawdown control, risk/reward, asymmetric payoff and scenario analysis. A stop determines where a position is exited; invalidation defines where the analytical reason for the trade is no longer valid. They may coincide, but they are conceptually different.
Trading Psychology
Execute the process consistently. Discipline, patience, bias management and the ability to distinguish a good decision from a good outcome — the behavioural foundation of the framework.
Trading psychology ensures the trader can execute the process consistently without allowing emotion or behavioural bias to override the analysis or risk framework. It includes discipline, patience, consistency, confidence, overconfidence, fear, greed, FOMO, revenge trading, loss aversion, confirmation bias, anchoring, recency bias, overtrading, hesitation, and adherence to process. A losing trade can still represent a good decision if the thesis was reasonable, risk was appropriate and execution followed the framework. A profitable trade can still represent poor decision-making if the process was undisciplined.
How the Stages Interact
Trade Idea Generation may trigger further Fundamental Analysis. Fundamental Analysis may establish the underlying thesis. Technical Analysis may determine whether price structure supports the thesis. Sentiment Analysis may reveal that the idea is already crowded or fully priced. Risk Management determines whether the trade is worth taking and how much exposure is appropriate. Trading Psychology determines whether the trader can execute and manage the decision consistently.
The stages are connected, but they are not a rigid sequence that every trade must move through mechanically. The framework provides a structured decision-making process — not a checklist. Some stages may carry greater weight depending on the asset class, the strategy, the holding period and the prevailing market regime.
Analysis vs a Trade
A common mistake is to confuse market analysis with a trade. Analysis describes what is happening and why; a trade is a specific, risk-defined commitment to a view. The framework exists to bridge that gap deliberately — so that a thesis becomes a trade only when the risk is understood and defined.
Thesis vs Setup
A thesis is the reasoned view of why a market should move in a particular direction. A setup is the specific price structure that offers an opportunity to act on that thesis. A setup without a thesis is just a pattern; a thesis without a setup is just an opinion. Good trades need both.
Stop Loss vs Invalidation
A stop loss is a mechanical price at which you exit. Invalidation is the level at which your thesis is proven wrong. They often coincide, but they are conceptually different: invalidation is about the reasoning, the stop is about the execution. Defining invalidation first keeps the trade honest.
Position Sizing & Trade Management
Position sizing is determined by the distance to invalidation and the risk you are willing to take — not by conviction or target. Trade management is planned before entry: how the trade develops, when to add, when to take risk off the table. Review after the trade closes is what turns experience into improvement.
A Good Decision vs a Good Outcome
A losing trade can still represent a good decision if the thesis was reasonable, the risk was appropriate and the execution followed the framework. A profitable trade can still represent poor decision-making if the process was undisciplined. The framework is designed to improve decision quality — not to guarantee outcomes.