Extremely Important Tool for Trading
Trading Log: Let’s talk about a tool that I think is extremely important for trading, a trading log, or a trading journal. Let’s discuss what this is and why you need to have it.
See, I believe a trading log is the most important tool other than having charting software and a broker platform.
Because you do need a charting software to know what you want to buy or sell. What stocks to buy, when to enter, and when to exit.
Now, as you know, my favorite tool is the PowerX Analyzer.
If you’re interested in learning how I trade, go to mytradingroutine.com.
This is where I have a quick video for you showing the exact indicators that I like to use. It shows you exactly when I enter, when I exit, and how I limit my risk.
What Is A Trading Log?
Let me show you what you need to do because the trading log is the tool that has turned my trading around.
These days, I don’t use it only to improve my trading, but I also use it to improve the trading of other traders in a matter of minutes.
I use a simple Excel spreadsheet – because that’s the beautiful thing. You can go as fancy as you want but you can also keep it simple.
What to record
Here are the important things you need to write down every single day that you trade.
First of all, the entry date. Then the symbol. What did you trade?
Did you go long or short? Long means that you’re betting on a rising market. Short means that you’re betting on a falling market.
How many shares or contracts did you trade? Entry price? Exit date and the exit price?
Gross profit and loss? What were the commissions, and therefore, what was the net profit and loss?
And then there are comments.
And you see, in the comments, you should write anything that comes to mind.
For example, you say, “wasn’t quite sure before I entered the trade, but once I did, I was glad because it turned out to be a winning trade.”
Or you might say, “I was in this trade for three days, felt compelled to take profits, and I’m glad that I didn’t because it turned out to be a good trade.”
This is so important, let me show you why.
When you don’t know what is working for you, it is very difficult to improve it.
So, for me personally, when I kept a trading log, I started realizing that I made money in the morning, and I gave it back in the afternoon.
So, what’s the easiest way for me to improve my trading? This is when I was still heavily day trading.
If I make money in the morning, and I give it back in the afternoon, what’s the easiest way to improve my trading? Stop trading in the afternoon, right?
And that’s what I do.
When I day trade, I only trade for an hour and a half.
Sometimes only an hour in the mornings.
I also realize that I made money on Monday, and Tuesday, and Wednesday, and Thursday, and I gave back money on Fridays. What’s the easiest way to improve my trading?
Exactly. Stop trading on Fridays. Then I analyzed the markets and I wanted to see… This is again, from a time when I was very, very heavily day trading.
These days, I swing trade stocks and options more.
It fits my lifestyle better because I enjoy not sitting in front of the computer; therefore, I personally prefer swing trading stocks and options.
When I was heavily day trading, I realized I made money trading the Dow. I made money trading the S&P, crude oil and gold. And I lost money trading the euro currency.
Now, in school, how are we trained? In school, if you’re not good at something, what do you need to do? Get a mentor. Get a teacher, right? If you’re not good at math, you need to focus on math.
So, same here.
Having this crappy mindset…
Instead of focusing on the markets that worked, I focused on the euro currency, and what happened?
I still lost money in the euro currency, and since I was focused on it so much, I also lost money in the other markets.
Now, if you see that you’re making money in four markets, and there’s one market where you lose money, what’s the easiest way to turn your trading around?
Stop trading that market that you’re not good at, right? When you fill out this trading log, you will be able to objectively see what’s happening.
Surprisingly, sometimes we get caught in our mind, and we think that we are really good trading one market, when we are not.
Here’s what I did for my students
I took this to the next level.
I asked my programming team to actually program all this information into a database.
In the video at the top of the page, I will walk you through a students log. Here you’ll find it in text form.
Let’s discuss the trades of Tom.
Tom and I started working together in 2017. Tom is a day trader and he’s trading stocks and options.
And so, for the first two months he started trading, working with me, he did pretty well.
He started with $10,000, and he was very diligent about putting trades in. After two months he was up $3,492. Almost $3,500. Not bad at all, right?
If you can achieve this within a couple of months, I mean, would you like that? Obviously.
And then I got on the phone with Tom and I said, “Hey Tom. I looked at all your trades and wanted to see what’s going on. So, out of curiosity, what is your favorite market to trade?”
And Tom said, as far as I remember, he said, “Oh hands down, the bonds.”
So, he was trading several markets, one of them being the bonds.
I said, hey, this is so odd because when I look at your trading log, I see that you made money trading crude oil, the S&P and trading options – but lost money trading bonds.
So what do you think would be the easiest way for Tom to improve his trading? Stop trading bonds, right? Exactly.
If Tom wouldn’t trade bonds, instead of making $3,500, he would have made $4,300 in only two months.
This is what a trading log can do for you.
Objectively show you of what is working for you. So, what else could you look at when you’re looking at a trading log?
Days you trade
Well, when I work with students, what I like to look at, because based on my experience, I know that there might be certain days when you are better than others.
For me personally, it’s Fridays. Fridays is not a good day for me. I don’t know why but I have made so many trades that I’m looking at my trading log.
And for me, I make money Monday, Tuesday, Wednesday, Thursday, and Fridays are typically underperforming for me.
Let’s take a look at Tom’s log and see how he’s doing.
Over the two months that he has been logging the trades, he made money on Tuesdays, Wednesdays, Thursdays, Fridays, and lost money on Monday.
What’s the easiest way for Tom to improve his trading? Stop trading on Mondays, right?
Another thing that I like to look at is the hours
Especially when you’re day trading, and I don’t know, for you, you might be swing trading or day trading.
I want to take a look at the hours, and I want to see are there certain hours when you are better in trading than not?
For Tom, he made most of the money between 9 and 10 Eastern. After this, not a whole lot.
So, what would you recommend to Tom if you were his trading coach? Stop trading after the first hour, right? It’s not getting any better.
Can you see how powerful a trading log can be?
A trading log shows you objectively what’s working for you and what is not.
Don’t trust your mind. Don’t trust what you think.
I mean, when it comes to trading, I trade what I see, not what I think, and you should do the same with a trading log.
It’s extremely important for me.
I want to see, am I doing better in my long trades where I’m betting on a rising market, or my short trades I want to see am I doing better in my stock trades than my option trades?
And this is what a trading log can do for you.
By all means, you’ve got to keep a trading log.
This is like your trading journal, and especially when you have the comments section, in the comment section, you can fill out what’s working for you and what’s not.
And as you can see, when I work with my private students, when looking at the trading log, very easily I can help them in a matter of minutes to turn their trading around.
Are you keeping a trading log?
Let me know in the comments if you do.
If not, you could just fire up Excel, or Google Sheets, or whatever you have. Or Numbers, if you have a Mac. Put in the columns and then make sure that you analyze your trades.
Trust me, this is the number one thing that has turned my trading around and therefore, I highly recommend it to everybody.
In fact, when we work together, it is mandatory for you. You have to fill out the trading log.
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