Trading Psychology and Journaling: Following Your Own Rules

Trading psychology is about following your own rules when fear, greed, boredom and frustration push you to break them, and a trading journal is the tool that makes that measurable. By recording every trade with its plan, its result in R, whether you followed the rules and how you felt, you turn vague feelings into data that you can review each week and fix. Most traders already know enough rules; the hard part is following them.

Why good traders still break rules

Your brain was not built for markets. A few well-documented tendencies cause most of the damage:

• Loss aversion: losses hurt more than equal gains feel good, so traders cut winners early to "lock in" a win and hold losers hoping to avoid the pain of realising them. That produces exactly the small-wins, big-losses pattern from Stop-Losses and Risk:Reward.
• FOMO (fear of missing out): chasing a coin after a big green candle, usually far from any planned entry.
• Revenge trading: taking a bigger or unplanned trade right after a loss to win it back.
• Overconfidence after a streak: a few wins make you feel the market is easy, so you raise size just before the next losing streak.
• Recency bias: treating the last few trades as the truth about a strategy, when they are mostly noise.
• Confirmation bias: looking only for posts and charts that agree with your position.
• Sunk cost: "I've held it this long, I can't sell now."

Knowing the names does not stop them. Systems do.

Guardrails that remove decisions

Write these into your trading plan and follow them mechanically:

1. Pre-trade checklist. No trade unless entry, stop, size and reason are written down first.
2. Daily loss limit. For example, stop trading for the day after a loss of 2% of the account or three losing trades.
3. Maximum trades per day or week. It limits over-trading and fees.
4. Cooling-off rule. No new trade for a set time, such as one hour or until the next daily close, after a big win or a big loss.
5. Drawdown rule. If the account falls a set amount from its peak (say 10%), halve risk per trade until it recovers part of the loss.
6. No trading when tired, ill, angry or rushed. Crypto is open every hour; you do not have to be.

The trading journal

Keep it in a spreadsheet or notebook. One row per trade:

Field	What to record
Date and time (UTC)	When you entered and exited
Coin and direction	ETH long
Setup	Which rule triggered it, e.g. "20-day breakout"
Entry, stop, exit	Planned and actual prices
Size and 1R in money	Position value and the amount at risk
Result in R	+2.0R, -1.0R, +0.3R
Followed the plan?	Yes or no; if no, which rule broke
Emotion before and during	Calm, anxious, excited, bored, angry
Mistake tag	Late entry, moved stop, oversized, FOMO, none
Screenshot	Chart at entry and exit
Lesson	One sentence

Recording results in R rather than money lets you compare trades of different sizes and see the real shape of your trading.

The weekly review

Each week, spend 30 minutes on the journal:

1. Total R, win rate, average win, average loss and expectancy.
2. Rule-following rate: what share of trades followed the plan completely?
3. Results split by mistake tag.
4. One thing to keep doing and one thing to change.

Also look at the average loss. If it is larger than 1R (here -1.1R), stops are slipping, being moved or placed too loosely, and that leak deserves attention.

Process over outcome

A single trade's result is mostly luck. A trade that followed every rule and lost is a good trade. A trade that broke the rules and won is a bad trade that will cost you later, because it rewards the wrong behaviour. Grade each trade on process first.

	Followed the plan	Broke the plan
Won	Good trade	Bad trade, lucky
Lost	Good trade, normal cost of business	Bad trade, the one to fix

Handling drawdowns

Every strategy has drawdowns. Before one happens, write down:

• The drawdown you expect, from your backtest. A good rule of thumb is to expect live drawdowns to be worse than the backtest showed.
• What you will do at each level: for example, halve risk at -10%, pause and review at -20%.
• What would tell you the strategy itself has stopped working, versus a normal bad patch. More on this in Risk of Ruin.

Next, step up from single trades to the whole account in Crypto Portfolio Construction and Correlation With Bitcoin.