Do you know almost every beginning trader repeats the same mistakes at least 50 times?

That’s insanity, literally!

The definition of insanity: The process of doing the same thing over again and expecting a different result.

So why does this continue to happen?

Sadly…many traders fail to keep detailed records of their trading.

They rely on a “foggy memory” to guide them through the decision making progress.

This is something that doesn’t work if you are trying to make a career out of trading.

Take this example…A bodybuilder has a journal to track his every movement, such as his daily diet, weight, and strength.

And a scientist has a journal to record their latest research, findings, and the results of recent experiments….

So why not do this for trading? Especially when the results matter at the end of the day.

Most traders don’t even have a trading journal, let alone know what a trading journal is.

And one of the major benefits of a trading journal is keeping record of your losses, and being able to learn from them.

Now… I understand that being self-critical is the hardest thing for anyone to do.

But it’s ok!

Because I will explain to you (including step-by-step directions) on how to create your own trading journal and learn from your mistakes and losses.


What Is A Trading Journal


A trading journal is a “diary” that records your trading activity on a daily basis.

In my opinion, a trading journal is one of the largest factors of whether a trader can become successful.


A trading journal helps to clearly identify your strengths and weaknesses.

This is the truth.

Nobody is a perfect trader.

A perfect trader just doesn’t exist. And not every trader will make money in the market.

Instead, the pros take advantage of their strengths and try to prevent their weakness from jeopardizing their trading accounts.

The trading journal is meant to keep a trader focused.


A Trading Journal Keeps You Focused


Let’s look at this one trader…

He was unfocused and all over the place when it came to his trading style. He didn’t know what he was.

Let me explain.

This trader was a “serial chartest”. He was always scouring the internet looking for the “next best indicator” to add to his charts.

He once said, “If I keep reading and trying new strategies, I’ll find the perfect one someday.”

The problem?

He didn’t identify with a style of trading. He was trying to be everything.

What the trader didn’t realize is that there was no consistent trading setup he could perfect, everything was different and always changing.

One day, something major went wrong… And the trader could not pinpoint exactly what that was from since his strategy was always changing on him.

And after almost blowing out his account. He “woke up” from his mistakes and now to this day creates a trading journal.

Let’s see why…


A Trading Journal Gives You An Edge


One of the biggest takeaways from trading…

If you want to be an elite trader, you must have a consistent set of actions.

Remember: Trading is about consistency. The more of a machine you become, the better of a trader you become.

It doesn’t matter if you are consistently winning or losing, everything is data for your journal.


For example, if you are a new trader and consistently losing and tracking all your decisions in your trading journal, you have created a set of data that shows exactly what is going wrong in your trading.

Just like a professional athlete, this is something you can learn from and prevent yourself from repeating in the future.

You are able to look back at past trades and identify which patterns cost you money, and stop trading it all together. The theory is to identify losing strategies and cut them. That’s why it’s so important to paper trade and journal if you’re serious about learning how to trade.

This is the pattern you want to exclusively focus on and repeat…




One of the most important pieces of information to put into your trading journal is the basic trade information.

Such as:

  • Entry price
  • Exit price
  • PnL
  • Etc.

Tip: Happen to forget to record this one day? Don’t worry – your brokerage should have a fully detailed report you can download each day.

But unfortunately, this is just not enough.

You need to record the factors that affect your trading performance such as emotions, analysis of markets, macroeconomic reviews, and broad market news.


Because you need a full picture of the trading environment before you place your trade to keep an eye out for abstract commonality amongst your trades.

For example, you happen to lose money every day there is a jobs report released.

This is a piece of information you would never be able to identify without tracking the economic calendar and recording this in your journal

By including this information you should get a full picture of the factors that drive your trading performance.

Now you are wondering. What do I include in my journal?

Let’s look at the details.


What Is Included In Your Journal


If you don’t write down your thoughts or prepare for the market ahead, you’ll be missing obvious trading setups.

Everything that is in your trading journal must be aligned with your trading plan. Don’t stray away from your trading plan or it can defeat the purpose of the journal.

Example Journal Entry

For example:

On a daily chart, NFLX is near the middle Bollinger Band but could continue lower to its lower band..

