A trading journal is a record of every trade you take, written at the time, with enough detail to judge the decision as well as the result. Reviewed once a week, it tells you which setups earn their place in your plan, which habits cost you money, and how close your worst day came to the daily loss limit.
What you will learn
- The fields to record on every trade, and why each one matters later.
- How to convert dollar results into R so trades and accounts can be compared.
- A weekly review routine, worked through on ten example trades.
- How to compare your worst day with the Classic and Direct daily limits.
What to record on every trade
Fill in the journal when you open and close each trade. Entries written from memory at the end of the week lose the details you need later. A useful entry holds these:
- The date and time you opened and closed the trade.
- The symbol, the direction and the name of the setup from your plan.
- Your entry, stop and target prices, and the size in lots.
- Your planned risk in dollars and the result in dollars after costs.
- The result in R, explained in the next section.
- Whether the trade followed your plan, and if not, which rule you broke.
- One line on your state before entry, such as calm, rushed or frustrated, or a score from 1 to 5.
- A screenshot of the chart at entry and another at exit.
Record costs with the result. Simulated trades carry trading costs, as they would on a live account: a commission when a trade opens and when it closes, a price markup on some symbols, and holding costs on positions kept overnight. A journal that leaves them out makes every setup look better than it is.
Measure every result in R
R is the amount you planned to risk on a trade, as lesson 3 set out, so a result in R is the dollar result divided by that planned risk. If you risk $50 and close $110 up, the trade made +2.2R. If you close early $35 down, it lost 0.7R. If the market gaps through your stop and you lose $65, it lost 1.3R, which the journal should flag, because the loss was bigger than planned.
R lets you compare trades of different sizes and accounts of different sizes. A $250 gain on a $25,000 Classic account risking $125 a trade (0.5%) is +2R, exactly like a $100 gain on a $10,000 account risking $50. The risk-reward and expectancy lesson explains why expectancy in R is the number to watch.
The weekly review, worked through
Here is one week on a $10,000 Classic account risking $50 a trade. Setup A is a trend pullback and setup B is a breakout.
- Setup A: +2.0R
- Setup A: -1.0R
- Setup B: -0.5R, closed early
- Setup A: +2.5R
- Setup B: -1.0R, taken outside the plan
- Setup A: -1.0R
- Setup B: -1.0R, taken outside the plan
- Setup A: +2.0R
- Setup B: +1.5R
- Setup A: -1.0R
First, the totals. Four wins and six losses give a 40% win rate. The wins add up to 8.0R, an average of 2.0R. The losses add up to 5.5R, an average of about 0.92R. Net, the week made +2.5R, which is $125 at $50 a trade.
Next, expectancy, the average result per trade. It is the win rate times the average win, minus the loss rate times the average loss: 0.4 × 2.0 minus 0.6 × 0.92, which is 0.80 minus 0.55, or about +0.25R per trade. That matches the net figure: 2.5R over 10 trades.
Then split by setup. Setup A made +3.5R from six trades. Setup B lost 1.0R from four.
Then split by plan. Trades 5 and 7 broke the plan and lost 2.0R between them. The eight trades that followed the plan made +4.5R, about +0.56R each. In this week, sticking to the existing plan would have made a bigger difference than any new setup.
Finally, make at most one change and write it into your trading plan with the reason. Ten trades are too few to judge a setup, so do not drop setup B on this week alone. Wait for a larger sample, such as the 50 trades suggested in lesson 3, before deciding.
Compare your worst day with the daily limit
Your journal should also show your worst day. Suppose trades 5, 6 and 7 all fell on Wednesday: that is -3.0R, or $150. At $50 a trade, the $500 daily limit on a $10,000 Classic account is 10R, so the worst day used 30% of it. On a $10,000 Direct account the limit is $400, or 8R, and the same day would have used 37.5%.
The daily limit is measured on equity, so open positions count. Add a note on how far each trade went against you before it closed. If your worst days keep creeping towards half the limit, cut your risk per trade before the next week starts. The daily loss and max loss lesson covers how the limit is measured.
Check your understanding
1. You risk $40 on a trade and close it $100 up. What is the result in R?
$100 divided by $40 is +2.5R.
2. Over 20 trades you win 9, averaging 1.8R, and lose 11, averaging 1.0R. What is your expectancy?
0.45 × 1.8 is 0.81, and 0.55 × 1.0 is 0.55. Expectancy is 0.81 minus 0.55, which is +0.26R per trade.
3. Why record whether each trade followed the plan?
It separates a weak setup from weak discipline. In the example week, the trades outside the plan were the ones that turned +4.5R into +2.5R.
Key points
- Record each trade as it happens, including costs, your planned risk and whether you followed the plan.
- Convert every result to R by dividing the dollar result by the planned dollar risk.
- Review weekly: win rate, average win and loss in R, expectancy, then split by setup and by plan.
- Check your worst day against the daily limit: at $50 a trade, $500 on Classic is 10R and $400 on Direct is 8R.
Next lesson: From challenge to reward stage
All trading is simulated. Rewards are based on performance and are not guaranteed.