Wednesday, January 24, 2018

Trading Journal – 8 Ways for Maximum Impact | Trading Psychology



Today’s Trading Psychology question of the day…

“You talk a lot about using a trading journal, but you never really told us how to use it. Can you give us a strategy on how to get started with a journal?”

This is a great question, and you’re right, I talk a LOT about using a journal because it’s such an important aspect of trader development.

In today’s psychology lesson, I’m going to give you a strategy on how to begin a trading journal, all the tools you need, and how to use your journal for maximum benefits for your trading career.

But before I go into today’s lesson, I need to remind you that this psychology lesson is the most recent in a series of videos that I publish every week, and these videos build on the topics we’ve already discussed, so if this is the first video you’re watching, you might want to go back and start from the beginning to get the most value out of these lessons. 

Here’s the link to watch from the beginninghttps://goo.gl/k1F34D

I also want to remind you to subscribe to this YouTube Channel and click the “bell” icon so you get notified every time I post something new…

And if you really want to stay in-tune with what’s going on here at SchoolOfTrade, head on over to our homepage and join the mailing list so you never miss a new video.

Ok, now that we got that out of the way… let’s get into today’s lesson.

The topic of today’s psychology lesson is how to use a Journal to maximize your potential as a trader

Journaling is essential for personal growth and development as a professional trader because it tells us what’s working, what’s not working, what to do more of, and what needs to change.

We can’t make positive changes in our personal and professional lives if we don’t keep track of what we’re doing in a way that’s easy to review at the end of the day, week, and month.

Just like traders look back on previous chart patterns to learn how to trade them, a trader needs to look back on previous activities if we want to improve them as well.

The most effective way to look back at your previous actions is to keep a journal.

The key with this is to document as much as possible using your journal, and then carve-out a certain amount of time each day and week to look back and review what happened.

When you’re new to trading, I would encourage you to write in your journal at all times, include screenshots along with your writing, and review this journal multiple times each day.

As you get more experience, you can dial this back, entering new information in your journal at the end of the day, and then reflecting on your progress at the end of each week.

It all depends on where you are in your trading journey.  The less you know about the markets (and yourself) the more you need to journal, and vice versa.

One of the biggest mistakes we make as new traders is either not using a journal, or even worse, writing in your journal and never investing the time to actually go back and read it!

One important thing to understand is that keeping a journal is not going to make you a better trader, but when you begin to use that journal for reflecting, then you will see its full potential.

In my personal experience, keeping a journal helps me…

·        Identify problem trade set-ups to avoid
·        Identify ways to improve on my best trade set-ups
·        Identify new opportunities that I had never considered before
·        Identify ways to avoid mental “blind spots” that are preventing me from executing my plan correctly each day

An example of this would be…

I use my journal at the beginning of my day to clearly define my plan for the morning session.  I include screenshots of the chart, and then I add updates to the journal as the session develops, including screenshots of each trade, my reasoning for each trade, and a summary of my experiences with each trade.

In an entire trading session, I probably spend 20-minutes total on writing the text and including the screenshots and summaries.  It’s not a very big investment in my time up-front.

The real investment in time comes at the end of the day, when I take anywhere from 30 to 60 minutes to review the journal and write a summary.

The key is writing that summary at the end of each trade and at the end of the day, because then at the end of the week I can use that summary as a way to quickly digest what happened that week, and make changes for next week.

Here’s how I would recommend you use your journal

·        Start each day with a clearly written plan of attack
o   “I see Crude Oil trending lower with two legs down, I have a multi-tiered channel, so I’m watching for selling-opportunities at the mid-line and at the high of the channel, and a target would be the low of the channel or the third leg down.”
·        Include a screenshot of the chart I’m watching at the beginning of the session
o   You can use a free software such as Lightshot or Gyazo, or you can buy software such as SnagIt or Jing
·        Update the journal with each trade you take
o   Provide a written reason of why you took the trade, which specific trade set-up you used, your level of confidence in that trade.
o   Add a screenshot of the trade, making sure that you include enough context in that screenshot for you to truly understand why you took the trade. 
o   Too many people just take this image that only shows the entry, but that’s not good enough, you need to show the full chart so you can actually see the entire set-up before it happened.
o   After the trade is closed, update the journal with the results, and how you feel after the trade. 
o   Was there anything you learned from this trade?  Did you make a mental mistake that needs to be avoided next time?  What was the experience like?  Put that into words as best you can.
·        Finish the trading session with another screenshot and a summary of what happened.
o   Add a screenshot of the entire chart, with all the trades marked-up, and most importantly, take a few minutes to summarize how the day went, if your initial plan was correct, and any important things you learned along the way that can make your job easier next time.
·        Do this each day of the week, you’ll get better each time you do it.
·        End of the week, read all the summaries you have written
o   This summary should be all the little golden nuggets you took away from that week, and use those ideas to make a plan for next week.
·        Use a 3x5 index card to write down 3-5 actionable goals for next week. 
o   If you have more than 3-5 that’s ok, but we need to tackle the most important first, and we don’t have unlimited time and resources, so trim it down to 3-5 so it’s manageable for next week.
o   Keep that index card with you at your desk next week, staring you right in the face, and if possible, share those 3-5 goals with another trader, and ask them to help hold you accountable.
·        The magic behind this journaling technique is that you are documenting everything during the week, serving it up with a summary of all the most important stuff you learned, and then taking action to make those changes for next week in a way that is actually manageable for a REAL human being, because if it’s not relatively easy we won’t do it.

