What to Look For in Your Trading Journal

In my previous post, I mentioned what to include in your trading journal. Now that you have started keeping one, now what?

Your trading journal will help you succeed in investing. By carefully reviewing your trading journal you should be able to improve on your gains, and avoid some key losses. You’re also likely to pick up on the habits which are holding you back and the methods which are working for you. Unfortunately, even the best traders will lose money sometimes. But hopefully through your analysis you can work out what is and isn’t successful for you and how you can further refine your trading methodology.

So what should you look for in your trading journal?

  • Take note of the number of long and short trades you’ve made. This can be checked against the market to see if I’m trading with the current or against it.
  • It’s also important to note the number of winning and losing trades you’ve had. When things are going well it means that you’ll see more winning trades than losing ones and you should also see a healthy margin of profit. However, when you see more losses over a longer term (because there may be a few short slumps), you’ll need to re-evaluate your trades as well as your methodology.
  • It’s also important to note the amount of time that you hold trades. Why? See if you can find a pattern whether you do better with short term trades, long term trades, or something in between see what’s working for you. Moving beyond that comfort level by cutting trades short or going for in for the long haul may not work for you if you’re accustomed to a different method.
  • Monitor the time you spend holding losing and winning trades. Why? It’s far more difficult to make money by holding on to losers for an extended period. Rather cut your losses early, and move on. Generally, when you hold a losing position the losses gain steam and can end up greater than the winners. So, even if you have more winning trades than losing ones you can still end up in the red.
  • Also, check your profits and losses in the context of the length of the trade as well as market conditions. This should help you further pinpoint the conditions that lead to your success and failure. In this way you can learn whether breakout movements or ranges work better for you, or whether I’m doing better when you buy or sell. Obviously if you seem to excel in one over the other you can make improvements based on that.
  • Finally, it’s worth noting both the average profit vs. average loss on your successful and unsuccessful trades.

With any luck you’ll be raking in the cash once you successfully create and analyze your trading journal. Best of luck!