The journal's process discipline is organized around four cadences: the daily note, the weekly recap, the monthly methodology audit, and the quarterly strategic review. The four cadences together produce the playbook's living-document quality, and the four cadences are the mechanism by which the journal's process discipline is applied consistently.
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The daily note
The daily note is the journal's most frequent process work. The daily note captures the day's trades, the day's market context, the day's structural backdrop, and the day's lessons. The daily note is typically 200-500 words, and the daily note is written at the end of the trading day.
The daily note includes:
1. The day's trades. A list of every position opened, closed, or adjusted during the day. The list includes the structure, the ticker, the entry and exit prices, the realized P&L, and the position's reasoning.
2. The day's market context. The market's behavior during the day, including the underlying's price movement, the realized volatility, the implied volatility, and the key levels (prior day's close, overnight range, key moving averages).
3. The day's structural backdrop. The structural backdrop of the market, including the VIX regime, the sector rotation, the calendar events (FOMC, CPI, earnings), and the technical levels.
4. The day's lessons. The lessons learned from the day's trades, including any playbook rules that were not followed, any playbook rules that need to be revised, and any patterns that are emerging.
The daily note is the journal's source of truth for the day's trades. The daily note is the basis for the weekly recap, and the weekly recap is the basis for the monthly methodology audit. The daily note is also the journal's way of capturing the day's context at the moment the context is fresh.
The weekly recap
The weekly recap is the journal's second-most-frequent process work. The weekly recap summarizes the week's trades, the realized P&L, the structure-level performance, and the patterns that emerged. The weekly recap is produced every Sunday evening, and the weekly recap is typically 1,000-2,000 words.
The weekly recap builds on the daily notes. The recap aggregates the daily notes into a weekly summary, and the recap identifies the patterns that are not visible from the individual daily notes. The recap is the journal's first place where the patterns become visible, and the recap is the basis for the monthly methodology audit.
The weekly recap includes:
1. The week's trades. A list of every position opened, closed, or adjusted during the week. The list includes the structure, the ticker, the entry and exit dates, the realized P&L, and the position's reasoning.
2. The week's P&L. The total realized P&L for the week, broken down by structure and by ticker. The breakdown shows the structures and tickers that contributed the most to the weekly P&L.
3. The week's patterns. The patterns that emerged from the week's positions. The patterns are not always obvious from the individual entries; the weekly recap is the first place where the patterns become visible.
4. The week's lessons. The lessons learned from the week's positions. The lessons are documented so that the lessons can be referenced later and so that the lessons can be the basis for the monthly methodology audit.
The monthly methodology audit
The monthly methodology audit is the journal's deepest process work. The audit is produced the first Sunday of every month, and the audit is typically 4,000-6,000 words. The audit is the only place where the methodology is reviewed against the realized outcomes, and the audit is the basis for the playbook's revisions.
The monthly methodology audit builds on the weekly recaps. The audit aggregates the weekly recaps into a monthly summary, and the audit computes the realized hit rate, the realized P&L, the structure-level performance, and the rule revisions that should be considered.
The monthly methodology audit includes:
1. The month's realized hit rate. The realized hit rate for the month, broken down by structure and by ticker. The hit rate is compared to the expected value at entry; a hit rate that is significantly below the expected value is a sign that the methodology is not working.
2. The month's realized P&L. The total realized P&L for the month, including the transaction costs. The P&L is compared to the journal's monthly target; a P&L that is significantly below the target is a sign that the methodology needs to be revised.
3. The month's rule revisions. The rule revisions that were proposed during the month, with the rationale for the revision and the expected impact on the methodology. The revisions are not automatically applied; they are reviewed against the trade log's historical data and either accepted, rejected, or modified.
4. The month's patterns. The patterns that emerged from the month's positions. The patterns are documented in the lessons-learned article, with the date of the pattern and the rule revision that was proposed in response.
The quarterly strategic review
The quarterly strategic review is the journal's least-frequent process work. The review is produced the first Sunday of every quarter (January, April, July, October), and the review is typically 4,000-6,000 words. The review is the journal's opportunity to step back from the trading and to evaluate the methodology at a strategic level.
The quarterly strategic review builds on the monthly methodology audits. The review aggregates the audits into a quarterly summary, and the review evaluates the methodology's long-term performance, the methodology's edge sources, and the methodology's strategic direction.
The quarterly strategic review includes:
1. The quarter's realized performance. The realized hit rate, the realized P&L, and the realized EV for the quarter. The performance is compared to the journal's quarterly targets, and the performance is compared to the journal's historical performance.
2. The quarter's edge sources. The realized contributions of each edge source: the volatility risk premium, the directional bias, the IV rank signal, and the technical levels. The contributions are evaluated against the expected contributions, and the underperforming edge sources are identified.
3. The quarter's strategic direction. The journal's strategic direction for the next quarter: the structures to focus on, the underlyings to add or remove, the IV-regime rules to revise, and the position-sizing rules to revise. The strategic direction is informed by the realized performance and the realized edge sources.
4. The quarter's lessons learned. The lessons that emerged from the quarter's trading, documented in the lessons-learned article. The lessons are the basis for the next quarter's playbook, and the lessons are the basis for the journal's public communication of the methodology.
The four cadences together
The four cadences together produce the journal's process discipline. The daily note captures the day's context; the weekly recap identifies the patterns; the monthly methodology audit evaluates the methodology; the quarterly strategic review evaluates the direction. The four cadences are the mechanism by which the journal's process discipline is applied consistently, and the four cadences are the basis for the playbook's living-document quality.
The journal's rule for the four cadences is: never skip a cadence. The daily note is the most frequent, and the daily note is the easiest to skip. The weekly recap is the next most frequent, and the weekly recap is the most important for the pattern identification. The monthly methodology audit is the deepest, and the monthly methodology audit is the most important for the methodology's evaluation. The quarterly strategic review is the most strategic, and the quarterly strategic review is the most important for the journal's long-term direction.
The journal's view is that the four cadences are the foundation of the playbook's improvement. The playbook is a living document, and the playbook's improvement is the result of the four cadences' consistent application. The four cadences are the journal's way of converting the daily trading into a feedback loop that improves the playbook over time.