You follow your plan perfectly and get stopped out. The next day you break every rule and make money. Which trade was better?

Process vs outcome

A good trade is one that follows a plan with a positive edge and correct risk. A bad trade breaks the plan. The result of any single trade is mostly random, even when the edge is real.

If you judge trades only by profit, you will slowly start rewarding the bad habits that happened to work and punishing the good ones that happened to lose.

Think in samples

An edge only shows up over many trades. A strategy that wins 45% of the time with a 2R average win will still have long losing streaks. Losing six in a row is normal over a few hundred trades.

How to grade yourself

• Grade every trade A, B or C on how well you followed the plan, not on what it made.

• Review your A trades separately. Their results show your real edge.

• Look for patterns in C trades. That is where the leaks are.

The takeaway

You control the decision, not the result. Focus on making the right decision every time, and let the results take care of themselves over the sample.