By keeping accurate records of your trading habits, you are creating a wonderful tool for looking back in objective reflection, and recognizing problem areas. It is especially helpful if you are struggling with your trading and don't know exactly where you are going wrong, or if you are caught in the stop-blowing pattern.
By looking for common denominators in your bad trades, you can learn where your weaknesses are, and which type of trades you may be better off avoiding. It will also become much clearer to you where your strengths lie, and which types of trades best match your abilities and personality. The idea is to do more of what works, and avoid what doesn't. That may sound simple, but many times that really doesn't become clear until you have gone over your records and done some reflecting. You may find out things about your own trading that surprises you!
The more complete your journal is, the better a tool it becomes. Obviously you want to include the information of entry price, exit price, and the outcome of the trade. But the information that will really help you the most will be things like your expectations for the trade, the patterns you were working with, and how the outcome compared to your expectations. You will also want to record the reasoning for your trades, your thoughts at the time, and how you felt about the trade. In these kinds of journal entries is where you will find the true jewels of information. Many times, re-reading those passages, you will find light bulbs suddenly going on.
I generally keep my journal in a spiral note-book sitting next to me for easy access throughout the day. It is messy and full of whatever insights or thoughts occur to me at the time. Personalize yours to meet your needs.
As always, let me know if you have any questions or need any help.
Shawn Klug aka Gimmie firstname.lastname@example.org
Date – (self-explanatory)
Stock Symbol – (self-explanatory)
Sector – (self-explanatory)
Level of Play - (1. Observation, matching criteria to trade 2. Paper Trade using realistic paper
trading technique 3. Real Trade, small # of shares 4. Real Trade, larger # of shares)
Long or Short - (self-explanatory)
Type of Play – (First Day News Gainer, Second Day News Gainer, First Day News Dumper,
Second Day News Dumper, Open Short Pre-market, Open Short First Top, IPO, Breaking News
Play, Continuing Momentum Basket Stock, Small News Stock, etc.)
Expectations for the play – (50 cent climb based on patterns, indicators and macro-momentum;
Small scalp with no known upside target; Fall from open based on current patterns of second
day gainers and current macro-momentum; Climb from the first bottom based on current dumper
patterns; Break out from current price based on increased pace of buying as news began
receiving attention; Direction change at a double top or bottom; Climb or fall from pivot, support,
or resistance, based on macro-momentum and indicators. Whatever your reason, the point is to
Potential Reward, Target Price – (rough target)
How did I arrive at that target? – (based on recent patterns, average 5 day range, market
momentum, next support/resistance barriers, etc)
Potential Risk, Stop Price – (self-explanatory)
How did I arrive at that stop? - (based on previous support/resistance, low or high of day, etc)
Risk vs Reward – (is that ratio reasonable enough to justify the trade?)
Entry Time - (Pay attention to the time of day in relation to high percentage trading times)
Entry Price - (self-explanatory)
Exit Time - (self-explanatory)
Exit Price - (self-explanatory)
Outcome of the Trade – (Stopped, Gain, or Loss)
Were my expectations met? (Yes or No)
If not, why do I think that is? What went wrong? (I didn't have my expectations clear in my mind.
The trade became an exception. I was incorrect about the market momentum direction. I failed
to look for potential: I failed to look for active pace. Slow time of day. Pace did not match my
abilities, I mis-read the bottom. I chased. I hesitated and waited too long to exit. My executions
were too slow. Pattern changed, etc)
How did I feel about the trade? (I made a good gain and I feel great! I blew my stop against all
better judgement and I am disappointed in myself. I do not understand why it went against me
and I am confused. I made a gain but I am still confused about how. I played an IPO even
though I know better and I am kicking myself. I played a fast, wide-ranging stock with too many
shares and it was impossible to keep less than a 50 cent stop and I am not going to do that
again. I was having a fight with my spouse and my judgement was altered. I was under the
influence of cold medication and my reactions were slow. Anything that pops into my head at
If I am met with a serious loss, blown stop, or more than three stops in a row, I will take one
step back in the level of play, reflect on my journal, and not continue forward until I know the
reasons for my errors and feel capable of confidently moving forward again.