Chapter 04 · Risk and the decision to stay
A short review after the session
A review is a comparison between what you said you would do and what you did. It is not a diary of feelings about the index. This chapter gives a format short enough to finish after a session, and a weekly version that looks at the method rather than the trade.
The same evening, four lines
For every order that filled, write four lines before you look at the resulting profit. What was the written reason, copied from the note you made before the order? What did you do, including size? Did the size match the loss limit? What, if anything, did you do that the note did not mention — an early exit, an add, a cancelled stop? The fourth line is the only one that improves anything. A profitable trade that broke the note is a failure of process that happened to be paid. An unprofitable trade that followed the note is a cost the method is allowed to have.
A filled example
| Line | Entry |
|---|---|
| Reason, written beforehand | Weekly chart still making higher lows; wrong if the close is below ₹450. |
| Action | Bought 600 at ₹500. Loss to ₹450 is about ₹30,000. |
| Did size match the limit? | Yes. The limit was one month of surplus. |
| Anything off-note? | Moved the alert to ₹430 in the afternoon because the fall ‘looked temporary’. That edit is not allowed. Restored it after writing this line. |
The profit or loss does not appear in the four lines on purpose. Add it afterwards if you need it for the ledger. If you put it first, the rest of the review becomes a justification of the number.
Once a week, five questions
- How many trades followed the note completely? Write the fraction.
- Of the ones that did not, what was the repeated edit? People have one or two habitual edits, not ten.
- Did the week’s rupee loss, even if later recovered, breach the account limit at any point?
- Was there a trade whose reason you cannot reconstruct from the note? That trade had no reason.
- What will you change next week that is a process change, not a prediction? One change. A list of seven is a wish.
What you are not reviewing
You are not reviewing whether the market was fair, whether a result was manipulated, or whether a method ‘works’ on the basis of eight trades. You are reviewing your compliance with a method. If the method itself is the suspect, that is a separate, slower review, done with a sample you defined in advance, not with the trades that still annoy you. Mixing the two reviews is how a bad afternoon edits a good rule.
What to remember
- Review the note against the orders, the same day, before the profit gets a vote.
- A paid mistake is still a mistake. An unpaid rule is still a success of process.
- The weekly review looks for the repeated edit, not for a new opinion about the index.
- Change one process item, or none. Do not change the method because of the week’s last trade.