In this lesson
- learn a regular review that takes an hour a month
- compare real results with the backtest
- separate execution mistakes from the swings of the strategy
The journal from the previous course is raw material. On its own it improves nothing – a regular review does. Professional traders do it like closing the books: on a fixed day, using the same template, no matter whether the month was good or bad.
The numbers: compare yourself with the backtest#
Once a month, calculate the same metrics as in the testing module and put them side by side:
| Sample month | Backtest | Reality |
|---|---|---|
| Number of trades | 8 a month | 11 |
| Win rate | 40% | 36% |
| Average win / loss | +2.0R / −1R | +1.8R / −1.2R |
| Result for the month | – | −1.2R |
Sample numbers, not real trades.
What the table tells you:
- More trades than there should be. The strategy gives about 8 signals a month. Where did the three extra come from?
- Losses are bigger than 1R. An average loss of −1.2R means the stop-losses are slipping – through slippage, or because you move them.
- A 36% win rate against 40% means nothing over 11 trades. On such a small sample it is noise.
Pay more attention to results in R than in money. Money changes with the size of the account; R shows how well you trade.
Execution mistakes#
Mark every trade in the journal with one question: did I follow the rules? Then split the results:
- trades by the rules – they judge the strategy,
- trades outside the rules – they judge you.
If the trades outside the rules lose money (and they usually do), you do not have a problem with the strategy. You have a problem with discipline, and that is solved differently – limits, less time at the chart, clearer rules.
A decision is not a result#
A good decision can end in a loss and a bad one in a profit. That is why every trade gets two grades:
| Profit | Loss | |
|---|---|---|
| By the rules | a deserved reward | the normal cost of trading |
| Outside the rules | dangerous luck | a deserved lesson |
The most dangerous box is the bottom left: you broke the rules and made money. The brain remembers that it works – and next time tries it with a bigger position.
A monthly review template#
- Numbers: number of trades, win rate, average win and loss in R, result, drawdown from the peak.
- Comparison with the backtest: are the numbers within the expected range?
- Discipline: how many trades were outside the rules and how did they end?
- Costs: fees and slippage against what the backtest assumed.
- One change: at most one adjustment for next month – in behaviour, not in the strategy.
Do not change the strategy every month
A month is too short to judge a strategy – it is 5 to 20 trades. The monthly review mainly watches you. You decide about the strategy only after dozens of trades – that is what the next lesson is about.
Common myths#
- "The month was profitable, I do not need a review." A profitable month with broken rules is a warning, not a success.
- "I judge in money, that is what I want." Money mixes up the size of the account with the quality of trading.
- "Bad month = bad strategy." First check whether you traded it at all.
Summary
- Review regularly, with the same template, whatever the month was like.
- Compare real numbers in R with the backtest – number of trades, win rate, wins, losses, costs.
- Separate trades by the rules (they judge the strategy) from trades outside them (they judge you).
- A good decision is not the same as a good result.