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Notes from a Newbie: The Trade Journal is your friend

August 5, 2018

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Hey traders and welcome back to yet another edition of Notes from a Newbie. Hopefully, this earnings season has treated you more like Apple and less like Facebook! While it hasn’t been as fruitful as it could have been for me it also hasn’t been that painful either. I am going to end this reporting season with a profit and a whole lot of education. Who knew the market was capable of giving so much low-risk education! There isn’t much more a new trader can ask for right?

Speaking of education, let’s get down to business. So, as I always do prior to writing this blog I went back to do a review of my trading journal in order to look at my past few months of trades and my current trades to see if anything stood out that was worth discussing. As I was going through my review several things stood out to me, so much so that I decided to make this the topic of this week’s discussion.

First off, I cannot express enough the importance of documenting your trading journey. This is something I have always been good at, but what I have learned is journaling and learning to analyze what you’re journaling are two completely different things. Anyone can just fill out a spreadsheet, but what you do after that can be a crucial step in your progress as a trader. Just like stocks develop trends, stock traders do as well. The trading journal is your means to identify what trends (either good or bad) you have. If you ask any coach or mentor for trading advice or mentorship the first thing they are going to ask for is…you guessed it, your trading journal. Why? Because it helps paint a picture of who you are as a trader. And I can tell you studying my own trading trends has been a very eye-opening experience.

Allow me to give you a few examples of what I learned by spending just 10 minutes reviewing my journal tonight.

First off, I learned early on that one of my mistakes keeping my losses small. I was winning more trades than I was losing but my losses outweighed my gains. This was something I needed to fix. I won’t get into my methodology on how I went about this today, but what stood out tonight is that this is something that is still hindering my progress and more adjustments need to be made. While my losses have drastically reduced over the months, I still need to be more disciplined with my stop losses. Without conducting a review, I would have no doubt ably continued thinking my risk tolerance was acceptable.

Another thing it showed me was how I have grown as a trader and learned to trade what the market is giving me. Prior to earnings as volatility and options premiums rose, I had great success leaning heavily on credit spreads. But now that earnings are mostly behind us and volatility has dropped I have placed more directional or debit trades. I didn’t go into the trade looking to trade one strategy over the other, I just found set-ups I liked and that was the strategy that made the most sense to me given the situation. Reviewing my journal has given me confidence that learning is in fact occurring. I may not always place the perfect trade or right strategy for the situation and that’s ok because my journal will be a great reminder the next time a similar set-up arises.

It has helped paint a picture as to what trading strategies have given me the most success and which strategies I need more practice placing, managing, and exiting. An example of this would be the Iron Condor, I have an undefeated record on Iron Condors but have placed fewer of them than any other strategy. Something I probably would continue to overlook if I didn’t analyze my journal. I have always talked about bringing all your weapons to the fight, and I have been leaving poor IC on the bench. I need to fix that.

My point behind all of this is that there is a lot to learn by utilizing a crucial tool that has been provided to us as new traders. Don’t just log your trades because that is what we have been told to do, learn to analyze and understand the story that it is telling you. It can and will tell you a lot about who you are as a trader, how much you have improved, and what you still need to adjust. The only way the journal will lie is if you lie to the journal. The journal is your friend, use it!

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One Reply to “Notes from a Newbie: The Trade Journal is your friend”


    Thanks Randal – I am guilty of journaling and forgetting! I’ll work on analyzing too now.

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