My quarterly look back at how my risk per trade drifted

[Fairman]

My quarterly look back at how my risk per trade drifted

every three months I go through my journal and look only at one thing: my actual risk per trade compared to what I'd planned. I'd assumed I'd been consistent. The data said I hadn't.

What I found is that my size drifted in a pattern. After a few wins, it crept up a little. After a couple of losses, it dropped. So my biggest positions often came right after good runs, when I was overconfident, and my smallest came after losses, when I was shaken. Neither was a decision, they were reactions.

The difference was not huge on a single trade, but in total it was a drag. My losing trades averaged a bit larger than my winning ones, mostly due to the timing of the size changes.

Since seeing that, I've fixed the risk in money for each trade, and I check it before every entry. I calculate the lot size from the stop distance, and I don't change the percentage based on how the last trades went. I'll check again next quarter to see if it's holding.

[Fairman]

How I check it in practice. My journal has a column for planned risk in money and one for actual risk, which I calculate from the entry, stop and lot size after the trade. Once a quarter I plot them side by side in order. Any drift jumps out as a wavy line instead of a flat one. It takes about fifteen minutes and it is the only way I have found to see these patterns honestly. Doing it quarterly keeps it from becoming a chore.

[Fairman]

Something I did after this review was make the lot size calculation automatic. I put my risk amount into a small calculator, enter the stop distance, and use whatever it gives me. No adjusting it up or down based on how I feel. It removed the decision completely, and since then my size has been almost flat. I still check every quarter, but there is a lot less to find now. Taking the choice away was the real fix, more than any amount of willpower or reminders written on sticky notes.