Suggestions for trading journals

G

Ghost of Cutten

Here are a few suggestions for anyone making a trading journal on here.

i) Give explanations for your positions, rather than just state what they are. A call with no explanation is not meaningful information. You don't have to give away your exact strategy but some kind of trade reasoning is important.

ii) Discuss your position size. Otherwise it is impossible to tell if call A is 10 times the size/risk of call B, for example.

iii) Give some idea of your risk control approach, how you deal with losing trades, when and why you exit. How to manage risk and losing positions is an important aspect of any attempt to trade.

iv) Give prices and times for entries, exits, and other position adjustments. Again they don't have to be exact but readers aren't going to check the time stamps of every trade in a journal, and without prices we have no idea how you are doing.

v) Let us know your approximate results. You don't have to disclose exact $ figures, but % returns would be useful, and at the very least, a profit (or loss) vs amount risked is needed. Without this, there is no performance measurement at all.

The ideal trading journal is one where any trader reading it can recognise all the important elements of trading, and see how the author handles them - how he or she struggles with the dilemmas of running vs taking profits, choosing appropriate size, exiting bad trades, handling drawdowns, implementing strategies in real-time with limited and changing information, and (hopefully) making profits and improving as a trader.

Now, for reasons of privacy and so on, that ideal is rarely if ever reached. Most people don't post trading journals at all. But the closer you can get to it, the more useful, credible, and interesting your trading journal will be. There are also some kinds of journals whose goal is not optimal trading, for example someone might be doing a journal to instruct, in which case the size may be minimal; another might be experimental, so again large size is not going to be used; or there are ones done for PR or bragging rights, where the outright $$ P&L is not as important as the risk to reward ratio over the lifetime of the journal. And some journals preclude detailed discussion (e.g. intraday trading) because the timescale is too short to make live calls and posts. In such cases, an after-the-fact diary is the only option - but most of the other elements can still be discussed.

Another way to look at it is to consider what would be a bad trading journal. E.g.

i) posts trade entries only
ii) no posted reasoning for trades
iii) no posted price for trades
iv) only posts exits on profitable trades
v) no description of P&L
vi) losing trades and drawdowns are not discussed
vii) no analysis of errors, no discussion of lessons learned, no attempt at improving the approach or strategy
viii) position sizes not disclosed
ix) no hedges or partial profit-taking discussed
x) no discussion of selection of best trade instrument
xi) no discussion of position correlation
xii) no trade planning discussion (i.e. what to do if the trade doesn't work out; how to handle unexpected events etc)

I am sure there are many others I missed. Feel free to add your suggestions.
 
Quote from Ghost of Cutten:

Here are a few suggestions for anyone making a trading journal on here...

Feel free to add your suggestions.
More...

It would be very helpful to those that start journals that yourself maintain a trade journal here as an example of what you want others to do.

If you can't do it, don't expect others to do it (seriously).
 
Quote from wrbtrader:

It would be very helpful to those that start journals that yourself maintain a trade journal here as an example of what you want others to do.

If you can't do it, don't expect others to do it (seriously).
More...

I have a trading journal that I maintain here. In fact, part of my reason for posting this thread was to improve my future journal entries so they are more useful, informative, and accountable.

I don't want or expect others to do trading journals, or to do them in any particular way - that is entirely up to them. However, if they want to post trading journals that others find useful, I have made some suggestions, and invited suggestions from others, on how better to do that (and I will be trying to do that with my own future journal entries).

Besides, it is quite legitimate to make and invite suggestions on how to do something, without doing it oneself. For example, readers of 'How to" guides may make comments on what aspects they find useful, and what missing aspects they would like to see. It is not a requirement that they themselves write 'How to' guides - their comments are just as valid even if they only use, rather than create, guidebooks.

Similarly, concert goers may make suggestions about the quality of the sound, the volume, venue conditions etc - a suggestion that only people who have promoted a concert should say anything about concerts would be misguided, in my opinion.

Do you agree?
 
Quote from Ghost of Cutten:

Here are a few suggestions for anyone making a trading journal on here.

i) Give explanations for your positions, rather than just state what they are. A call with no explanation is not meaningful information. You don't have to give away your exact strategy but some kind of trade reasoning is important.

ii) Discuss your position size. Otherwise it is impossible to tell if call A is 10 times the size/risk of call B, for example.

iii) Give some idea of your risk control approach, how you deal with losing trades, when and why you exit. How to manage risk and losing positions is an important aspect of any attempt to trade.

iv) Give prices and times for entries, exits, and other position adjustments. Again they don't have to be exact but readers aren't going to check the time stamps of every trade in a journal, and without prices we have no idea how you are doing.

v) Let us know your approximate results. You don't have to disclose exact $ figures, but % returns would be useful, and at the very least, a profit (or loss) vs amount risked is needed. Without this, there is no performance measurement at all.

