Trading Journals and Reviews
Record the reason, emotions and result of every trade. After a few dozen trades, the data will tell you which setups really make money and when you're most likely to make mistakes.
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Text version · Risk Management & Trading Psychology, lesson 7: “Trading Journals and Reviews”
Record the reason, emotions and result of every trade. After a few dozen trades, the data will tell you which setups really make money and when you're most likely to make mistakes.
Write down the reason, the mood and the result
A trading journal should record at least: the entry setup, the planned stop and target, your mood when placing the order and the result in R. After a few dozen trades, the data will speak for you.
Review decisions, not just results
Good decisions sometimes lose and bad ones sometimes win. Tally the expectancy by tag to find the setups that really make money and cut the habits that keep losing.
You need a big enough sample
When a type of trade has only five or six examples, the results are mostly luck. Collect at least twenty or thirty of each type before drawing conclusions; with small samples, keep following your original rules and keep recording.
Key takeaways
- At a minimum, a journal records: the reason for entry (the setup), the planned stop and target, how you felt, and the result in R.
- Group trades by tag and calculate expectancy to find your real edge and cut the habits that lose money.
- Collect at least twenty or thirty trades in each category before drawing conclusions; statistics from tiny samples are mostly noise.
- A review looks at the quality of decisions, not just individual results: good decisions can lose and bad decisions can win.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- By entry setup: which setup has the highest expectancy? Which is worst?
- Exclude “News chasing”: what are the total for all trades and the total after excluding, in R?
- Now exclude “Bottom fishing” too: how many trades are left? Is the expectancy positive now?
- Switch to “By mood when ordering”: what's the expectancy of “Chasing losses”? Look at the table: why do these trades often lose more than 1R?
Quiz and explanations
- 1. Your review shows that "impulse trades" have an expectancy of −0.6R. What should you do?
- Answer: Set rules to prevent impulse trades.The value of a journal is finding the patterns that lose money and fixing them.
- 2. What unit is best for recording trade results so they're easy to compare?
- Answer: R (multiples of risk per trade).Measured in R, trades of different sizes can be compared side by side.
- 3. A setup has a 35% win rate, an average win of 2.5R and an average loss of 1.2R. Roughly what's its expectancy?
- Answer: About +0.1R.0.35 × 2.5 − 0.65 × 1.2 = 0.875 − 0.78 ≈ +0.1R. An average loss above 1R means stops weren't respected, and most of the edge got eaten.
Terms in this lesson
- expectancy (Expectancy): What you make per trade on average over the long run: win rate × average win − loss rate × average loss; only worth trading if positive.
- trading journal (Trading Journal): A record of each trade's reasons, plan, emotions and result, used to review and find your real edge and repeated mistakes.