Keeping a Swing Trading Journal

trading journal

A trading journal is like a vegetable. We know we need it but we don’t partake enough.

Committed traders keep track of progress and there is no better way to do this than a trading journal. On the surface a journal helps evaluate performance but applied properly it should go much deeper than the results.

A trading journal is a checklist for measuring execution. It’s a friend to be accountable to. Long-term results are driven by each action-from strategy to stop-loss. Documenting your ability to follow your plan is crucial to success. It’s crucial in the pursuit of consistency.

Trust me that I am not using the word crucial, lightly.

What a Trading Journal Is Not

The word “journal” gets a bad rap. We tend to think of it as a notebook to jot down ideas that pop into our head. We picture the nostalgic and dog-eared book someone like Indiana Jones would carry.

Without guidance, many traders mistakenly document “what they traded and what the result was.” This is like writing an article about a baseball game that was nip and tuck for nine innings and you only say the score and who played. “Mets beat the Cubs 3-2.”

You want your trading journal to come alive with depth and meaning: “Today’s game had great pitching, and great defensive plays, and the winning homerun hit the top of the fence popped three feet in the air and eventually landed in the visitor’s bullpen to end the game in dramatic fashion.”

Your trading journal is not a place to write a simple recap.

What a Trading Journal is (Or should be)

A trading journal is the most important trading book you will ever read.

A trading journal is a place to gather valuable information on yourself. But gathering information is not enough. You need to measure and track your performance so you can improve.

If it isn’t tracked, measured and analyzed you can’t improve. Trust me when I tell you we all have selective memory. Write the details so you have the truth for review. I have seen it play out over-and-over where the reason for the trade and trade management were not in sync.

This is where the journal is gold. You want to document the “reason why” you did everything from start to finish and whether or not is was the correct action, and how to improve.

Elements of a Well-Written Journal

From the star think of your journal as a manager you are responsible to. Make it a place that holds you to high standards and the flawless execution of your plan.

Here are some must-have elements:

Why the trade was made: This is probably the most important entry because nothing else matters without a good idea. This helps tremendously because you are committing to admitting the quality of the idea. I say admitting because we are prone to convincing ourselves a mediocre idea is good. Writing it down makes it a little more difficult to admit.

The security you bought or sold-short: Aside from the obvious reason, this also helps you be disciplined in your selection. Often we can stray from stocks that match our risk tolerance.

When you made the trade: Documenting timing and the entry signal is important to track your patience. May traders enter too soon for fear of missing a coming move. Poor timing can lead to unnecessary risk because you were not patient to get the right price. Risk/reward is skewed from the start even though the idea is valid.

Targets: Documenting both your stop-loss and profit targets are crucial to risk management and profit discipline. If a trade is working well it is imperative you hold until your analysis tells you to exit for a profit.

Trade Management: If the reason for the trade is peanut butter, trade management is jelly. A good idea poorly managed is why most traders never get past break-even. Ten traders can enter the same trade and you will most likely see ten different results. Being truthful in your trade management is the greatest gift you can give yourself. To put it clearly, this is where success or failure is found.

Trading Journal Review

Scheduling time to review your journal is just as critical as writing it.

Discipline is often associated with executing a stop-loss. How about discipline to keep a journal and review it? Over the years I have often heard the excuse “I don’t have the time to keep a journal.”

My answer? “You don’t have the time to write down how you plan to be successful? If you believe that then you will soon have all of the time in the world to think about why you aren’t trading anymore…”

Many traders don’t bother crafting a journal. Many traders struggle and fail.

Coincidence? I think not.

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