📘 I. BACKTESTING – STRATEGY VALIDATION ON PAST DATA

✅ 1. What is Backtesting?

Backtesting is the process of testing the effectiveness of a trading strategy by applying it to historical market data.

You assume that you are trading according to the established rules – and track the results to see how that strategy performs.

For example: You have a strategy “Buy when RSI is below 30, sell when RSI is above 70”. You will apply this strategy on the chart from 2020 to 2023 to see the win rate and profit.

✅ 2. Benefits of Backtesting

✅ Build trust in the trading system → do not panic when the market fluctuates.

✅ Clearly know the win/loss ratio, risk, drawdown → manage capital effectively.

✅ Eliminate emotions in trading → enter trades correctly, not swayed.

✅ Improve the strategy → know when to stick to it and when to optimize.

✅ 3. How to conduct effective Backtesting

Step Content

1️⃣ Choose a specific strategy (with clear entry/exit rules)

2️⃣ Choose the time period and time frame to test

3️⃣ Record the results of each trade: entry point, SL, TP, result, emotions

4️⃣ Calculate the metrics: win rate, average profit, RR, Max Drawdown

5️⃣ Evaluate effectiveness and improve if needed



📝 II. TRADING JOURNAL – A REFLECTIVE MIRROR OF TRADER PSYCHOLOGY

✅ 1. What is a trading journal?

It is the detailed recording of each trade you execute, not only about the technical aspects (where to enter, where to exit) but more importantly, the reasons for entering the trade, emotions, thoughts during and after that trade.

A professional trader will not only ask, “Did I make a profit or a loss?”

But also ask, “Am I following the process correctly? Am I being influenced by emotions?”

✅ 2. What does journaling help you with?

✅ Understand personal psychology when trading: are you anxious, experiencing FOMO, or revenge trading?

✅ Identify bad habits or recurring mistakes → fix them.

✅ Increase self-discipline because you must be responsible for each decision.

✅ After 1 month – 3 months – 6 months… you can analyze your trading style to improve.

✅ 3. What to write in the journal?

Content to record

✅ Date and time of trading For example: 27/04/2025 – 9:30 AM

✅ Currency pair / stock For example: BTC/USDT

✅ Strategies using RSI, Price Action, Breakout, Pullback…

✅ Reason for entering the trade Based on support zones + reversal candle patterns

✅ Entry / SL / TP Position Buy at 62,000 – SL 61,000 – TP 65,000

✅ Result Win / Loss / Draw – How much profit?

✅ Psychology when entering/exiting trades Are you in a hurry? Are you following the rules?

✅ Key takeaways Can you take profits earlier? Have you set a reasonable SL?

💡 III. COMBINING BACKTEST + JOURNAL = TOP TRADER

When you backtest to understand the strategy and journal to understand yourself, you will:

No more worrying about losing a few trades → because you know your system is effective in the long run.

Not influenced by emotions → because you are accustomed to observing psychology and adjusting.

No more trading based on inspiration → because you have clear data to make decisions.

✅ CONCLUSION

Backtesting and Trading Journals are not 'side' parts of trading.

They are the core that helps you trade systematically, make sustainable progress, and rise to a professional level.

🎯 “Trading is not about guessing right – but executing correctly.”

And to execute correctly, you need a system + a self that understands yourself well.

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