Quick definition — An entry reason is an ex-ante record that connects a context and observable condition to a plan rule, the intended action, and its invalidation.
An entry reason answers a verifiable question: which information available before the order triggered which rule? It is not a prediction, a justification of the outcome, or a generic label such as “trend,” “signal,” or “looked strong.”
An intermediary can record symbol, quantity, price, and time, but cannot reliably infer the human reason for a decision. The reason therefore belongs in the trading journal and should be linked to execution data rather than replaced by it.
From observation to a verifiable record
What it should contain
| Field | Question | Record |
|---|---|---|
| Context | On which instrument, timeframe, and session am I deciding? | Explicit values, not inferred later |
| Trigger | Which observable condition occurred? | Defined fact, level, event, or combination |
| Reference | Which plan rule authorizes the action? | Rule name and plan version |
| Intended action | What do I intend to submit? | Direction, order type, and parameters already decided |
| Invalidation | What cancels the thesis or prohibits entry? | Observable condition, not “if I dislike it” |
| Risk | Which planned risk am I taking? | |
| Time and evidence | When did I write the record, and what evidence accompanies it? |
Not every method requires indicators or charts. A decision can rely on fundamental data, flows, events, or systematic rules; the requirement is to declare the source and condition consistently with the method.
Fact, interpretation, and action
Separating the three layers makes the note easier to read:
- observed fact: “the interval closed beyond level L”;
- plan interpretation: “rule A treats this condition as a trigger”;
- intended action: “submit order O with invalidation I and risk already defined.”
“Price will rise” confuses interpretation with prediction. “Everyone is discussing it,” “I need to recover,” or “it looks strong” can be recorded honestly as influences or deviations, but they do not identify a verifiable rule by themselves.
An auditable syntax
One possible, non-universal format is:
Context: [instrument, timeframe, session].
If: [observable condition].
Then: [intended action under rule and version].
Do not trade / invalidate if: [condition].
Risk: [reference to the rule].
Recorded: [timestamp and source].
General research on implementation intentions studies plans of the form “if Y occurs, then I perform X.” This format can help make the signal-action link explicit, but it does not prove that a trading setup has an edge or should be executed.
Illustrative, not prescriptive, example — “Contract X, 15-minute interval, plan v3. If the close exceeds level L and condition C remains within the plan's defined limit, then I evaluate order O. No entry if C is absent; invalidation I; risk under rule R. Note recorded at 13:27 UTC.” The example's quality is documentary, not strategic.
When to record it
To treat the reason as ex-ante information, save it before submitting the order. If it is written later, retain the actual timestamp and classify it as a post-entry note or reconstruction. There is no universal number of seconds that automatically turns a late note into a preventive one.
An automated system can generate the reason when the rule and data that triggered the order are recorded deterministically. Even then, preserve the rule version, timestamp, relevant inputs, and any manual intervention.
Classify without rewriting
A simple taxonomy can distinguish:
- planned: the trigger matches the recorded rule;
- planned discretion: the plan permits human judgment, and the note states which elements were assessed;
- deviation: the rule did not authorize the action or a condition was missing;
- not assessable: insufficient ex-ante reason or data.
These categories describe adherence and record quality, not the trade's economic value. Preserve the original note; after the outcome, add a dated review without retroactively correcting the reason.
Operating procedure
- Identify the rule and its version in the trading plan.
- Record context and trigger in observable terms.
- State intended action, invalidation, and risk reference.
- Save timestamp and source before submitting the order.
- Link reason, screenshot, and execution record with the same ID.
- During review, compare note, data, and fills; add conclusions in a separate field.
- Across a trade series, assess completeness and category consistency before attributing meaning to results.
Limitations
- a detailed reason can accurately describe an ineffective rule;
- free text can become inconsistent when names and categories change;
- hindsight wording can make a trigger appear more precise than it really was;
- the record alone does not measure data quality, execution, or unobserved conditions;
- success rate and P&L cannot be inferred from one reason;
- no entry reason is financial advice or a guarantee of outcome.
Sources
- CME Group — Keep a Trade Log — advises recording why a trade was made and details such as targets, entry and exit points, times, levels, and indicators.
- CME Group — A Trader's Guide to Futures — describes defining the objective, risk, exit, and monitoring method before entering a trade.
- CFTC — Understand Risks and Markets before Reacting to Internet Hype — advises developing a plan suited to one's situation instead of following hype and notes that programs cannot guarantee results.
- Gollwitzer and Sheeran (2006) — Implementation Intentions and Goal Achievement — peer-reviewed meta-analysis of “if-then” plans in general self-regulation research; it does not evaluate trading strategies.