30 terms
Trading psychology and journaling glossary
Plain definitions of the habits, measures and routines this blog keeps coming back to, with the arithmetic where there is some. Each entry links the longer reading and, where there is one, the part of Trader Reflect that works with it. For the longer versions, start with the blog.
A
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D
- Discipline scoreA discipline score is a measure of how consistently you follow your own trading rules, most simply the share of trades on which you kept to your plan.
- DrawdownA drawdown is the fall from an equity peak to a later low, measured before a new peak is reached; maximum drawdown is the deepest such fall.
E
- EdgeAn edge is a repeatable advantage that gives a trading method a positive expectancy after costs over a large number of trades.
- Emotional logAn emotional log is a record of how you felt before, during or after trades, kept so that states can be compared with results.
- ExpectancyExpectancy is the average result per trade, usually measured in R, found by adding up all results and dividing by the number of trades.
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M
- MAE and MFEMAE (maximum adverse excursion) is the furthest a trade moved against you before it closed, and MFE (maximum favourable excursion) is the furthest it moved in your favour.
- Mistake taggingMistake tagging is labelling each error in a journal with a short category so that the costliest mistakes can be counted and ranked.
O
P
- Position sizingPosition sizing is deciding how much to buy or sell on a trade, commonly so that the loss at the stop equals a fixed fraction of the account.
- Post-trade reviewA post-trade review is a structured look back at a trade or session that separates the quality of the decision from the outcome.
- Pre-market routineA pre-market routine is a fixed sequence of preparation done before trading starts, covering your state, your plan for the session and your risk limits.
- Process goalsProcess goals are goals about the actions you control, such as following your plan, rather than outcome goals such as a profit target.
R
- R-multipleAn R-multiple expresses a trade's result as a multiple of the amount initially risked on it, where 1R is that initial risk.
- Recency biasRecency bias is giving too much weight to the most recent events when judging what is likely or what works.
- Revenge tradingRevenge trading is entering a trade mainly to win back a loss, rather than because the setup meets your plan.
- Risk of ruinRisk of ruin is the probability of losing enough capital that you can no longer trade your plan, given your win rate, payoffs and position size.
S
- Sample sizeSample size is the number of trades behind a statistic; the smaller it is, the less the statistic tells you about what will happen next.
- Setup taggingSetup tagging is labelling each trade with the named setup it was meant to be, so results can be compared between setups.
- StreaksA streak is a run of consecutive wins or losses; streaks occur in random sequences and say little by themselves about what comes next.
T
- TiltTilt is a state of emotional frustration in which a trader's decisions become reactive and drift away from their plan; the word comes from poker.
- Trading journalA trading journal is a written record of each trade and the reasoning, state and outcome around it, kept so that behaviour can be reviewed and measured.
- Trading planA trading plan is a written set of rules covering what you trade, when, how much you risk, and when you stop, decided before the session.
V
W
Educational content, not financial advice. Trading involves risk of loss.