I’ve learned a lot from my journal, and working with over 3000 clients here at SchoolOfTrade

One thing I’ve learned from reading my journal, is that there are times of the day and times of the week when we are at our best and at our worst, and we need to do the most important work during those times.

For example, I know that if I don’t capture my notes during the trading session, I can’t recall them as well after I’m finished, so It’s important for me to write and grab those screenshots during the session.

I’ve also learned that if I don’t write that summary at the end of the day I won’t go back and read ALL the week’s journal on Friday because I’m just too mentally exhausted from the week, so the summary is critical to make it all come together.

I’ve also learned that after I read the summary, the best thing I can do is identify the top 3-5 things I want to do more/less of next week, rather than just trying to remember it all.  Keep the list small and focused on the top 3-5 things you want to improve, don’t get make that list too long or you won’t do any of it.

I’ve also learned that my clients, when they use a journal, they almost always improve at a much faster rate than my clients who do not. 

This is interesting because it clearly illustrates that I can teach the same strategy to 100 people, but it’s how they deal with adversity along the way, and how they identify and overcome their mental “blind spots” that truly creates a successful trader.

I’ve also seen that when my clients over-trade, journaling becomes much harder because there is so much to do.  When they trade less often with more potency, journaling is much easier, which is a clear indicator that you’re doing something right.

Your journal is going to make it easy for you to see patterns.  Patterns in your trading, and patterns in your decision making.  Both of which are essential to keep improving, but it takes a little while to see those patterns when you begin.

I’ve seen that it takes a few weeks of journaling to REALLY start seeing the benefits.  Just like exercise, at first you don’t see much improvement, but then all of a sudden it kicks-in and you can clearly see results.  The hardest part is getting started, but once you get into the routine, it becomes a lot easier.

I’ve seen my clients use journals in SO many different ways.  I can teach you my way, but I can almost guarantee that you will adapt that to better-suit YOUR style of trading and journaling, which is great!

I’ve seen proof that setting trading goals without the use of a trading journal is like planning a vacation and then never buying the plane ticket.  In other words, A goal without a journal is just good intention, it’s a happy thought, but you’re lacking the vehicle you need to activate change and get you where you want to go.

One thing I’ve learned about coaching traders is that most of us want to be successful, we want to learn trading, we want to learn the patterns and earn the money that comes with it, but many people don’t see the value in understanding themselves and how their small actions and decisions are impacting their ability to do their jobs correctly. 

In other words, most traders are motivated to earn the money, but not motivated to do the little things it takes to earn the money.  Anyone with a drop of trading experience knows that you can’t have a successful trading career if you don’t have a knowledge of both the markets and ourselves.

The best traders in the world make it a priority to keep improving themselves, not just their trading.

In coming lessons, I’m going to go into more detail about how to use your journal to keep improving, but for today, your homework is to get this journal started, which is always the hardest part.

It’s going to feel like you’re wasting your time because it’s not looking at charts, but soon it will get easier, become routine, and you will start seeing those patterns I mentioned earlier.

We’ve covered a LOT in this psychology lesson, so let’s do a quick recap.

Using a journal is extremely important for a successful trading career because is helps us identify patterns in our trading and in our decision making each day.

With that information, we can take actionable steps to keep improving.

It can be hard at first, but making it a routine, and sticking to it will yield the best results.

You don’t need very much to start journaling.  You only need a word document, screen-capture software, 20 minutes of your time each day, and about an hour each week is all you need.

The key is using your time wisely.  Document everything during the day, and write a summary.  Then review those summaries at the end of the week, and create a short list of goals for next week.

Do this for a few weeks consistently and you will start seeing those patterns, and there is GOLD in those patterns, even though they don’t involve candlesticks.


In the coming lessons, we’re going to discuss more ways to use the data you’re seeing in your journal, because knowledge is power, and the power to improve your trading is worth the time invested.

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