On Trading Journals

Last week the following question was asked of me about trading journals:

This expectancy stuff is very intriguing. I plan to take advantage of that concept immediately. I have been keeping a log of every trade I have done, but I have not kept track of what I now wish I had (overall market sentiment, etc…). Do you have a specific list of recommended things to keep in a trading log, or better yet, do you know of any trading log software?

I’ll answer the last part of that question first. I couldn’t find any (reasonably priced) software after doing some searches on Google and in the EliteTrader forums. I actually started out using a generic journaling software package but after a week or so I realized that a spreadsheet would be a much better way to go. One problem with using a package like that is that I could only see the details of one trade at a time. The other big issue was that it didn’t allow me to generate statistics.

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A spreadsheet solves both of those problems. And after seeing the example spreadsheets in Van K. Tharp’s ‘Financial Freedom Through Electronic Day Trading‘ it became very clear that a spreadsheet was the way to go. The journal that Tharp recommends calculates the (oh-so-important) expectancy of your system. It also displays your win %, which is a number that I’m always interested to see. Tharp also discusses other ideas for things a trader may want to write down, from things like market sentiment and indicator values to things like room temperature and what was one your mind at the time.

Here are the columns in my spreadsheet (you may download my spreadsheet if you wish):

  • Date
  • Ticker Symbol
  • Long/Short
  • Quantity
  • Bought (Price)
  • Sold (Price)
  • Initial Risk ($ amount of my loss if my initial stop gets hit)
  • Commission
  • R Multiple (P&L divided by Initial Risk)
  • Win %
  • Comments (free-form text)
  • $ at Work
  • % Gain/Loss
  • Initial % Risk
  • Expectancy (this cell is up at the top of the page and is calculated across all of my trades)
  • Total P&L (another cell at the top of the page)

One of the nice things about using a spreadsheet is the flexibility and extensibility it provides. For example, my journal originally didn’t contain the last three columns listed above. But I was curious about those numbers so I just popped them in there. I’m sure I’ll be adding more columns to the journal as time goes by. Here are some other potential things to track which were suggested in “Tools and Tactics for the Master DayTrader“:

  • Style of Trade — swing or day trade, etc
  • Reason for Entry
  • Initial Stop Price
  • Objective – (I had this field in my first journal and it drove me nuts. I have major issues with trying to attach price objectives to trades mainly b/c I don’t want to cut them short…)
  • Sell Date (should be ‘Exit’ date, sell date assumes all of your trades were longs)
  • Reason for sell (Exit!)
  • Error 1
  • Error 2
  • Error 3

Hopefully that will give you some good ideas about what to put in your journal. One thing that I found is that just the exercise of keeping the journal updated keeps me on my toes. Whenever I find myself thinking about taking a flyer on a trade that I know I shouldn’t, I ask myself how I’m going to explain my entry in my journal. That’s usually enough to keep me out of that questionable trade. Another nice thing is tracking the R multiples. You know that if you start seeing R multiples much less than -1.0 that you’re really messing up. There’s no justifiable reason for letting the stocks fall through your initial stop. It also becomes exceedingly clear how important it is to keep those losses small.

P.S. If anybody has other ideas about what to put in a journal or knows of a good journal software package please leave a comment.

P.P.S. I forgot to mention that I also have additional sheets in my journal ‘workbook’ (excel terminology). One page I call ‘daily recaps’ is just my P&L for the day with whatever comments I feel necessary for that day. The other page is identical except the columns apply to the entire week.

Comments

  1. Posted by The Doji Trader on August 29, 2005 at 9:26 am

    I use an excel spreadsheet at the moment as well. I find it more flexible as I can experiment with my data. However I am looking to move to a software based one if any good ones exist, it would make managing the data easier.

    Thanks for giving us a look at how your journal is setup as well as those links. You’ve given me some ideas to think about :)

  2. Posted by Michael on August 29, 2005 at 10:18 am

    Seems like there’s a good opportunity for somebody to develop a good (inexpensive) trading journal package. I’d try writing one myself if I had the time.

  3. Posted by Mousefinger on August 29, 2005 at 1:25 pm

    Excellent post…trading journals is a subject that isn’t talked about enough, IMO.

    I use a freeware product called “iDaily Diary”. They also have a “pro” version (don’t they all) that sells for $30 (USD). It works pretty well for me…granted, it isn’t designed specifically for trading, but then, a blank note pad isn’t either. 😉

    I would love it if a trader developed a good trading journal package. One meant for a trader of all time frames. That would be excellent.

  4. Posted by The Doji Trader on August 29, 2005 at 10:46 pm

    Mike, I was thinking the same thing… I reckon a web based trading journal would work well. Might start collecting ideas for a system and start a side project. Like you said the only hissue is time… however I do develop software for a living(I want to trade for living tho) so I may be able to fit it in.

  5. Posted by Scott_H on August 30, 2005 at 4:18 pm

    I found this site one day when I was looking for trade journal software:

    http://www.members.optusnet.com.au/~traderslog/index.html

    There is a free “lite” version available for download and an updated (pro?) version supposedly due out in September. I haven’t played around with it, so I can’t comment on its usefulness.

    I use an Excel spreadsheet to track most of the numeric data related to my trades and a Word doc template I created (that is linked to the spreadsheet) to track the “qualitative” items (to include screen captures of the charts at the time of trade entry and exit). I’ve found this to be more flexible than software that someone else created.

    On one of the Yahoo Groups, someone had a nifty way of using the calendar function in Outlook as a trade journal. I’ve got the particulars around here somewhere. I’ll send them along if I find them.

  6. Posted by Michael on August 30, 2005 at 8:03 pm

    Thanks Scott.

  7. Posted by Technicator.NET on October 9, 2005 at 4:02 pm

    I also use excel for position sizing. It seems that high priced stocks tend to give you better leverage (such as google), and smaller stocks require a bigger initial risk (most of the time). Therefore, according to position sizing, many times it’s better to trade higher priced stocks which are less volitile. Do you think position sizing can be implemented into volatility based calculations or expectancy? I was thinking of that because position sizing doesn’t rquire any volatility calculations in it and that does matter when trading and assessing risk.

  8. Posted by Michael on October 9, 2005 at 8:01 pm

    People can and do take volatility into account when sizing their positions. See the ‘percent volatilty’ method in my position sizing post for just one example of that.

  9. Posted by Flow on October 30, 2005 at 10:40 am

    Mike,

    you should check out Ninja Trader, Version 5(Beta). Just got it, and it automatically generates all of your categories, but also Maximum Adverse excursion of your trades etc. etc…. seems well worth it since it saves you a lot of time…