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Process over outcome

Judging a trade by whether it followed the plan rather than by whether it made money, because good decisions and good results are different things in the short run.

A trade that breaks every rule and wins is a bad trade; one that follows the plan and loses is a good trade. Over a real sample-size, the process determines the outcome, but any single result is mostly noise.

Grading trades on process in the trading-journal keeps recency-bias and hindsight-bias from rewriting the rules after every result.

Example: a trader takes a valid setup, risks 1R, and is stopped out before the stock reverses and hits the target. The journal grade is A for process, -1R for result. Nothing changes.

Related: trading-plan, trading-journal, sample-size, hindsight-bias

Educational only, not advice. Spotted an error? Post in Site Feedback.