Keeping a trading journal

You can set up a trading journal that records plans before trades and emotions during them, and run a short weekly review.

Guess or evidence?

Ask a trader why last month went badly, and the answer is usually a guess: the market was choppy, the news was strange, bad luck. Ask which of their own habits cost the most, and most cannot say.

Memory is a poor record keeper. It favors big wins, forgets small losses and rewrites reasons after the fact. A journal replaces guesses with evidence about your own behavior.

Plan, trade, record, review

A trading journal is a record of your trades that goes beyond the broker statement. The lesson on record keeping covered statements for taxes and overviews. This journal has a different job: it records your decisions and your state of mind, so you can learn from them.

Each entry has two parts.

Before the trade, written before you click:

the setup and the reason for the trade,
entry, stop and target,
position size and risk in money,
how you feel: calm, rushed, bored, frustrated.

After the trade:

the result, in money and as a multiple of the risk,
whether you followed the plan, and if not, what you changed,
one sentence on what you would do differently.

Writing the plan first matters because of hindsight bias. Once you know the outcome, your memory of your reasons changes. A note made in advance cannot.

The journal becomes useful in the trade review: a regular session, for example once a week with the market closed, where you read your entries and look for patterns. Useful questions are:

Which trades broke the plan, and what did they cost together?
Are losses concentrated at certain times, setups or moods?
Did size or frequency rise after wins or losses?

Research supports paying attention to emotions. In a study of 80 day traders, those with more intense emotional reactions to gains and losses performed significantly worse. A journal makes these reactions visible.

Six trades, most of the damage

A fictional trader reviews the last 20 trades, each with a planned risk of 100.

14 trades followed the plan. Together they made 450.
6 trades broke it: two entries without a setup, three moved stops, one doubled size after a loss. Together they lost 780.
Four of the six were taken within an hour of a previous loss, and the journal noted "frustrated" each time.

Without the journal, the month looked like a losing month with an unclear cause. With it, the cause is specific: trades taken right after losses. A rule like "no new trade within an hour of a loss" is a small change that can be tracked over the next month.

Common mistakes

Writing everything afterwards. Then the outcome shapes the reasons. Write the plan first.
Recording only numbers. Feelings and rule breaks often explain the numbers.
Never reading it. A journal without a review is a diary, not a tool.
Changing many rules at once. Change one thing, then check it over enough trades.
Hiding the bad trades. The entries you least want to write are the ones that teach the most.

The takeaway

A journal written before and after each trade turns memories into evidence. The weekly review shows which mistakes repeat.

Check yourself

Quick quiz

4 questions. Instant feedback, nothing is saved.

1Tap the step where the journal turns into learning.

Tap the chart.

Records only help when you read them. The weekly review is where patterns and repeated mistakes become visible.
2Why should the plan be written before the trade?

Hindsight bias rewrites memories. A note made in advance is fixed evidence of what you thought at the time.
3Which entry is most useful for a review?

Profit alone hides the process. The details show whether results came from the plan or from breaking it.
4A review shows that most losses came after 3 p.m. What is a sensible next step?

A journal shows patterns. The response is a small rule change that you then track, not a guess.

of 4 correct.

Sources

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