Keeping a Trade Journal

One of the habits I’ve developed over time is keeping a precise record of every trade.  I have logged every trade I’ve taken for many years now, and that record has proven invaluable.  There are lots of reasons to create and keep a trade log.  To name just a few:

• It creates discipline:  Great traders have great discipline.  Trading is a mechanic and the trader most often gets in the way when they have poor discipline and fail the execution.
• It creates routine:  Part of my daily routine is updating the trade log.  It keeps my head in the game and ensures that I execute all of the details of my trading plan.
• It reminds me of the big picture:  Sometimes I have a few losing trades in a row and I think, “Why am I doing this again?”  If I survey my trade log over the past year and see the overall gains it reminds me that a few days of losers is just part of the big picture.  Overall my trading rules win, and my trade log shows it.

And now for the Grand-daddy of reasons to keep a trade log:

• It helps me evaluate my plan AND my execution: 

If I start losing, there are only two reason.  Either I failed the plan, or the plan failed me.  The only way to tell which is the case is to evaluate your trade log against the plan. At the end of each month I run a report showing all of the monthly trades (the same ones we publish on CalculatedReturns.com).  Then I compare those trades with my trade log.  Did I take every trade?  Did I enter at the right prices?  Did I exit at the right prices?  Did I correctly set my position sizes.  If I did all of those things correctly I should have replicated the results of my trading system.  Over the long haul the trading system works, but it’s up to me to execute.

I’ve made a sample of my trade log available to Members and posted it here.  You can take it and use it as is, or you can modify it in anyway you’ve seen fit. By the way, even though I've posted this in Excel I don't use it that way or with any other offline spreadsheet, which you could certainly do.  Instead, I keep it on Google Docs (I’m a big fan) so it’s available to me anywhere.  You can also use Docs offline, so you can get to it when you’re not connected.  Finally, here's a short video that will explain how I use it.

Good Trading…