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Trading Journal: Writing Things Down Can Offer Profitable Insight

No matter what type of trading journal you choose, taking notes will help you better understand trading and provide insights to improve your trading.

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https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Trading journal: How writing down trading mindsets, gains, and losses can help improve your trading
3 min read

Despite the interconnected world we live in today, trading can often be an isolating endeavor. A trader’s need to process the nonstop streams of data and information that the markets generate can create a type of inner echo chamber, in which thoughts and ideas lose objectivity and bad habits are reinforced.

A simple way for traders to break out of that feedback loop and potentially improve their trading skill is to keep a journal.

Ideas and information can exist in various forms. You can think about something, you can talk about something, and you write something down. It’s the last of these three, however, that’s the most tangible. Write it down!

When you write things down, they’re less susceptible to interpretation when you review them later. It’s easy to convince yourself that what you thought or said two weeks ago was different than it really was, but that’s pretty hard to do when it exists in physical form on paper or the computer screen.

It’s this objective ability to review, analyze, and correct trading mistakes (when needed) that a trading journal facilitates.

Pick a Style That Works for You

There’s no correct way to keep a trading journal. The most important thing is that you do it in a form that works for your trading style, your personality, and that gives you the most benefit.

If you’re a swing trader or a position trader, you might want to take a few minutes after entering a position to write a quick summary covering why you initiated the trade, what was happening in the overall market at the time, and what the trading plan is going forward.

If you are an active day trader, it might not be possible for you to journal about each of your trades as they happen. Instead, you might want to carve out an hour after the close when you can review your executed orders for the day and annotate significant trades.

But more than writing down the technical aspects of trades, try to jot down your frame of mind when you entered them. Did you approach each trade objectively with a sound methodology? Were you anxious about a recent loss or elated from a big win? What was going on in your life outside of trading?

This part is especially important because trading is a mental game, and sometimes we don’t recognize how negative thoughts and patterns affect our ability to be profitable. But when you record your mindset with your trading history, it can help you to understand how the two work together.

The Hidden Benefits of Journaling

About two years after I began trading, I started a trading journal, and there are two distinct ways that I can say it helped me. Keep in mind these are just examples from my own experience, your experience will probably be different, but the concept is the same.

The first thing I noticed when I began reviewing my journals was that I was losing on a higher percentage of trades that were done midday, which makes sense because during the middle of the day, there’s often no trend in the market. So I abstained from the markets during that time and my winning percentages went up.

The second thing I noticed was that I seemed to lose money on certain stocks consistently. Although you would think such a data point would be obvious, it wasn’t to me until I reviewed my journal. Exploring further, I found that the majority of these stocks traded erratically, had wide bid/ask spreads, or possessed some other characteristic that made them less than optimal trade candidates.

Paper or digital, ultra-detailed or in summary form, no matter what form of journaling you choose, it’ll help you to better understand your trading and provide insights to help you succeed.

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