First, a bit of background. In Big Mike's price action tread (, I was asked if I keep a journal. I admitted that I don't keep a classical journal, but rather a simple set of statistics that could be intrepreted as a simplified form of a journal. Mike seemed to take to the idea and asked me (start a thread on the subject. Following is the result:
When a novice trader gets the opportunity to discuss trading with an experienced trader, the novice will often request advice concerning what tools they could use to become a better trader. The experienced trader will usually provide list of several things including actions like create a trading plan, obtain ‘required reading’ books, learn better psychological approaches, maintain a profit and loss statement, etc. Inevitably, included in this list will be; keep a journal.
Keeping a journal is good advice in my opinion. Unfortunately, very few of us actually do it. Oh sure, we may start one with the best of intentions. But over time, it tends to sink lower and lower on the priority list, kid is crying, that broken water pipe needs repaired, it was a long day and I’m tired, sock drawer needs rearranged… Before you know it, the journal ends up at the bottom of the bird cage.
The primary reason for this (imho) is that the process of keeping a journal is a pain in the, um, posterior. They tend to be wordy. They contain long descriptions of why a trade was entered, the conditions of the environment, why was the trade exited, and a generally nebulous attempt to describe why the trade succeeded/failed. Ungainly at best. Worse yet, when you pick up the journal a month or two later and try to learn from it, you quickly determine it’s like trying to read hieroglyphics and it’s, well…, boring.
So, we need a method that is:
1)Easy to do – Doesn’t require a lot of time and effort, thus we’re not as likely to procrastinate.
2)Easy to interpret – To be useful, it needs to be easy to read and meaningful months later.
My solution to this dilemma, in my formative trading years, was to use a decision matrix. Draw a square, then divide it into eight equal bits and label them as shown in the attached (rather crude) drawing. Then simply place marks in the appropriate boxes based on how you entered/avoided a trade and how good/bad the result was. Each page could represent a week, month, or year worth of trades depending on what works best for you. A separate page would be used for each type of pattern/trigger method you use in your trading plan.
So there you have it, a rather long winded (sorry) description of a possible simple to use alternative to the often ungainly and disappointing trade journal.
Please feel free to discuss your thoughts on this…