Precis of PDF: “When Trading Journals Don’t Work”
5 frequent shortcomings with journals:
- lacks specifics. So instead of just saying “I overtraded”, identify why you overtraded, how you will avoid overtrading in future, and what steps you will take to return to discipline.
- emphasises problems, not solutions. Steenbarger said that the best time to keep a journal is when you’re making money, rather than be fixated on losing money. Your goal should be to replicate successful trading patterns, not simply analyse problematic ones.
- too much talk about the trader, not enough about the markets. Instead, you should try to identify favourable patterns in the market, rather than focus on your mental states.
- it’s reactive, not proactive.
- lacks metrics
Trading journals that work:
- make them part of the daily routine, even if you don’t trade on a particular day
- incorporate specifics
- review entries with a valued colleague
- use journals to review positive trading performance, as well as problems. Traders can learn as much from what they do right as what they do wrong
- include material both about the markets, and the trader
It’s about pattern recognition, which is about repetition – seeing enough variants that you become sensitive to essential and inessential features