Free Trading Tool: Trading Journal

Anton Chigurh: Don’t put it in your pocket, sir. Don’t put it in your pocket. It’s your lucky quarter.
Gas Station Proprietor: Where do you want me to put it?
Anton Chigurh: Anywhere not in your pocket. Where it’ll get mixed in with the others and become just a coin. Which it is.

— From No Country For Old Men

What is something you commonly find with successful traders? They religiously write in their trading journal. What is something you commonly find with unsuccessful traders? Missing, sporadic, or incomplete trading journals. I’m not suggesting that if you journal you will succeed, but I do believe that not keeping a trading journal makes an already tough path even tougher. This week’s free trading tool focuses on trading journals, their importance, formats, and what some pros have to say about these little gems.

It would probably make it a more palatable suggestion if I added that all you need to do is spend 5min a day, jot down some quick notes, and you’re good to go. Maybe that works for some people, but if it does, I haven’t met or talked to them. An effective trading journal is going to require you to keep specific information relevant to you, your performance, and your trading style.

Along with the information, you’ll need to decide (or discover) what type of trading journal works best for you. Some different approaches include a hand-written journal (spiral, etc.), any of the standard writers (MS Word, Open Office Writer, etc.), an online app (Google Docs, etc.), spreadsheet (Excel, OO Calc, etc.), or a blog (Blogger, WordPress, etc.). I know several traders who journal directly on their charts (@FuturesTrader71 uses a similar method). Get a screenshot, add notes and details via Paint or Snagit, print it out, and there ya go. Got a webcam? Do a video trading journal. Got video screen capture software? Add that to the mix too. There are also journal apps available (like iDailyDiary, Trading Journal Spreadsheets, and others). Personally, I like Google Docs (Document and Spreadsheet) plus Snagit.

Like trading or anything else you do, you will need to figure out what format works for you. This can take some time, some trial and error, and in six months you may be using a completely different format for your journal.

Now that you have your trading journal, what do you put in it? Everyone should love this answer: you have to decide what you put in your journal. I know, I know, but it really shouldn’t be surprising. One of the key goals of your journal is to be useful to you. If there are emotional, personality, or psychological elements you feel are impacting your trading, track that stuff. If you believe you really have your mental stuff in check, what do you do really well? Write that stuff down. What about your trading itself? What strengths do you see? Are you a master at position sizing? Managing order entry? Finding reversal points? Going with breakouts? Channel surfing? Write down the stuff you already feel you do well. Ideally, your journal will help highlight or uncover lots of things you do well, things you want to do more of. It’s one thing to look at things you think need improving, but the path of least resistance is doing more of what you already do well.

If you take a few minutes to search the interwebs, you will find several resources on journaling from some highly respected folks in the trading world:

• Dr. Brett(@steenbab) writes about three questions to answer at the end of the trading day. He also shares some ideas on journal formatting and other traders’ perspectives on journaling. UPDATE: Dr. Brett just added this post on trading journals today.
• The Kirk Report reposted a great journal template from Dr. Doug (@DougHirschhorn).
• Joey Fundora (@downtowntrader) shared some thoughts on journaling and a trading edge over at StockTickr. He covers the topic here as well
• For those leaning towards spreadsheeting it, Trader Mike lets you download a free copy of his trading journal spreadsheet. Mike also writes about trading journals here
• You can also find a list of do’s and don’ts for trading journals.
• Mike Bellafiore over at SMB (@smbcapital) also shares some great thoughts on the importance of journaling in his and his traders’ success. How serious is he about trading journals? He lays it out pretty clearly at about 7:30 into the video. UPDATE: Here is part two of Bella on trading journals
• Toni Hansen (@ToniHansen) also shares some ideas on trading journals
• An interesting article on trading journals from the folks at RightLine
• The question of “Why journal?” addressed on Ray Barros’ (@BarroMetrics) blog
• Also came across some interesting journal ideas here, here, here, here, and here

Okay, if you weren’t already on board with trading journals, maybe this collection of professional perspectives can help reframe the topic for you. If you already journal, I hope these resources provide some new ideas or directions you find useful.

An important thing to always keep in mind: How am I separating myself from unsuccessful traders? What things can you do to help stack the cards in your favor? Keeping a detailed journal can be one such tool.

All this brings us back to the quote at the top of the article. It’s from the movie No Country For Old Men, and I think this scene very bluntly parallels the life of a trader. You just made a trade. Win or lose, what are you going to do with it? What will it mean to you? What will you take away from the trade? A journal helps you keep that, and every other, trade from mixing in with all the other trades and become just another trade. Which it is.

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