Prop Training Section 5 - The Write Stuff

Article—The Head Coach : The Write Stuff

Put down the charts and pick up a pen -- the time to start your trading journal is right now. Unless, of course, you're content with mediocrity.

By: Doug Hirschhorn
August/September 2006 , Page 72

Every now and then -- on my birthday, at a funeral, in the middle of a restless night -- I ask myself: Where am I going, and where have I been? For traders of all stripes, these pivotal questions demand an answer daily, if not hourly. Hands down, the most powerful tool available to any trader is his journal. A decent percentage of traders I speak with have at least attempted to keep a trading journal, but most never quite stuck with it. It's like a short-lived commitment to the Atkins Diet or 6 a.m. jogging.

I implore you: Try harder. A journal is your best weapon against slumps, your personal turnkey to profits. Yes, it's great to read charts. By all means, read them. Read every chart you can (where's this market been, and where's it going?), and of course stay up on the news. But a journal keeps track, in unforgiving detail, of your mistakes and the areas in which you need to improve. If you're struggling as a trader, reading back over a faithful account of a week's worth of entries will illuminate subtle errors.

I find that most traders don't bother to keep a journal for two reasons: either they don't know how or they don't want to take the time. The latter doesn't cut it. We're all busy -- make the time.

On its face, a lack of know-how would seem to be an easy problem to deal with (after all, any 12-year-old girl can tell you how to keep a diary), but a trading journal is more than a simple daily recap. It should be a work in progress, amended and tended to from the time you get in until the time you go home. Over the years, I've compiled a 15-point template that helps my clients begin to chart themselves efficiently:

1. Establish your trading rules for the day. For example, if you've been struggling lately, you might establish a rule that you'll take 50 percent off your winners on the first hint of a pullback.

2. Identify the major world events that are currently in play.

3. Figure out which economic numbers are in play today.

4. Create a motto for the day. Keep it brief -- and positive.

5. Develop your morning game plan (be sure to do so before the open).

6. Evaluate your morning game plan -- how did things really play out? How did you react? Did you stick to or stray from your game plan, and why?

7. Prepare an afternoon game plan (create it over lunch, say, before the afternoon session begins).

8. Evaluate your afternoon game plan. A quick retooling of strategy could pay off in the second half.

9. Ask yourself: What did I do well today? What could I have done better? Use this step to dig deep and engage in some genuinely tough self-analysis.

10. List all your trades that appear to be working -- and all those that aren't.

11. Call the market -- is it range-bound? Trending? Which sectors are in play?

12. Determine for yourself: On a scale of 1 (low) to 10 (high), my level of focus and concentration today was (?).

13. Your daily question: Am I a better trader today than I was yesterday? If so, why? In other words, what exactly have I learned? A day without learning is a wasted day in a trader's career.

14. Which trades should I pay attention to tomorrow?

15. My goal for tomorrow is...

It seems simple enough, right? So give it a try. Not tomorrow or next week, but today. You have nothing to lose -- except maybe a few bad habits.