The daxdesai.com Trader Journal

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In my 8 Tips to Emotionless Investing, I list keeping a trading journal as tip #1. A trading journal requires some work, but enables you to analyze your trades more effectively. Through my trading mistakes and successes I’ve refined my trading journal and compiled my top tips for a good trading journal.

Observe your Best Trades

Make sure the journal includes observations about your best trades. You want to filter out what it is that you do that makes you money. Over time you should be able to replicate those winning tendencies and filter out the losing habits until you are winning becomes a habit.

Measure

Make sure you track metrics. You are measuring your trading and your success.

Some elements I track are:

1. Number of winning and losing trades – When I’m doing well, I have more winners than losers. I track that ratio and try to improve it. It is a good motivator when you can measure your win/loss ratio just as any professional sports team would. When my ratio dips, I reevaluate what I’m doing. When I’m doing better, I try to figure out what I’m doing better and incorporate it into my trading style.
2. Trading time period – I’m most successful as a short-term trader. Through analysis I’ve found I do better by many times when I focus on shorter time periods. I understand that I’m better at short-term trades and I focus on short-term trades. When I see I’m holding stock longer than my norm, I realized I may be going against my trading style.
3. Average Win/Average Loss per trade - In my Fundamental Rules of Day Trading: Preservation of Capital, I note that you want to: sell for small losses, small gains, and large gains. Never sell for large losses. As such you need to track your average win/loss per trade. At the top of my trading journal I have a summary of average win/loss as well as the ratio of win to loss.
4. Capital Gain broken down by long/short term - This tells me if I’m making money on longer term or shorter term trades. In my journal I track the average holding period, then I further categorize the trade as either long or short term. It is important to note which style is more successful for you. You will establish a pattern and will better understand if you are better at long or short term trading.

The trading journal is an important tool for the serious trader. Your trading journal is a training tool. The more time you spend on your journal the more you will understand your performance. Use a trading journal wisely and it could mean the difference between a winning trader and a losing trader.

Below is a screenshot of my trading journal for 1 week. [click on it to enlarge] Over a period of time I drove my average gain up and my average loss down. I also increased my win ratio at the same time. See below on how you can get a copy of my trading journal.

To get your copy of the daxdesai.com Trader’s Journal: Link to this post on your blog or website with the anchor text “High Return Investing with Dax” and I will email it to you.

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