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TimRacette

Ideas for Building Your Personal Trading Journal

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The main reason people fail at a new venture is a lack of experience. Entering the world of trading, you are up against the best and brightest minds in the world that have years and year of experience on top of you. The #1 tool that can help speed up the learning curve is the implementation and use of a trading journal.

 

"Trade to trade well, and the money will follow."

 

Whether you journal by hand, on the computer, by audio recording, or through video, there is no right or wrong way. The ideas discussed here are simply a template to get you started. Be creative and adapt them to your own style that what works for you.

Establish the End Goal

The first thing to do before creating a journal, before placing a trade, even before picking a market to trade is to pull out a piece of paper and write down your answers to the following three questions.

 

* If you had an unlimited supply of money, what would you spend your time doing, and who would you spend it with?

 

* What will happen to you 20 years from now if you do not learn the skills necessary to become a successful trader or investor today?

 

* Why trading? Given the four basic ways to make money (employee, self-employed, business owner, and investor) why do you want to be a trader?

 

Take some time to think about your answers and reasons behind them. Once you’ve done this you are then ready to create a goal. This trading goal might be something like, “I will make an income of $10,000/mo.” or “I am a consistently profitable trader month over month.”

 

Most people and goal setting workshops will tell you to attach a date to your goals and for most goals that is the case, however with major life goals attaching a date will only set you up for disappointment. Not reaching your goal by that date may deter you from moving forward and many will give up. You must commit to doing whatever it takes no matter what or how long it will take. Don’t let anyone discourage you. This concept applies for any major life goal.

Purpose

 

The purpose of a trading journal is to build confidence in your trading system. When you trade with confidence you are able to trade objectively. By taking detailed notes about your trade setups, emotions as you enter, manage, and exit the trade, accompanying market activity, and profit/loss (to name a few), you are able to break down which things are working and which are not.

 

My Trading Journal

 

Now that you have some ideas on how to begin I’d like to share how I organize my trading journal(s). I use handwritten notebooks for my emotional and daily market summaries and excel for the analytics and market analysis. I have attached the excel templates with examples below, feel free to tweak them and make changes as you like, if you have questions go ahead and leave them in the comments section below as often times many share the same question.

 

I have attached my...

* Trading Log

* P/L Report

* Daily Notes

* Market Analysis

 

Trading Log:

How I use it

 

I use this spreadsheet for recording and tracking the effectiveness of my individual setups. I break out the setup and the win percentage to see what setups are working the best.

 

Things I learned

 

After a few weeks of inputting trades it was really clear that the micro timeframes I was trading were not as profitable and in some cases the only negative trades I was having for the week. The result, I went back and tweaked my entry for these setups and then reduced the number of contracts I was trading for the setup resulting in decreased losses and increased profits.

 

P/L Report:

How I use it

 

Have you made money at the end of the day? This is the bottom line report.

 

Things I learned

 

This report keeps the commission expense in check and helped me see that my biggest days were sometimes the days with the fewest number of trades. It also makes it clear that the month is made up of a few big days and a number of average days. On days when the market is providing quality setup after quality setup I continue to trade, days where the market is slow and I have a couple scratch trades I usually lock in gains that I may have and stop trading by 10:30 CST.

 

Daily Notes:

How I use it

 

This is my go to spreadsheet that I use every day. I began this in a handwritten notebook, but after drawing the same boxes and diagrams day after day I moved it to excel. I have condensed it down over time.

 

In the beginning I would record the market internals every 30-minutes and this was the sheet that kept track of this. I have since added an indicator in my Thinkorswim platform (my charting package) that tracks this for me.

 

Things I learned

 

This spreadsheet acts as a checklist as I fill it out each night for the following day. During the trading day I record my trades on this sheet as well.

 

Market Analysis:

How I use it

 

I record all my market data on this spreadsheet. It may be a little overwhelming at first, but after years of recording this data each night it becomes pretty easy to spot patterns and trend changes.

Things I learned

 

I look to the internals each day to really gauge the strength or weakness of the market. This spreadsheet has helped me uncover very interesting patterns and occurrences that may only happen every few months, but result in big trend changes in the markets. These indicators are talked about in the book Mastering the Trade by John Carter.

 

End of Day Questions:

 

At the end of the day assess your trading by asking yourself these questions.

 

* Did I follow my rules?

 

* Did I take all the valid setups?

 

* Did I hold to my targets?

 

Review the setups for the day and congratulate yourself if you followed your rules, took all the valid setups, and held to your targets. If you do this the money will follow, as I can personally attest to. Since incorporating these journals into my routine back in 2007 I have been able to increase the efficiency of my strategy and continue to become more profitable each year.

 

Being disciplined and keeping a methodical approach has really helped me trade consistently over the years. If you’re interested in more reading on the subject of trading for a living check out Trade Your Way to Financial Freedom by Van Tharp.

 

If you’re not into keeping hand written journals and don’t quite get the whole excel coding thing, Trading Spreadsheets has some great tools for you to setup a journal.

 

I hope by sharing my trading journal you have uncovered a number of ideas to create and build your own. If you have more ideas (as I’m sure I haven’t touched on them all) please share them in the comments section for everyone to enjoy.

 

Thank You!

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For me and my student the process is a bit different.

We begin with supply/demand analysis of charts

Once we have overhead supply and underlying demand in place for our market, we look at the previous day, week and month

We also look at pending economic reports and high impact events

We look at average true range

We anotate our worksheets and develop a set of working numbers that correspond to our suppy/demand analysis. Based on these worksheet numbers and the location of supply & demand we locate our first two trades prior the open of the market.

We trade the market, take our trades and do our P/L

Rinse and repeat

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Very useful post Tim - thank you for sharing in meaningful detail.

Those xls files might or might not be utilised - I won't know until I really try to use them on a daily basis.

 

The way you have set out how to get the best from record-keeping seems to be bearing fruit for you. In my case, my trading has been limited - about 5 trades a week on average. I have had 2 winning weeks out of the past 3 weeks, and I think only by using these electronic aids will I find out if they are going to be my long-term friends.

 

Your three questions dig pretty deep.

 

Thanks again - this is worth bookmarking.

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Oh I completely agree Mystic, I should add into the post that you can solve the problem of trading too big for your account size by limiting your risk per trade to 1% of your total account balance and stop trading after 2 stop outs on the day. That's my philosophy anyways.

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