Event-Trade Contingency Map
Pre-plan every likely scenario before a high-impact event unfolds
- Difficulty
- Advanced
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 96%
The Event-Trade Contingency Map applies military-style war gaming to high-impact trades. Before a scheduled announcement or special situation, the trader enumerates plausible outcomes, estimates relevant ranges, and decides what action each branch will trigger. Preparation includes not only entries and exits but also invalidation points, position sizes, operational failures, and anticipated emotional responses. When the event occurs, the trader identifies which branch is unfolding and executes the corresponding plan rather than inventing one amid volatility. Some elements can be computerized so responses remain consistent. The framework is especially suited to rare, asymmetric opportunities where extensive preparation is justified by the potential payoff and where rapid improvisation would create excessive risk.
Origin
Extracted from Masters in Business through Schwager’s descriptions of Sal and John Netto preparing for special situations and economic reports.
Core principles
- 01Preparation should happen before volatility arrives
- 02Every major scenario needs a predefined response
- 03Emotional reactions are risks that can be rehearsed
- 04Rare asymmetric opportunities justify deep preparation
- 05Contingency plans preserve objectivity under pressure
How to run it
- 1
Define the event
Identify the catalyst, timing, affected instruments, and reason it may create an edge. State why this event deserves focused preparation.
Pro tip Prioritize events where your information or interpretation is demonstrably differentiated.
Watch out Do not manufacture a trade merely because an announcement is scheduled.
- 2
Build the scenario tree
List materially different outcomes and the market reactions each could plausibly produce. Include secondary reactions and ambiguous results.
Pro tip Use ranges instead of pretending to predict one exact number.
Watch out A scenario tree that omits an adverse surprise creates false confidence.
- 3
Assign actions and limits
For every branch, define whether to enter, wait, reduce, reverse, or do nothing. Set position size, invalidation conditions, and maximum loss in advance.
Pro tip Make the no-trade response an explicit branch.
Watch out Do not increase risk simply because preparation has increased conviction.
- 4
Rehearse emotional pressure
Imagine favorable, adverse, and confusing outcomes and how each may affect judgment. Prepare a behavioral response to excitement, fear, or frustration.
Pro tip Use a brief written script for the moments most likely to trigger impulsive action.
Watch out Visualization does not eliminate emotion; it only makes the response more deliberate.
- 5
Systematize repeatable decisions
Encode objective branches and actions into alerts, checklists, or software where possible. Keep discretionary judgment only where it adds value.
Pro tip Test automated responses with historical or simulated events.
Watch out Automation must include safeguards for bad data and abnormal market conditions.
- 6
Execute the observed branch
When the event occurs, classify the developing scenario and follow the prepared response. Review deviations after the event rather than improvising mid-trade.
Pro tip Pause if the outcome does not fit any mapped branch.
Watch out Forcing an unforeseen event into the nearest scenario can be more dangerous than doing nothing.
In the wild
A trader prepares for a central bank decision by mapping several rate and guidance combinations. Each branch specifies the relevant price range, entry trigger, size, stop, and no-trade condition. The trader also rehearses how to respond if the first market move reverses sharply.
→ When the announcement arrives, the trader executes a predefined response without allowing surprise or excitement to dictate the trade.
Common mistakes
Planning only the expected outcome
A single forecast is not a contingency map. The value comes from preparing for adverse, ambiguous, and unexpected branches.
Ignoring emotional scenarios
Technical plans can still fail if fear, euphoria, or frustration causes the trader to abandon them.
Trading every event
Deep preparation should support a demonstrated edge, not create an obligation to participate.
Is it for you?
Best for
It is best for selective traders preparing for scheduled announcements or other discrete catalysts with multiple possible outcomes.
Not ideal for
It is not ideal for unpredictable events that cannot be bounded into meaningful scenarios or for traders without a demonstrated event-based edge.
From the transcript
“think of every contingency”
“every possible fork in the road on that trade and be totally prepared.”
“anticipating all different types of scenarios as part of the trading plan.”
From the episode
Jack Schwager on the Glory Days of Trading (Podcast)
Jack Schwager