Making Trading Journals Work for You

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Brett Steenbarger

26 Sep, 2005

in Psychology and 1 more

Here are my favorite trading metrics for active traders:

  • Number of winning, losing, and scratched trades;
  • The average size of winning and losing trades;
  • The average holding time per trade, and the average holding time broken down by winning, losing, and scratched trades;
  • The number of winning, losing, and scratched trades broken down by long and short positions;
  • The number of winning, losing, and scratched trades broken down by time of day;
  • The average holding time per trade for long and short positions and broken down by time of day;
  • The number of winning, losing, and scratched trades for days categorized as uptrending, downtrending, and neutral;
  • Daily profit/loss, also broken down for days categorized as uptrending, downtrending, and neutral;
  • The sequences of winning and losing trades during a day and from day to day;
  • The largest winning and losing trades during a day and during a week;
  • The largest winning and losing days during a week and during a month.

Less frequent traders can keep these statistics manually.  Very active traders will benefit from programs that automatically capture trade data and summarize performance, such as Trader DNA (www.traderdna.com).  The data provide very helpful benchmarks that allow traders to diagnose problems and track improvement. 

Here are a few of the areas for improvement that commonly emerge from statistical analyses of performance:

  • Holding onto losing trades as long or longer than winners;
  • Trading with a persistent long or short bias that is not supported by market trends;
  • Significantly different profitability during morning vs. afternoon trading hours;
  • The tendency to have strings of winning and losing trades;
  • Significantly different profitability during different market conditions, such as trending markets or volatile ones;
  • The tendency to give back the results of many profitable trades in a few large losing ones.

When you combine rigorous metrics with a multimedia journal, the result is the kind of ongoing quality improvement process that typifies the finest business organizations.  The best trading journals are technologies for learning and self-improvement.  This takes time, effort, and creativity, but the results are worth the investment.  

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scrappy
Agreed that a psychologist cannot make a unsuccessful trader into a successful trader.
Can a successful trader make an unsuccessful trader into a successful trader. By successful trader i am referring to someone who is not part of the ring fence and does not need to make a living by teaching people how to trade. (Supposedly).

I had for sometime in my early days moved around the ring fence, trying to find someone who could show me the holy grail. It was only when i was mentored by a trader (who charged no fees for his help) that i realised the holy grail is within me.

Excellent posts Commanderco.


Scrappy,
I imagine that a successful Trader can help a novice Trader "tune up" their act.
Just a thought here and there opens up the doors of our minds.
The "grunt" as always comes from the Learner.

Oct 24, 2005

Senior Member (362 posts)

scrappy
Agreed that a psychologist cannot make a unsuccessful trader into a successful trader.
Can a successful trader make an unsuccessful trader into a successful trader. By successful trader i am referring to someone who is not part of the ring fence and does not need to make a living by teaching people how to trade. (Supposedly).

I had for sometime in my early days moved around the ring fence, trying to find someone who could show me the holy grail. It was only when i was mentored by a trader (who charged no fees for his help) that i realised the holy grail is within me.

Excellent posts Commanderco.

I am pleased to hear of your success.

Are you a psychologist, Scrappy ?

I am waiting for a psychologist to answer my questions that I posted above, and not a successful trader, but thanks all the same. Let us wait and see....

Oct 24, 2005

Member (4967 posts)

Agreed that a psychologist cannot make a unsuccessful trader into a successful trader.
Can a successful trader make an unsuccessful trader into a successful trader. By successful trader i am referring to someone who is not part of the ring fence and does not need to make a living by teaching people how to trade. (Supposedly).

I had for sometime in my early days moved around the ring fence, trying to find someone who could show me the holy grail. It was only when i was mentored by a trader (who charged no fees for his help) that i realised the holy grail is within me.

Excellent posts Commanderco.

Oct 24, 2005

Member (41 posts)

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