If this happens, NFLX could bounce off the horizontal support level and has a strong fundamental ranking based on my screening criteria.

There is no immediate earnings or economic information that is coming out in the next few weeks to months that will impact this stock price.

What trade could I do?

My favorite strategy is selling credit spreads. If NFLX continues lower, I may look to sell a put credit spread when it touches the lower Bollinger Band.

For now though, I am going to keep it on my radar, but use it for this example.

Note: The trading setup must be aligned with your trading plan! If you take any setup outside of the trading plan, then you are not trading, but gambling! Also, make sure you understand the risks involved in trading, and speak to your financial advisor or broker before you make real-money trades.

Don’t forget the charts of the trade

On NFLX, this is the chart pattern that was seen when I placed the trade.



I annotate the chart and include any relevant information along with the chart prior to trade being placed.

In this chart of NFLX, you can notice that I included two key pieces of information.

  1. What chart pattern I expect to trade
  2. The type of trade and time/price level it was placed

Additional Information For Your Journal

There are many additional pieces of information you can include in your trading journal.

Here is a brief list of what to include but not limited to just this information. Feel free to expand as you feel needed.

  • Date – Date you entered your trade
  • Time – Days until expiration
  • Setup – Trading setup that triggers your entry
  • Stock – Stocks you’re trading
  • Lot size – Size of your position
  • Long/Short – Direction of your trade
  • Price in – Price you entered
  • Price out – Price you exited
  • Stop loss – Price where you’ll exit when you’re wrong
  • Profit & Loss in $ – Profit or loss from this trade
  • Total Cost in $ – Total cost of spread

For example:

This table can help to keep a record of your trade information and risk levels.

It’s also important to include brokerage statements of the trade as additional trade information in regards to margins and trading costs since brokerage rates may vary.


How To Review Your Journal


If you consistently updated your journal, you can now review it and find the trading results that work.

Here’s how…

  1. Identify patterns that lead to losses
  2. Identify patterns that lead to winners
  3. Find ways to decrease losses
  4. Find ways to increase gains

Let’s take a closer look…

Identify patterns that lead to losses

Among different trade setups, there may be some which cause you to lose consistently.

Looking through your trading journal can help to identify the worst-performing setups so you can stop trading it.

Identify patterns that lead to gains

You want to identify your best trading setups.

Obviously, these are the ones that bring in the cash flows and make you money.

So, looking through your trading journal be sure to identify the best performing setup and focus on that alone.

This will also help you identify additional trading opportunities and give you the ability to expand your trading to new stocks and even different markets.

Find ways to decrease losses

This is one of the most important parts to your trading journal….

In order to become a successful trader, you need to learn how to decrease your losses!

By doing this you allow your winners to be more than your losers, generating profits for your trading account

Just as you have identified patterns that are constant losers, you can do the same with your trade setups.

For example, perhaps put spreads tend to make you money and call spreads tend to lose you money.

As you are looking through your journal you can start to clearly identify this pattern.

Perhaps you want to cut back on the number of call spreads traded or even eliminate them completely from your trading plan.

You would not have been able to identify this without your journal.

Find ways to increase gains

Just as you have identified ways to decrease losses you can use the journal to increase your gains.

For example, if you noticed that your put spreads help your bottom line but you leave money on the table.

What can you do to put yourself in a position to make more?

Well…maybe you have identified that you tend to exit the position too early or can even sell naked puts instead.

Other examples are:

  • Scale-out of positions to let winners run and lock in gains at various levels
  • Identify patterns that make money more consistently than others
  • Find ways to add to your trade and keep riding the monster winners

So do you see the power of the trading journal?

Let’s see what free tools are out there to help create your journal today.


Free tools to use to create your journal


Google Docs

This is a free word processing tool by Google. I use it to keep detailed notes of my thoughts and analysis of trades in the markets to supplement charts and tables.

This is stored in the cloud so you can easily access this data anywhere and don’t have to worry about losing the information at all.

Google Sheets

This is a free spreadsheet tool by Google. I use it to record relevant metrics, create calculations, and track profits on all trades.

This is stored in the cloud so you can easily access this data anywhere and don’t have to worry about losing the information at all.

