Too often we hear from struggling traders who ask what they can do to improve their trading. The
questions I always ask in response are, “Did you follow your trading plan?” and “What trades
are, or aren’t, working for you?”. We discuss trading plans in a separate blog post, but a trade
journal is a separate and equally necessary tool in your trading arsenal.
What is a trading journal? A trading journal is a tool used to track every one of your trades.
Using a journal is essential to improving your trading and simply knowing what works, and what
doesn’t work, for you. This applies to your overall strategy, the individual stocks traded, and
even the time of the day. The key is being able to see exactly where you made or lost money.
If you were a baseball coach and you knew one of your players batted .350 against left handed
pitchers and another batted .190, you’d know exactly which player to start if you were facing a
lefty. The same applies to trading. If you have stats from a trading journal to know what works
or doesn’t work, you’re far more likely to repeat winning trades or strategies. Without careful
records there’s no way to know if your strategy is working or not, let alone having the ability
to refine it.
Your journal can be as simple or as complicated as you’d like. There are obvious columns like
the security, price purchased and sold, date purchased and sold, and your profit on the trade.
Other columns are up to you. I would consider a column for the time of the day, stock sector and
a notes section for anything worth remembering about that particular trade. Your note might be
something unusual about the sector, the time of day or what happened after you exited the trade.
The key is to put it down in the journal so that you can learn from your success or failures.
Taking it down to the basics, here is a link to one of the best P/L spreadsheets I’ve seen. It
also has a link to download it if you’d like. I’m attaching it here with permission from Twitter
user @inefficientmrkt https://inefficientmarket.tumblr.com/PandLspreadsheet