How to Keep a Trading Journal
To keep a trading journal, fix your columns before the first entry and write the reason for each trade before its outcome is known. Record the trades you skipped as well as the ones you took, include costs on every row, and read it back weekly.
A journal exists because memory is unreliable in a specific direction: it edits the reason to fit the result. A row written before the result is known cannot do that.
Before you start
A spreadsheet with the columns fixed before the first entry. Changing columns halfway produces a record that cannot be compared across itself, which defeats the purpose.
The reason for each trade written before its outcome is known. This is the one rule that makes the whole thing work, and it is the one most often broken.
A weekly slot in which you actually read it back. A record nobody reads is data collection. The reading is where it turns into a decision.
The steps
1. Understand what it is for
Not to record profit — your broker does that. It records why you acted, which is the only part that can be improved and the only part memory distorts.
2. Write the reason before the outcome
At the moment of entry, in one sentence. A reason written afterwards is a justification, and it will always be a good one.
3. Fix the columns
Date, instrument, setup tag, entry, stop, size, reason, exit, cost, result. Ten columns is enough and more than ten usually stops getting filled in.
4. Record the trades you did not take
A row with the setup, the reason for skipping, and what happened next. Without these you have a record of your actions and no evidence your rules were applied.
5. Put the costs in
Commission and spread on every row. Every round trip pays the spread and any commission, and a journal without costs describes a market nobody trades in.
6. Tag every trade by setup
One word per row. Tags are what let you ask which setups pay and which do not, and a journal without them can only tell you a total.
7. Note the conditions
Trending, ranging, quiet, busy. Losses cluster by condition far more than by setup, and this column is what makes the cluster visible.
8. Read it back weekly
One slot, in the diary, every week. Sort by tag, sort by condition, and look for the pattern rather than at the last trade.
How to tell it worked
Check the journal after 30 days of trading.
Count the rows where the reason was written before the outcome. 30 out of 30, or however many trades you took. Any row where you cannot be certain is a row that has already been edited, and edited rows are worse than missing ones.
Count the skip rows. If there are 0, either your rules never said no or you did not record it when they did. Both are worth knowing and only one is fixable.
Then check that every row has a cost figure. A single row with a blank cost column means the totals are wrong, and totals are what the weekly read depends on.
Why the sample has to be large before you conclude
Short runs of results look meaningful and are not. The S&P 500 has finished higher over 59% of ten-trading-day windows since 1950 — a modest bias that still produces long winning and losing streaks purely by chance.
Losing streaks do not need a broken method. A method that wins 55% of the time still has better than a one-in-three chance of six straight losses somewhere in 100 trades. A method with no edge at all will therefore produce sequences that feel like confirmation, and a journal read after a good fortnight will find a pattern in noise.
Which is why the weekly read looks for process, not profit. How many rows had reasons, how many skips, how many costs recorded — those are answerable at 30 rows. Whether the method makes money is not.
The original data
Of the 24,971 unique videos collected for this site’s search study, 13 have an instruction-shaped title mentioning a trading journal, at a median of 12,952 views across 13 channels, with a maximum of 399,697. Trading psychology, the adjacent subject, appears in 67 instruction-shaped titles at a median of 8,228. Each video is counted once, even when several searches returned it.
The question: Six losses in a row. Change the system?
13 instructional videos from 13 separate channels, one each. Nobody specializes in this, which is unsurprising — it is the least exciting subject in trading and the one most consistently named by people who have been doing it a long time.
The answer is that six is not a sample. When half the trades win, a run of six losses somewhere in 100 trades is more likely than not, and such runs appear regularly in sequences with no edge at all. The journal answers a different question that six rows can address: were those six taken for written reasons, at planned sizes, with costs recorded. If yes, the system was followed and six losses is weather. If no, the losses are not the problem worth solving.
When it fails
Journals fail by attrition, and they fail selectively. The rows that go unwritten are the impulsive trades, the ones taken outside the rules, the ones that hurt — precisely the rows the record existed to capture. What survives is a tidy account of the disciplined trades, which reads as evidence of discipline and is actually evidence of selective recording. A journal with no embarrassing entries in it is not a well-run journal; it is an incomplete one.
The second failure is writing reasons after the outcome. They become justifications every time.
A third is no skip rows. The rules then have no evidence behind them.
A fourth is leaving costs out. The totals describe a market that does not exist.
A fifth is never reading it back. Collection without review changes nothing.
And a sixth is drawing conclusions from a fortnight. At that sample size you are reading noise carefully.
Related
Trading journal covers what to record and what to leave out. Trading plan is where the rules the journal tests are written down. And backtesting is the same question asked of history rather than of your own record.
Keep a column for the trades you do not take. Without it you have a record of your actions and no record of your rules, so you cannot tell a disciplined losing month from an undisciplined one. They look identical in a profit column and completely different once the skips are there.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.