Trading Journals and Trading Plans - Starting Anew

As a full-time day trader now for nearly seven years, I know how much better, easier (and successful) trading life can be when you abide by your own personal trading plan, and have a means to record, track and analyze every move you make.

Just recently, I was asked my recommendation on whether or not I would start my trading journal over as we were approaching the new trading year. Here was my (edited) response...

There is no imperative need to start another new sheet (or journal), especially if you have been diligently analyzing your trades and adjusting your trading plan from the findings of your results. If that task is up to date, then I would tell you to keep doing what you're doing and keep adding crucial data to the same sheet (or journal) you've been using. If you have not been keeping up with regular intervals of trade analysis, and you'd like some ideas for adjusting or fine-tuning your journal analysis, then please keep reading.

Let's first remind ourselves of why we are keeping a trading journal in the first place.

This trader is using the Trading Journal Spreadsheet^TM, so it will be assumed that whatever program the reader is using, also tracks various performance-tracking segments to analyze overall performance.

Since analytical stats should all work synergistically with one another, monitoring these stats over time would allow the trader (or in this case, the trade-tracker) the following benefits:

Discover correlations
Maintain successful Strategies and Tactics
Identify unsuccessful Strategies and Tactics
A means to confirm consistency of results and performance
Recognize Mistakes and Errors that are causing present-day losses - unlocking future profits
A warning that something is wrong, when your ratios vary significantly from historical averages
and of course... Improve on this knowledge!... by periodically adjusting your business/trading plan

With the New Year (2011) come new expectations, new goals and a chance to reflect on the changes that we need to make going forward. If your plan has changed enough so that the information in your current spreadsheet or journal program is no longer valid, you may want to start anew, while taking the information you've gleaned from the prior sheet and using it to modify what you will (or will not) do... going forward.

Note which of your Performance-tracking categories had a positive expectancy and add those to the new sheet (or journal). For those categories that did not produce a positive income, look at those specific trades to find if there was a common denominator that produced the net losses that you incurred. If using a spreadsheet, you can use the Auto-filter feature, sorting just those specific trades, then reading your entry and exit notes, looking for similarities that brought on the losses.

Better yet, if you hyperlinked (or saved hard copies of) the charts of each trade, compare your notes to what really happened on the charts, and especially make sure you compare them to the notes of your trading plan. I try to review all of my trades about a week after they occurred, when the trade is long over and any emotional biases of subsided.

Did you follow your plan? If you did, and the majority of these trades brought on a negative expectancy, then you'll need to take action. Again, try finding the common denominator that brought on these losses.

Did you consistently...

Enter too soon
Enter too late
Take on bad (Reward-to-Risk ratio) trades
Take trades that were really not in your Trading-plan
Place your stop too tight
Initiate trades with too many (or too little) Shares, Contracts or Lots
Take on too much risk
Etc...

If there is no real common denominator, then maybe these type of trades really don't fit your trading style, your personality or you may just not truly understand the concept of why you took these trades in the first place. Further study on the specific dynamics involved with these trades may be needed.

I have been known to make this mistake in the past, taking trades that were written up in a newsletter service or chat room, or called out by a participant (or even a moderator) in a trading room - that I just didn't understand - but took them anyway hoping for the same results. Those trades rarely (if ever) work out the same for you or me, as they do from the source that they came from. These trades must be in (your) trading plan, and (you) must understand the concept behind them, before you can trade them!

Did you not follow your plan? Now is the time to reflect and remember why your plan is so important. It is a means of keeping yourself honest, consistent and even-tempered during the heat of the battle. Your plan should tell you what to do in any situation, so now is a good time to adjust it accordingly. Remember, eliminating losses and mistakes that could have been saved by a detailed plan of action, equates to future profits!

About the Author:

Would you like to learn more about how I've been tracking and analyzing my trading progress over the years? Visit http://trading-journal-spreadsheet.com/ to view all Trading Journal Spreadsheet^TM products created for all Stock, Forex, Futures, Options, Spread Betting, CFD and Pairs traders. Today is the day you should start recording and analyzing your success and building your decision-making confidence.

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