Microsoft Paint

Free image editing tool by Microsoft.

I use this to mark up chart images and keep detailed records beyond what spreadsheets and documents can create.


Free charting package for stock charts.

By creating an account you can save your favorite charts and keep detailed logs of each trade. It allows you to keep drawings on each chart for you to review in the future.


This is a paid screen capture tool by Techsmith. You can use it to save your charts, edit your images, and annotate with ease.




It is basically a must-have!


Well, a trading journal helps you find your edge in the markets, identify your strengths and weaknesses, and improve your trading results.

Key points:

  • Split into Pre/During/Post trade recap
  • Include charts in your journal
  • Keep records of all winners and losers
  • Include brokerage reports for commissions and other expenses
  • Use free tools to create journals easily


Author: Dave Lukas

Some of my trades are starting to work out to my favor, even during this slight pullback… and I’ll just have to wait and see if it holds up.

Now, I want to use it as an opportunity to teach you about one of my favorite strategies.

Of course, in order for me to do that, I’ll have to explain the basics of credit spreads and how you can use these strategies to your advantage

And who knows, maybe something will click for you and you discover how to develop strategies on your own based on my teaching

I genuinely believe that there are great learning opportunities no matter what the market gives you. And since every day is different, trading is a never-ending process of learning, practicing, executing, and learning again.

That said, let me show you my two reasons why I like to sell options instead of buying them, and why I believe it’s possible to improve your trading with understanding the basics of credit spreads.


Learn How Credit Spreads Can Help Your Trading


The Classic Put


Typically if a trader is interested in going short and using the options markets, the first thing that comes to mind is to purchase a Put.

A purchase of a put option does two main things for a trader. It allows a trader to benefit from the decrease in the price of the asset and it limits or decreases the amount of loss they may incur.

This is much less risky than shorting the underlying asset and the trader can use the leverage of options to increase their gains, potentially, as well.

Here is a payout diagram for both a short stock and put option.



The diagram on the left shows a traditional short sale of a stock. With this, there is an unlimited loss as the share price increases!

The diagram on the right shows the purchase of a put option. With this, there are limited losses as the share price increases!

Quick Lesson: If a trader wants to short a stock and they are aggressive with the direction, buying at the money puts gives them the most bang for their buck.

So what’s the benefit of using this strategy?

  1. There is limited risk if they get the trade wrong
  2. There can be high upside gains if they get the trade right.

Unfortunately, there is something I must remind you of. If a trader is wrong on the timing, your options may expire and they will lose on the trade.

That’s the pain I feel all the time, and I don’t want to teach you my techniques to avoid it.

It really sucks to be right, just to be wrong.

But I have a solution that I think you might like.

It’s called a Call Spread.

I know that you may be confused, and it’s ok if you are.

Let me break it down for you a little more.


The Short Call


An alternative to buying a put is to sell a call.

This is usually described as a “naked call” and is one of the most terrifying trades anyone could place. Just ask one of the many hedge funds that blew up from this trade.

It works… until it doesn’t, that’s an old saying on the street.



As you can see in the risk diagram, you are subject to unlimited loss the further price increases.

I mean, who wants to sleep with one eye open?

Trading is stressful enough without having to worry about some pot stock going from $5 to $500 overnight causing you to lose your home and all your assets. There are some traders who think naked selling options is tried-and-true, and I can’t understand why for the life of me.

What if there is a way to still gain exposure to the short call and stay protected?

Let’s take a look at one of my favorite trades… the Credit Call Spread.


The Credit Call Spread


The Credit Call Spread (or Bear Call Spread) is a bearish to neutral options trading strategy.

It aims to capitalize on both downward price movement of the asset and theta decay.

Credit call spreads work extremely well in both directional and sideways markets as the options will expire worthless at the end of the trade, leaving the premium for the trader to collect on.

What does that mean exactly?

It means that I receive the cash upfront …

That’s right, I get paid to take that trade!

Another huge benefit of this trade is that it has a lower max loss compared to selling calls and even purchasing put options.




As a seller of options, I can still make money even in a sideways market!

