How many times have you read a book or a post telling you to keep a trading log. But you don't. Or it isn't consistent or some other excuse.
The reason I believe that most traders don't keep a log (remember most traders don't make money either) is because it requires discipline. And it requires that you confront your trading - warts and all.
I've posted a copy of today's trading log for the ER2 and YM. You'll notice that there are 2 trades that shouldn't have been taken at all! Also you'll note I calculate my average winner, average loser, and my winning %. That tells me my expectancy. Also all my profits and losses are denominated in R values (that's risk values) not ticks or dollars. This keeps me honest. If I risk 20 ticks to make a 2 tick trade then I don't get "rewarded" for that. However if I make a 20 tick trade with a risk of only 2 ticks then I do.
By the way thanks to "Ontariodave" for the inspiration for the grading system you see on this trading log. The idea is that for each of my trading components: 1) signal, 2) mechanics, 3) Position Sizing, 4) Trade Management, 5) and Exit mechanics I get a grade - just like school. Depending on how I handle each of those components. So at the end of the day I can quickly evaluate where my weak points were. Today I had trouble identifying valid signals. It was tough - we were in a trending market most of the morning (and this is a methodology that looks to fade breakouts).
Another thing I'd like people to note (just as Brett Steinberger says in his book "Enhancing Trading Performance" is that good traders will take that 5th attempt at something even though they've had several losers in a row. Inevitably, that is when I have my biggest winner (note the 5R winner at trade 8 after being -4R on the morning).
Good luck with your trading and I hope this inspires you to keep a trading log or improve your existing trading log.
Thursday, April 10, 2008
Posted by Lord Tedders at 2:06 PM