A trading journal: separating your plan from your luck

What to record

For every trade, before and after:

• Before — date and time, market and timeframe, the setup, entry, stop, target, size, and why you took it (a screenshot of the chart helps).
• After — exit price and reason, the result in R, fees, and whether you followed the plan.
• One line on how you felt — rushed, bored, angry after a loss. Patterns show up here first.

Reviewing in R

Every few weeks, add up the results in R: the win rate, the average win and loss, the expectancy so far — and, separately, the trades where you broke your own rules. Often the rule-breaking trades explain most of the damage.

How much is luck

Even a good plan produces very different results over a short stretch. Take a plan with a real edge: it wins 45% of its trades and each win is 2R — on average +0.35R a trade, +35R over 100 trades.

Luck and skill — twelve simulated runs of 100 trades of that plan, all with the same edge, ended between +14R and +65R. With this plan, 13% of traders would be down after 20 trades and 1.0% still after 100, and 31% would sit through 8 or more losses in a row somewhere in their 100 trades.

So judge a plan on many trades, and judge each trade on whether you followed the plan — not on whether it won. A good trade can lose; a bad trade can win.

Check yourself · 1 of 3What is the most useful single number to record for each trade?

AThe profit in dollarsBThe result in RCThe price at entry

Show the answer

R makes trades with different sizes comparable and shows whether the plan's arithmetic works.

Check yourself · 2 of 3A plan with a real edge loses money over its first 20 trades. What does that prove?

AThe plan has no edgeBLittle — for the plan above, 13% of traders are down after 20 tradesCThe market changed

Show the answer

Short records are mostly luck. Judge the plan on many trades.

Check yourself · 3 of 3You broke your rules and the trade won. How should the journal record it?

AAs a rule break, whatever the resultBAs a good tradeCIt should be left out

Show the answer

A journal is for finding what you do, not only what you made.

Takeaways

1. Record the plan before the trade and the result in R after it.
2. Review the rule-breaking trades separately.
3. A plan with a real edge can lose for 20 trades and run 8 losses in a row.
4. Judge a plan on many trades and each trade on the plan.

Open BTC in the terminal — the AI Brief is a quick record of the chart when you enter

Further reading

• Binomial distribution, behind this lesson's exact odds — Wikipedia ↗