This is such a great strategy since it allows me to trade a short call and have a max loss on the trade. This is a must to capitalize on premium decay and also market direction on the trade.


The Odds Can Be Stacked In My Favor At Times


Option sellers take maximum advantage of the option time decay theory, commonly known as Theta Decay.

OTM options lose value quickly and become worthless at expiration. This allows traders to not have to worry about correctly predicting the market direction or timing the market perfectly to generate income.

I can take advantage and I think I can be “the house” with odds in my favor

Now, keep in mind the markets move fast and prices will change, and if you’re a second or two late… it means the odds may not be in your favor. Again, not everyone will have the same odds utilizing this strategy, so make sure you do your due diligence to learn more about the ins and outs of it.

Don’t forget that an option buyer needs to be right about direction and time!

Remember traders, there are many ways to make money in this market and selling options is one of my absolute favorite go-to strategies.

Key Points:

  • Credit Call Spreads can gain if the stock goes down, stays the same, or goes up
  • Limited risk vs naked calls
  • Can improve the odds in some cases, in my opinion
  • Allows one to get paid to take risk
Author: Dave Lukas

This market is on fire.

It’s filled with crazy opportunities if you know where to look.

But you need to get in before the herd comes rushing in.

Of course, this is hard for a lot of traders to be good at.

Most new traders usually ask:

  • What chart patterns are worth looking at?
  • Are fundamentals important?
  • What indicators should I use?
  • Are earnings names good to trade?

Now, it’s great that new traders are asking those questions – that means they are wanting to learn!

Unfortunately, not all indicators are created equally.

And I believe that there are two concepts traders should be focused on…

Momentum and Location

For me personally, those two factors help me spot a trade that’s about to pop off.

Now, let me show you how they help me time my trades better.

Timing The Markets

Momentum and Location in the markets are everything, in my opinion.

And the way I time the markets is by knowing where the momentum is going to come in…

Which means it’s important to know both where the buyers are and when the buyers are coming in

You see, this is the When, Why, and How of an explosive stock movement all wrapped up into one location.

However, timing is one of the hardest things to do in the markets. And sometimes everything could align but the buyers just simply cannot overtake the sellers.

But, I feel that I’ve actually developed a strategy that pinpoints when I should get into a specific stock, where I should lock in gains, and how I will take a loss if it doesn’t work out.

This is one of my trading strategies, specifically designed for capturing market momentum every week…

You see, I believe Fractals are what moves stock prices. Now, chart patterns may work, but what actually causes these chart patterns?

Buyers and sellers, in my opinion…

When buyers and sellers are fighting for stock price, certain patterns will form.

And when the buying and selling is taking place at elevated levels, I typically see Fractal Energy continue to climb.

It will continue to climb until it releases its energy when either the buyers or sellers take control of the stock.

Let’s take a look at these 4 locations where Fractal Energy was fully charged and the markets were at a support level.

What happened?

The stock traded higher shortly after signaling the Fractal Energy was fully charged for this specific chart.

How did I know this?

And I knew the direction based on the Bollinger Bands, or a technical indicator that tells me where the support is located for a stock.

The key is to spot where a fully charged Fractal Energy lines up with the Bollinger Bands.

Now, most traders try to chase stocks higher or trade 100 different indicators… but not me.

To be honest with you, that’s too difficult to analyze and break apart the information that the indicators tell me.

For me personally, I just want to follow the K.I.S.S Rule, (Keep It Simple, Stupid).

And now that I’ve found the location where the stock is going to trade higher… I now move to finding my trade.

This is where I turn to trading credit spreads instead of buying stock.

You see, when I sold the 19 Mar ‘21 340/350 @ $1.20… based on my Fractals and Bollinger Bands, it was a signal the market wouldn’t go much lower. However, keep in mind, markets move fast, and things change.

So I sold these options to traders who were trying to short NFLX.

Now, I am looking to cover this position and start getting out of my trade.

You see, I laid out my buy level, my target level, and my stops clearly to enter this trade.

And this way I am calm, cool, and confident with my trade and don’t let any emotions get in my way to make bad decisions.

I can come up with trade ideas on my own, but I prefer to let the market come to me and tell me where and when I should be trading.

Author: Dave Lukas