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Stop Making These Trading Journal Mistakes

Kyle DennisKyle Dennis ·

The stories you are about to hear are true. However, the names have been changed to protect the innocent. Now, it’s great that you decided to keep a trading journal, it’s an excellent way to review and learn about your trading decisions. The problem is a lot of you are doing it wrong.

Let’s take a look at some poor journal entry posts, and some tips on how to improve them.

Bad Journal Entry #1

$150 Loser. Here is what happens when you trade a ticker not on your watchlist. I will stick to the game plan moving forward.

What’s wrong with this comment?

Okay, so you didn’t follow your game plan and decided to style drift. But why? Did you get into the trade because a buddy told you to; itching to get into a trade and make something happen; or just out of boredom. You see, you have to get into greater detail and answer the why.

A better way to journal:

I broke one of my trading rules and ended up losing $150. My trading rules say that I should only trade stocks on my watchlist. One of the traders in my chat room gave me the play, but I need to take responsibility for my trading.

In addition, its a good practice to review what your strengths and weaknesses are. For example, if you look at your results at following other people’s plays, and see that they lose money, then its probably less likely you’ll style drift in the future.  

Bad Journal Entry #2

I am the man, very pumped to take 8% out of this trade.

What’s wrong with this comment?

Nothing. He really is the man. Just kidding.

Imagine that guy reading his journal 6 months from now, what can he possibly learn?

Not much, right. You’ve got to get into greater detail: the trade setup, logic behind the trade, why you liked it, what was the risk/reward, and any other factor that you feel influenced your decision making.

A better way to journal:

The stock hit the lows on its highest volume of the day. I took it long thinking it would bounce. With the stock trading at $50.10, I was only risking $0.10, a break below $50 would indicate to me that the stock had further downside. In addition, the stock is down 30% on no real significant news.  In terms of a profit target, I didn’t have one, was just looking a quick scalp.

It worked exactly as planned. However, the stock actually moved much higher than I anticipated. Maybe I should hold some shares if the trade is looking good, instead of closing out completely. That is something I will start doing and keep records of.

Bad Journal Entry #3

I got shook out because I was not confident, but if I waited an hour, the stock moved like I thought it would, ended up losing $500.  

What’s wrong with this comment?

Everything. Was this a good entry? Why did you get shook out? What was the plan?

You see, if this trader would to read this a month from now, what could they learn?

I hope you are noticing a trend here. The clearer and more detailed your journal entry is, the more you will learn and develop as a strategy.

A better way to journal:

I had too many shares on in this trade, and I didn’t give myself enough wiggle room. Once I saw the stock move against me, and realizing I was oversized on the position, I got shook out and end up losing on the trade.

Here is the thing, my logic was right. However, by improperly sizing my trade, this turned out to be a loser. In the future, I need to give myself wider stops and trade smaller on more volatile names.

This at least attempts to address the problem of the trade. There is a reason why the trader got shook out, they need to figure out why and what they can do to get better next time.

Bad Journal Entry #4

Another bull flag pattern. I’m bad at picking these and slow at the executing. I wanted to get long at $10, however I chased like a fool and bought  at $10.40, causing me to get long at the highs and out at the lows. This trade ended up costing all of my days gains and then some.

A better way to journal:

I took a trade that was not one of bread and butter setups. Whenever I do that my PnL suffers. Not only that, but I executed the trade without any discipline. In order to correct this from happening again, I must review my trade history, clearly define what my best trades are and focus on those exclusively. In addition, remind myself what happens when I deviate from the plan, and review my PnL when that occurs.

You see, you want to develop the habit of taking responsibility for your trading. Your early stages will be filled with mistakes, which is only natural. However, since this is the money game, you want to learn as quickly as possible, while losing the least amount as possible.

Final Notes

If you take one thing from this blog post, it’s that the devils in the details. The better you take notes, the likelier you’ll be able to make changes and improve your trading. However, it doesn’t necessarily have to stop there. In fact, tracking other areas of your life to improve your trading is encouraged, and should be journaled.

For example, tracking and recording: your diet, sleep patterns, stress levels, exercising routines, can all be helpful in developing a positive routine.

Journaling is one of the most important things you can do as a trader. Make sure you get the most out of it, and try to be as detailed oriented as possible.

 

Don’t wait. Accelerate your trading potential right here!

 

 

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