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Trading Journal That Works

The document discusses the importance of maintaining an effective trading journal. It outlines 5 key elements that should be included in a trading journal: 1) Observations about yourself as a trader and the market, 2) Notes on your best trades, 3) A plan for the coming trading day, 4) Specific steps for self-improvement, and 5) Performance metrics to track progress over time. Maintaining a thorough journal that incorporates these elements can help traders discover what they do well, prepare effective trading plans, and continuously improve their process.

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67 views

Trading Journal That Works

The document discusses the importance of maintaining an effective trading journal. It outlines 5 key elements that should be included in a trading journal: 1) Observations about yourself as a trader and the market, 2) Notes on your best trades, 3) A plan for the coming trading day, 4) Specific steps for self-improvement, and 5) Performance metrics to track progress over time. Maintaining a thorough journal that incorporates these elements can help traders discover what they do well, prepare effective trading plans, and continuously improve their process.

Uploaded by

amy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Trading Journals That Work

Brett N. Steenbarger, Ph.D.

www.brettsteenbarger.com

In an article for a trading website that should appear shortly, I review five of the
common mistakes that traders make when utilizing trading journals. My experience is
that few strategies are as promising and few so misunderstood and misused as trading
cle and
make five suggestions for the creation and maintenance of a trading journal:

1. Make sure the journal includes observations about you and your trading and
about the markets themselves
toward self-analysis and include little in the way of market observation. When I

comments on these, pointing out the patterns that I wanted to watch for in the
future. After doing this for months, I sensitized myself to the point where I could
see the patterns emerging in real time. The trading journal is a learning tool and a
great mechanism for training your eye to see the setups you want to be trading.

2. Make sure the journal includes observations about your best trades. As I
emphasized in my book, the idea is to discover the trader that you are when
-criticism, and
market. Over time, you

those success elements, and then rehearse them so that they become habits. The
journal can be a tool for discovery, helping you find out what you do well.

3. Make sure the journal truly prepares you for the coming trading day. Many times
journals chronicle what has happened in the past, but do not include concrete

is an edge the next day, these should be part of the journal. If there are setups that
have been working in the recent market (sectors that are leading your market;
intermarket relationships), these go in the journal as well. The idea, as I
mentioned in the article, is to make your journal your business plan for the day.

4. Make sure the journal outlines specific steps for improvement. It is not enough to

stick with my discipline


(proper setting of profit targets, self-control strategies, etc.) or maintain discipline
(risk management, taking breaks, etc.) makes the journal a game plan for the next
day. Your journal, outl
approach yourself each trading session will allow you to review each day and
see if you met your goals. Such review is an essential step in the kind of
continuous improvement that marks winners across all disciplines.

5. Make sure the journal includes performance metrics. Some of the ones I prefer
are:

Number of long and short trades I correlate this to the trend condition of
g
in a one-sided way in a range-bound market. The number of trades also

Number of winning and losing trades


more winning trades than losers by a reasonably healthy margin. When
the ratio dips for more than a short time period, I need to re-evaluate my
trading and my trading strategies.
Time holding trades -term trader, and I tend to have a
relatively narrow time band in which I hold trades. Moving beyond that
ther cutting trades short or going for home runs and
neither of those have worked for me in the past.
Time holding losing trades versus winners It is very hard to make money
over time by holding losers. Eventually, the size of the losers becomes
greater than the winners so that even a trader who has more winning trades
than losers can end up in the red.
Profit/Loss broken down by long and short trades and broken down by
market condition
movements
my performance is significantly worse in one mode than another, I start to
examine my trading for needed improvements.

-intensive

participating in it. If your journal is a hurriedly scribbled paragraph per day, the odds are

what needs improvement. For full-time traders, trading is a business. The journal is a
business plan. The right plan, executed faithfully, can be the difference between success
and failure in any endeavor.

Brett N. Steenbarger, Ph.D. is Director of Trader Development for Kingstree Trading,


LLC in Chicago and Clinical Associate Professor of Psychiatry and Behavioral Sciences
at SUNY Upstate Medical University in Syracuse, NY. He is also an active trader and
writes occasional feature articles on market psychology for a variety of publications.
The author of The Psychology of Trading (Wiley; January, 2003), Dr. Steenbarger has
published over 50 peer-reviewed articles and book chapters on short-term approaches to
behavioral change. His new, co-edited book The Art and Science of Brief Therapy is a

and trading strategies are archived on his website, www.brettsteenbarger.com

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