Counting the trades not taken

[Fairman]

Counting the trades not taken

A journal records trades taken. It ignores the larger set: setups that appeared and were skipped.

Skipped trades carry information. If the strategy defines a clear entry rule, each missed signal can be logged with its hypothetical outcome. Over time, the record shows whether skipping was prudent or costly.

If the skipped trades would have been winners at the same rate as the taken ones, hesitation is a pure cost. If they would have been worse, the filter that caused the skip is valuable.

Recording a skipped trade takes ten seconds: the time, the pair, the reason for skipping. Evaluating the outcome can be done later from the chart.

Over a month, the pattern is hard to ignore. Many traders discover that their biggest leak isn't bad trades but good ones that never happened.

Last week, how many valid setups were skipped, and what would they have returned?

[Amanhasnoname]

I started logging skipped setups in the spring and it was one of the more uncomfortable exercises I have done. For my London breakout, the skipped trades came out about as profitable as the ones I took. Most of the skips came from hesitation after a loss, not from any rule, so that was money left on the table for no good reason.

The interesting part was that one category of skip really was useful. When I passed on a trade because the spread was wide or the move had already gone more than half the average range, those would have done noticeably worse. So I turned that into a written filter and stopped calling it a feeling.

Last week I had four valid setups I did not take. Three would have been small winners and one would have hit the stop, so roughly plus two R missed. I log the reason in a single word, like tired, spread, late or fear, and after a month the pattern in those words told me more than the numbers did.