In the past few days there has been a lot of discussion on The Slope about keeping a trading journal. Here is a very brief examination of the subject. I hope it helps!
I cannot over stress how important it is that the trader maintain a constantly up to date trading journal. Yet most traders do not even have one! A trading journal is NOT just a compilation of entry, exit and net profit or loss for each trade. That is what is in your brokerage statements . Of course, you should also include that information. There are many things that can go into your trading journal and each trader will do it differently. Here are just some ideas of what can be included and they are by no means exhaustive, far from it. Nobody but you will ever see your entries in your journal. Be brutally frank. Use your journal as a vehicle for improving your trading. Here are just a few ideas to get you started.
- – Did I follow my trading plan for the trade? If not, why not.
- - At what point in the trade did I doubt the trade. If so, why
- - What did I do right in the trade
- - Where did I stumble in the trade?
When you make an error, make a statement of correction. An example: I did not honor my stop in the trade according to my trading plan. I moved it NOT according to plan…therefore, in my next trade, I will adhere to my trading plan as to stops. I will place stops and manage my stops according to my trading plan. This will demonstrate that I am a patient and disciplined professional trader.
We ALL make mistakes and errors. Take total responsibility for your trading decisions and outcomes. When an error is made, do not beat yourself up over it. Make the correction and move on as demonstrated in the above example. Attempt to keep it positive. We should learn from our own errors. This is part of how we can improve our performance as traders.
You can also grade your trade. You can use a simple pass/fail. Do not grade your trade according to the trading outcome! Grade it in light of whether you followed your trading plan or not. Here is a more complex grading system and one I use.
A=I followed my trading plan and made good money.
B=I followed my trading plan and made some money.
C=I followed my trading plan and lost some money.
D=I did NOT follow my trading plan and made good money.
E=I did NOT follow my trading plan and made some money.
F=I did NOT follow my trading plan and lost money.
We all want to be A traders, right? That being said, there is nothing wrong with being a B or C trader. Over time, your grade average will increase!
If you can, also take screen shots of your trade and put them in your journal. A picture is often worth more than one thousand words.
Here is another VERY important reason for keeping a trading journal. It can be the very best source for gauging your own trading metrics! Over time, you can discover which are your best trading days of the week and which is your worst. You can find out what hours are your best/worst if you are a day trader. In other words, you can find another edge for yourself. IF Fridays are your worst days, then decide not to trade on Friday or if you do trade on Friday, you may wish to cut down the size you trade.
In summary, if you are NOT keeping a trading journal, you are setting yourself up for trading failure. IF you are under utilizing this tool, you may just be a lazy trader. It is a very simple process and again, I cannot over stress your need to keep a complete trading journal.
Yours in the ever elusive search for trading edges, the Market Sniper