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Making Trading Journals Work for You

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by Brett Steenbarger -  Sep 26, 2005
8.0 (from 23 ratings)

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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Recent Comments:
Quote: Originally Posted by 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,...
commanderco   24-10-2005 18:27:49
Quote: Originally Posted by 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...
SOCRATES   24-10-2005 17:36:28
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...
scrappy   24-10-2005 16:51:08
Quote: Originally Posted by commanderco QUOTE=SOCRATES Though you may not realise it, this journal you keep is not a journal at all Can a House Psychologist wave a magic wand and make the process evaporate in order to exonerate everybody from having to experience it ? Because, if that could be done, all the unsuccessful traders could be made to be successful in an instant. I am very interested to hear (on your behalf, not mine, as I...
SOCRATES   24-10-2005 16:06:56
QUOTE=SOCRATES Though you may not realise it, this journal you keep is not a journal at all Can a House Psychologist wave a magic wand and make the process evaporate in order to exonerate everybody from having to experience it ? Because, if that could be done, all the unsuccessful traders could be made to be successful in an instant. I am very interested to hear (on your behalf, not mine, as I already have the answer) for the benefit of the membership and visitors how this magic wand can...
commanderco   24-10-2005 15:05:39

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