Trade Journals

Every Tuesday Chuck releases a new Trader Tip video on YouTube. This week we will discuss how your trading journal is one of your most useful assets for improving your trading performance. When we talk about a trading journal, there are actually different aspects of a trading journal. In fact, there are three separate areas that we're going to talk about today.

You can read the episode transcript below or watch the video that follows.
If you have any questions, please reach out to us. We look forward to being a continued part of your trading education!

Today we’re going to talk about trade journals.

Your trading journal is one of your most useful assets for improving your trading performance.
When we talk about a trading journal, there are actually different aspects of a trading journal. In fact, there are three separate areas that we’re going to talk about today. But first, why do we want to keep a trade journal?

One, it allows the trader to be objective in the review of their performance. It also improves awareness, and a trade journal supports the trader to learn from themselves. One of the big things I talk about with students is that in your evolution as a trader, initially, you are trying to find somebody that you can learn from. But there comes a key point in your evolution as a trader, where you actually will begin to learn more from yourself than you do from me or any other instructor. A key element for you to be able to learn from yourself is your trade journal.

There are three types of trade journals that we want to keep track of.
1.) The first is what I call a TEA log. The second is a trade capture journal, and the third is a metadata journal. What is the TEA log? TEA stands for thoughts, emotions, and actions. Now there’s a progression that we go through psychologically, we have a thought, and if we continue to focus on that thought, it leads to emotion. If we continue to focus on that emotion, it will lead to action. So there might be a thought that says something like, “Man, I’m not trading well. I’m making lots of mistakes, and this is extremely frustrating for me. If I don’t start making money soon, I’m going to go broke.” Well, that thought then leads to emotion and emotion of anxiety, and emotion of fear, where you feel it in your body. If you sit with an emotion of anxiety or fear long enough, you’re going to start to take action. So maybe you’re in a trade, you have this thought that you need to make money trading, for you to make it. You have money in the trade, but as you think about your anxiety grows and grows and grows, about how you need to make money trading and this trade cannot turn to a loser. If you think about it long enough, and hard enough, BAM you’re going to take action and you’re going to get out of the trade because you’re scared. What you’re going to find is later on and trade keeps going. It’s been an amazing trade and you missed out on most of it. Why? Because you gave in to your thoughts and emotions by taking an action that was against your plan. So just remember thoughts lead to emotions, emotions lead to actions.

The way we short circuit this is through our awareness.
If we start to have an aware and start to be aware of a negative thought, we can cut it right there. Or if that thought starts to lead to an emotion, we can feel this emotion, we can cut it right there. It does not have to lead to action. This is why that log is important. One, it helps you be aware. It helps you be aware that you’re actually having these thoughts and emotions. Then this awareness helps you recognize your cues that will allow you to take action before you make a poor decision. If you see this happen enough, you’ll start to see patterns in your emotions, in your thoughts and emotions, that influence your trading and you can then be proactive in addressing them, and be aware enough where they come up to minimize them. This is a TEA log, where we record the time whether it was a thought, emotion or action and the context. What triggered you, and then what was the resolution.

This is an example of a couple of entries from my log.

8:41am – last night had excitement and anxiousness as the $ broke and Risk assets sold off. I was hoping it would continue and being a Friday there is a decent chance. However, I had anxiousness about giving the money back. Also, my mind was extrapolating how much money I would make if we had a 3% month. None of that matters. God is my Source and He has got me. Go trade your plan. So you can see here that I’m capturing my excitement, and anxiousness, my thoughts and emotions in this log, and then I’m able to correct it by stating something different reminding myself that God has got me, and I should be focused on executing my plans.

2.) Now we move to trade capture. This is where we do a screenshot. We do a screenshot of our trade. At the time we make it, we’re actually going to do about three points.

We’re going to do them when we initiate the trade, we’re going to do them a key inflection points of the trade, and we’re going to do it at post trade. This is going to allow you to review what you were thinking at the time of the trade. A lot of times when we go back and we think about our trades, we actually recall them differently than what we were actually thinking at the time. A lot of students actually will go back, and in the moment, they think they’re all good. But when they go back later and review their trade capture journal, they realize that they’re actually making errors that they were totally unaware of. By filling this out, it allows you just see what you’re actually thinking allows you to be objective, and it also tends to improve your execution efficiency, you’re taking time to record your trade before you execute it. So we record the trade itself, and we record data around the trade. This is called trade scorecard, you can see a capturing all this different data, different timeframes, different indicators, and so forth.

3.) The third type is metadata journal, where we do metadata capture. In metadata capture, we’re capturing all the different data points, similar to what we were doing here. We’re doing it in a log for all our trades. This allows us to go back and analyze all of our trades together, allows us to sort, rank and analyze the data. By doing this, this allows us to review our trades through different variables to determine patterns of success or failure. This is one of the best ways to learn because analysis is derived from your real trades that have their real emotion in them. So I’ve had numerous traders who have done a good job of keeping metadata logs, or metadata journals, and literally, in some cases, under 10 minutes, I’ve been able to double, triple or quadruple their profitability just by being able to do this metadata process. This is where I say that they really start to learn from themselves because when they can do their metadata capture, and then they go look at it, a lot of times they learn and they gain tremendous insights into their performance and why their performance is substandard or why it’s great.

So are you capturing?
Are you doing these three different types of journals? Are you doing a TEA log or an awareness journal? Are you doing a trade capture journal? And are you doing a metadata journal? Each of these is critical to your development. So, make sure you’re doing it, and stay tuned every Tuesday for an additional webinar like this one where I will teach you different ways to think about trading that will take your performance to an elite level.

Everybody have a great day. God bless I will see you next week. Bye.
~Chuck Whitman