How to write trading rules and keep a journal

Most trading mistakes are not about analysis. They come from acting on impulse: trading too large, moving a stop, chasing a move or trading out of boredom. Written trading rules and a trading journal are the two simplest tools for fixing that. This guide shows what to put in your rules, which fields to record in a journal, how to review it and the numbers that tell you whether your approach is working.

Why write your rules down

Rules that live only in your head change with your mood. After a loss it is tempting to trade bigger to win it back, and after a run of wins it is tempting to relax your standards. Writing your rules down before you trade gives you a fixed reference to follow when emotions are running high, and it makes your trading measurable: you can only judge an approach that you apply the same way each time.

Your rules do not need to be long. One page that you actually follow is worth more than ten pages you ignore.

What to include in your trading rules

Section	Questions to answer
Markets	Which pairs or gold will I trade, and which will I avoid?
Timing	Which sessions and timeframes will I use? When will I not trade?
Entry criteria	Exactly what must I see before I open a trade?
Exits	Where does my stop loss go, where is my target and when do I close early?
Risk per trade	What percentage of my account will I risk on one trade?
Limits	What is my maximum daily or weekly loss before I stop trading?
News	What do I do around high impact releases?
Review	When will I review my journal and update these rules?

Many educators suggest risking a small, fixed percentage of the account on each trade, often between 0.5% and 2%, so that a run of losses does not cause serious damage. Our risk management guide explains how to turn that percentage into a position size, and the lot size calculator does the arithmetic for you.

What a trading journal is

A trading journal is a record of every trade you take, with the reasons, the numbers and the result. A spreadsheet works well. Some platforms export trade history automatically, but the most useful parts of a journal, your reasons and your state of mind, have to be written by you.

Field	Example
Date and time	Monday, London session
Market and direction	EUR/USD, buy
Entry, stop and target	1.10000, 1.09800, 1.10400
Position size and risk	0.25 lots, 1% of account
Reason for the trade	Pullback to a support zone in an uptrend
Rules followed?	Yes or no, and which rule was broken
Exit price and result	1.10400, plus 2R
Notes and emotions	Calm, waited for confirmation
Screenshot	Chart at entry and at exit

Measuring results in R

Recording results as a multiple of your initial risk, called R, makes trades of different sizes comparable. If you risked 100 dollars and made 200, the result is plus 2R. If you lost the full 100, it is minus 1R. Over time you can see whether your wins are large enough to cover your losses, whatever your account size.

The numbers to review

• Win rate: the percentage of trades that made money.
• Average win and average loss in R.
• Expectancy: the average result per trade, in R.
• Rule adherence: the percentage of trades where you followed every rule.
• Largest losing streak and the deepest fall in your account.

Expectancy combines the first two. The formula is win rate times average win, minus loss rate times average loss. Worked example: you win 40% of trades with an average win of 2R and lose 60% with an average loss of 1R. Expectancy is 0.4 × 2 minus 0.6 × 1, which equals 0.2R per trade before costs. A positive figure over a large number of trades suggests an edge; a negative one says the approach needs to change. Use the risk to reward calculator to see the break even win rate for any reward to risk ratio.

Small samples can mislead. Ten trades can look excellent or terrible by chance, so judge results over a meaningful number of trades, not a single week.

A simple review routine

• After each trade: complete the journal entry while it is fresh, including a screenshot.
• Weekly: count rule breaks, check your results in R and note one thing to improve.
• Monthly: calculate win rate, average win and loss, and expectancy; look for patterns by market, session or day.
• When you change a rule: write down what changed and why, so you can compare before and after.

Separate two questions when you review: did the trade make money, and did you follow your rules? A losing trade that followed the rules is part of the process. A winning trade that broke them is a warning sign.

Common mistakes to avoid

• Recording only some trades. Skipping the bad ones makes the numbers look better than reality and hides the problems you need to fix.
• Changing rules after every loss. Losses are part of any approach. Change a rule only when your review of many trades shows a clear reason.
• Vague entry criteria. Phrases like "looks strong" cannot be tested. Describe what you need to see in terms you could check on a chart.
• Ignoring costs. Include spreads, commissions and swaps, because they can turn a small positive expectancy into a negative one.
• No stopping rule. Without a daily loss limit, a bad day can turn into a damaging one.

Example of a one page rule set

A beginner focused on EUR/USD might write: trade only during the London session and the first hours of New York; no new trades in the half hour before high impact releases; enter only on a pullback to a marked support or resistance zone in the direction of the higher timeframe trend; stop beyond the zone, target at least twice the stop distance; risk 1% per trade; stop for the day after two losses. It is short, clear and testable, which is what makes it useful.

Trading rules and journal checklist

• My rules are written down and fit on one page.
• I know my risk per trade and my daily loss limit.
• I record every trade, including the reason and my emotions.
• I measure results in R and calculate expectancy.
• I review my journal every week and update my rules on purpose.

Frequently asked questions

What should a trading journal include?

At minimum the market, direction, entry, stop, target, size, risk, the reason for the trade, whether you followed your rules, the result and notes on your emotions.

What is expectancy in trading?

It is the average result per trade. Multiply the win rate by the average win, then subtract the loss rate multiplied by the average loss.

How often should I review my journal?

Complete each entry straight after the trade, review rule breaks and results weekly and calculate your key numbers monthly.

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