Grading Your Passes: Reviewing Skipped Setups Like Real Trades

Skipped: breakout retest. Entry $25, stop $24, target $28. Failed check: earnings inside the holding period. Hypothetical result: +3R.

That’s a journal line for a trade that never happened. It stings to read. It’s also the only way to find out what your pre-trade filter costs you, because the filter’s whole job is to turn trades down, and a journal that records only the trades you took can’t tell you whether the ones you turned down were worth turning down.

What to log for each pass

Treat a pass like an order you didn’t send. Write down the date, the stock, the planned entry, stop and target, and the check it failed. If more than one check failed, write the first one that did.

Then leave it alone.

When the setup has played out, either by reaching the target, hitting the stop or running past your planned holding period, score it in R: -1R if the stop would have been hit first, the multiple of risk if the target was reached, and whatever the position would have been worth at the planned time exit if neither happened. The reward-to-risk ratio is the same measure applied before the trade; here it is applied after.

Score the passes on a fixed day, once a week or once a month. Scoring each one the moment it resolves invites a running tally in your head, and a pass that just ran to its target has a way of feeling like a verdict on the whole filter. A batch of results read together is harder to argue with.

Be strict about the rules of scoring. If the price touched your planned stop before it reached the target, the pass lost 1R, even if the stock later ran all the way to the target and beyond.

Adding up the passes

Take a hypothetical log of ten passes. Six would have hit their stops for -1R each. Three would have reached targets at 2R. One would have closed at the end of its holding period for +1R.

Ten passes would have made 1R between them. For a trader risking $300 a trade, that’s $300 of hypothetical profit forgone across ten decisions, and it comes with six losing trades that would have tested your patience and your account. The filter cost little.

If the same ten had netted +8R, the picture would be different, and the log would tell you where to look.

Reading the log by reason

A total across all passes is the first view. The better one is by reason. Group the passes by the check they failed and total each group. If the passes that failed on liquidity keep coming out negative, that check is earning its place. If the passes that failed only the 2R minimum keep coming out positive across many entries and several different weeks, that one rule may be tighter than your trading needs.

A passed trade that would have won doesn’t make the pass a mistake. The decision was made on what the chart and the calendar showed at the time, and the Skill or Dumb Luck quiz tests the difference between a good decision and a good outcome.

Tighten or loosen one rule at a time

When the log points at a rule, change that rule alone. Move the minimum from 2R to 1.5R, say, and keep every other check exactly as it was, then keep logging both the trades you take and the ones you pass on, so that after enough entries you can see what that single change did. Change two rules at once and you’ll never know which one helped.

The same goes in the other direction. If the passes that failed a check look bad and the trades that barely cleared it look bad too, tighten it.

The filter from the earlier lessons, the size rules and this log make a loop: decide in advance, act on the decision, grade it later, and adjust one piece at a time. Use Green Light or Walk Away to practice the first step on setups described in words, and the stock trading section for more on managing trades once they are open.