Your best trading book is your own trading book: four steps to making it real

There are a few practices that consistently separate winning traders from the losers. True, there is an incredible diversity of winning strategies, approaches, and personalities, and winning traders do and act in very different ways. However, we when look at and talk to consistently profitable traders, we start to see a few common threads. There are some things that winners do that losing traders often ignore. Keeping a trading journal, of some kind, is one of those practices.

As I was thinking about this topic, I received a question from a reader, Brijesh. To paraphrase the question:

What should go into a daily trading journal?

  • should it just narrate the day’s activities like “price opened slightly higher than yesterday’s close and then it closed lower forming a down trend bar”?
  • should it include my [the trader’s] thought process which went through during the day while seeing the price and/or also after seeing the closing price?
  • how to see the last bar in the context of previous bars? Should I look at range of the bars or a doji bar in context of earlier bars?
  • Does it really help to evaluate each bar on daily timeframe (except the sigma spike types bar) if you are swing trading? Or I am just analyzing the noise but if bars seen together will make sense?

Of course as you have mentioned in many of your blogs/videos/book [and also my most recent podcast!] the market structure/context plays an important part. But while noting down in my trading journal, I am not sure it is really helping me to improve my decision process.

So, the answer, I think, is that you need to keep some kind of trading journal, but I don’t think you need to keep a specific kind of journal. In other words, you probably need to keep a journal, but it’s hard to give you specific rules for what must and should go into the journal. Let me try to simplify this a little bit, and hit some bullet points:

journal1. The most important thing about your journal is that you do it! All the planning and best intentions in the world are worth nothing if you don’t follow through. Consider this carefully when you plan your journaling–it has to be realistic. If your journal involves filling out 3 forms and writing a page of text twice a day, you’re probably not going to do that. On the other hand, scribbling three lines in your note book at the end of the week (“It was a good week. Made a ton of money. Bough pizza.”) probably doesn’t really provide a lot of value. If there’s a key to successful journaling, it’s finding that balance between ease of use and complexity. From my own experience, I’d encourage you to aim low with this, and then look to expand/refine your journal as you get into the routine.

2. Just to expand on that point, it’s the routine that matters. Keeping your journal, whether you do it daily, weekly, or monthly (depending on your timeframe) is a matter of discipline. In trading, being disciplined means that you are always disciplined. This means that you must follow through and do your journal! Get into the routine, and do it without fail. Another note from my own experience: the less you want to do your journal on any period, the more you need to. Never underestimate your mind’s ability to avoid tasks that really need to be done.

3. I often suggest that traders keep two journals: a market research journal and a personal, behavioral, journal. These can be combined, but I’ve found it useful to understand that I’m shining the spotlight of my focused attention alternately on the market and on myself. This helps to separate out what is market behavior from errors that I may make as a trader. To me, this is an important part of understanding who you are as a trader.

4. Think about the format of the journal. I’m convinced that paper and pencil engage a different part of the brain, and writing things by hand helps us to learn differently. Most of use don’t do a lot of writing by hand today, so sitting down with paper, feeling the rhythm of your body as you write, pacing your thoughts to match that rhythm, and focusing your attention on the smooth glide of ink onto paper–knowing that your abstract thoughts are taking form in the outside world–that’s a unique, powerful kind of magic. However, it’s not so easy to go back through five years of trading journals to understand some market tendency if those journals are a Hemingway-esque pile of Moleskine notebooks bound with a string in the corner of a closet. Using a database program or even a searchable word processor document makes for much easier review.  My personal answer is to do a lot of stuff on paper, and to separate out “research” from journaling as a separate process. Research is done in python or Stata or (gasp) Excel, but I want to hold my journal in my hands. Different strokes for different folks, and there’s no right or wrong, here.

A lot of the questions I receive focus on that market journal. I’ll follow up soon with a post that talks about how and what to record when you look at the market, and how you can begin to use this record to refine your own market sense and intuition.


Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.

This Post Has 8 Comments

  1. Chuck R.

    Success in trading, like so much of life, is about having confidence to act. My “journal ” covers just one thing. Due to the type of setups I look for, I note where the pullback went in regards to what I considered the “right” entry, whether I took the trade or not. Seeing how well the setups rate in this regard is a confidence booster to be more active and take more trades. So my journal is really a compilation of a single statistic. In the past I’ve tried adding other things, including written statements, but I found I never had time to review it, so I dropped that part. The journal has to be something you can review at least every week, if not every day, as is my case.

  2. PA_trader1

    Thanks very much Adam for your post. It will surely help me in building up my journal. Appreciate your feedback and time. – Brijesh

  3. Sukhy

    This is a great post Adam. Do you have any examples of trading journals that you think are helpful?

    1. Adam Grimes

      I don’t have any specifically that I can share, but these guidelines should help you create your own!

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