The ideal trading journal is one where any trader reading it can recognise all the important elements of trading, and see how the author handles them - how he or she struggles with the dilemmas of running vs taking profits, choosing appropriate size, exiting bad trades, handling drawdowns, implementing strategies in real-time with limited and changing information, and (hopefully) making profits and improving as a trader.

Now, for reasons of privacy and so on, that ideal is rarely if ever reached. Most people don't post trading journals at all. But the closer you can get to it, the more useful, credible, and interesting your trading journal will be. There are also some kinds of journals whose goal is not optimal trading, for example someone might be doing a journal to instruct, in which case the size may be minimal; another might be experimental, so again large size is not going to be used; or there are ones done for PR or bragging rights, where the outright $$ P&L is not as important as the risk to reward ratio over the lifetime of the journal. And some journals preclude detailed discussion (e.g. intraday trading) because the timescale is too short to make live calls and posts. In such cases, an after-the-fact diary is the only option - but most of the other elements can still be discussed.

Another way to look at it is to consider what would be a bad trading journal. E.g.

i) posts trade entries only
ii) no posted reasoning for trades
iii) no posted price for trades
iv) only posts exits on profitable trades
v) no description of P&L
vi) losing trades and drawdowns are not discussed
vii) no analysis of errors, no discussion of lessons learned, no attempt at improving the approach or strategy
viii) position sizes not disclosed
ix) no hedges or partial profit-taking discussed
x) no discussion of selection of best trade instrument
xi) no discussion of position correlation
xii) no trade planning discussion (i.e. what to do if the trade doesn't work out; how to handle unexpected events etc)

I am sure there are many others I missed. Feel free to add your suggestions.
More...

Set an example by going first.
 
I think the trade-by-trade approach is self-destructive for any active trader.

Lets not forget that the outcome of every single trade is pretty much a random event, as long as the trading plan rules where followed a trade must be considered as a good trade, regardless of its outcome.

I do believe in a private trade-log, where each trade is recorded with all the information required to track whatever metrics a trader wants to monitor wrt his/her own trading performance.

From a public journal point of view, I favor a weekly summary approach, which gives the trader a chance to reflect upon his/her trading performance as a whole.
 
Quote from dom993:

I think the trade-by-trade approach is self-destructive for any active trader.

Lets not forget that the outcome of every single trade is pretty much a random event, as long as the trading plan rules where followed a trade must be considered as a good trade, regardless of its outcome.

I do believe in a private trade-log, where each trade is recorded with all the information required to track whatever metrics a trader wants to monitor wrt his/her own trading performance.

From a public journal point of view, I favor a weekly summary approach, which gives the trader a chance to reflect upon his/her trading performance as a whole.
More...

But if the approach is active trading, then what is the problem with any given trade losing money? If a trader starts his journal saying that he works a moderate edge with lower win rates, and thus large losing streaks can occur, then surely the readers of the journal (and obviously the trader himself) can take account of this? Instead of paying much attention to a single trade, people will pay attention to how it performs over 10, or 20, or 50 trades, depending on the expected win rate of the strategy.

For example a breakout player will expect to lose frequently, and hit the occasional home run. If this is their approach, they state it up front, and cut losses quickly each time, then I think there's no problem with recording that - in fact, it will give a more realistic view of trading a strategy, rather than the swinging for the fences style that many trading calls and journals follow.

The problem with a backward looking journal is credibility, especially if claims to significant profits are made. It is also less useful for the audience - it is much easier to rationalise decisions after the fact, and the temptation to window-dress positions, explanations etc, is enormous. But I agree that for some active short-term styles, real-time or before-the-fact is not possible. However, even someone posting after the fact can still do things like explain their trade rationale, mention their position size (even if just 'large', 'small', 'medium' - exact $ or % amounts are not essential), talk about their plans for how to exit if the trade goes wrong etc.

A big problem with announcing trades in advance is then feeling pressure to stick to the position. This is one good reason why people might not want to post a live trading journal.
 
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