Expectations and the big picture
Stop grading days. Grade your last 100 trades
A single day is mostly noise. Moving your scorecard to a 100-trade sample changes how you feel, and how you trade, on any given morning.
Most traders judge themselves daily. Green is a good day, red is a bad one, and the mood follows. The trouble is that a day contains too few trades to tell you anything.
A day is mostly noise
Take a hypothetical strategy with a true 55% win rate and equal wins and losses. Run the numbers:
| Sample | Chance it ends negative |
|---|---|
| 5 trades | About 41% |
| 20 trades | About 25% |
| 100 trades | About 14% |
A trader with a real edge would have a red five-trade day around four times in ten. If you judge by the day, you'll be "failing" for no reason, and that feeling tends to produce the behavior that causes real damage.
The cost of a daily scoreboard
Daily thinking pushes you to fix every red day before the close. That's where forced trades come from. It also makes a green morning dangerous, because you start protecting the number or chasing a bigger one. Both make the next decision depend on P&L when it should depend on the setup.
A better scorecard
Track two sets of numbers.
Every 100 trades, outcome:
- Average result per trade, in R (R is the amount you risked)
- Win rate and average win against average loss
- Largest drawdown
Every day, process:
- Did every trade match a written setup?
- Did I stay within size and loss limits?
- Did I follow my rule after a loss?
Give the day a process grade, A or F, and leave the P&L out of it. A red day with perfect execution is an A. A green day with a broken rule is an F, and it's the more dangerous of the two, because it taught you that breaking the rule pays.
- Calculated from a binomial model at a 55% win rate, equal wins and losses; a break-even sample counts as not negative. Hypothetical illustration.