Price Tag on Rule Violations
Posted: Mon Oct 26, 2026 6:28 am
Price Tag on Rule Violations
A trader flags each trade as clean or flagged for rule violations over 80 trades. Sixty-eight trades were clean, averaging plus 0.30R. Twelve were flagged, averaging minus 0.55R.
Compute. Clean total: 68 times 0.30 is 20.4R. Flagged total: 12 times minus 0.55 is minus 6.6R. Net: 13.8R, or 0.17R per trade overall.
Violations made up 15 percent of trades. They cost 6.6R directly, which is 32 percent of the profit the clean trades earned.
Now consider the counterfactual. Without the flagged trades, the account would have earned 20.4R over 68 trades. Alternatively, if each violation was replaced by a skipped trade, the gain is 6.6R.
Look at the difference in averages: 0.30 minus minus 0.55 is 0.85R per trade. Every violation cost the trader about 0.85R compared with a clean trade, roughly equal to the expected profit of three clean trades.
What patterns would you check? When do violations happen: after losses, late in the day, on particular pairs? What type: oversized, no stop, entering without a setup, moving a stop?
Set a target: reduce flagged trades from 15 percent to 5 percent. At 80 trades, that is 4 violations instead of 12, saving about 5R at the same average.
The best performance improvement available is often not a better strategy, but fewer departures from the one you have.
Exercise: add violation flags to your journal and compute the cost per violation.
A trader flags each trade as clean or flagged for rule violations over 80 trades. Sixty-eight trades were clean, averaging plus 0.30R. Twelve were flagged, averaging minus 0.55R.
Compute. Clean total: 68 times 0.30 is 20.4R. Flagged total: 12 times minus 0.55 is minus 6.6R. Net: 13.8R, or 0.17R per trade overall.
Violations made up 15 percent of trades. They cost 6.6R directly, which is 32 percent of the profit the clean trades earned.
Now consider the counterfactual. Without the flagged trades, the account would have earned 20.4R over 68 trades. Alternatively, if each violation was replaced by a skipped trade, the gain is 6.6R.
Look at the difference in averages: 0.30 minus minus 0.55 is 0.85R per trade. Every violation cost the trader about 0.85R compared with a clean trade, roughly equal to the expected profit of three clean trades.
What patterns would you check? When do violations happen: after losses, late in the day, on particular pairs? What type: oversized, no stop, entering without a setup, moving a stop?
Set a target: reduce flagged trades from 15 percent to 5 percent. At 80 trades, that is 4 violations instead of 12, saving about 5R at the same average.
The best performance improvement available is often not a better strategy, but fewer departures from the one you have.
Exercise: add violation flags to your journal and compute the cost per violation.