Make your Journal Compound your Trading

As some of you know I coach high school cross country with my wife Joan. At first glance you’d think that running and trading don’t have a lot in common, but as with many performance activities there are lessons to be learned from each.

Today the team did one of the tougher workouts of the year (safely socially distanced, mind you) at one of my favorite running venues, Brumley Forest Preserve. The workout is 4 intervals around a 1000m loop (or 3 for the freshman). The pace is steady, steady, fast, then back to steady for each interval. This is one of the 8-10 quintessential team workouts that serve as anchors for us to determine if we’re on track to meet our season goals for the team.

We keep meticulous records for these important workouts. I record each time for each interval for each kid in a grid on a sheet of paper along with some notes. These really important workouts we only do once per season, so as the kids progress through high school it becomes more and more important to refer back to previous years’ results to track their improvement. This provides a great perspective for, say, a senior who feels like they didn’t have the best workout today to go back and see just how much they’ve improved over the years. Maybe the workout didn’t go as badly as they thought it did. It’s not only upperclassmen – even the freshmen get a taste by comparing their times to freshmen of previous years.

What we’ve realized over time that as valuable as the times for the intervals themselves are, the notes about the intangibles turn out to be perhaps even more valuable. For example, on the interval loop there is a small section of clay that you run through. We’d never really taken much notice of it but today it played an oddly important role. It had rained the previous night and the clay ended up having a perfectly sticky texture and caked on the bottom of the runners’ shoes on each interval. So at the halfway point of the interval – where the loop bottoms out and gets harder for the rest of the way – the kids’ shoes were probably a pound or so heavier over the next 50-100 meters as the clay came off.

It was also oppressively humid today, but not so hot. This is another detail I keep track of on the sheet. And of course each individual runner has significant things going on today that might affect their mindset. Some have just dropped an older sibling off at college for the first time and they’re suddenly an only child. Another just had a zoom recruiting call with a division 1 program the evening before and was particularly fired up.

Of course there are a thousand things we COULD keep track of – but what’s important?

What’s true for high school cross country is also true for your trading.

What’s Important Enough to Keep Track Of?

In your trading journal the most important thing is to record the profit from each trade plus the entry and exit time so you can go back to a chart and overlay your trade on the chart. This is the bare minimum and should be your starting point.

Once you start trading multiple strategies (you are or are working towards that, right?), the next essential thing to record in your journal is the strategy that the trade came from. This is really critically important.

It’s really hard to over emphasize this point. It’s probably the single most important data point in my trading journal. There’s really no question in my mind that my trading profits would be FAR less if I didn’t track the strategy. Tracking it allows me to:

• Easily see strategies that are performing well and performing poorly
• Quickly make decisions to scale up size in a strategy that’s doing well
• Scale down or stop trading a strategy that’s doing poorly
• Identify which strategies I should focus my research on

Your daily P&L – that single number – hides so many details about how your trading is really going and yet that’s the only number that the vast majority of traders look at when evaluating their performance if they evaluate it at all. If you have multiple strategies that you’re trading with different sizing, then you overall P&L is going to be woefully inadequate for measuring your trading performance.

Beyond the Basics

What are the important intangibles you should keep track of like the weather or the sticky clay in the interval workout today? There is no one size fits all solution – it’s going to depend on the strategies you trade and what’s likely to have an effect on them.

It’s probably not going to be immediately apparent on day one what additional parameters you should be keeping track of. What you should be doing over time is getting better and better at discovering what will be valuable to look back on in the future.

Here are some concrete examples of things I started keeping track of in my journal that turned out to be extremely valuable. These things are very likely irrelevant to the strategies you trade, but should give you some ideas.

Trade Timeframe

When I first started trading gaps, I traded off the 30 minute bars. After some success, I decided to trade the same system off the 15 minutes bars where there are more opportunities. When I started taking these additional trades, I started keeping track of the timeframe that I took the trade off of. In addition to the strategy, I added a timeframe field and used 30 minute bars or 15 minute bars depending on the timeframe I took the trade off of.

Although it’s been several years now I remember distinctly how this benefited me. Right away I had a couple really big winners off the 15 minute bars. After 2-3 months though, I looked back at my journal and realized that the trades I was taking off the 15 minutes bars, in aggregate, were performing pretty poorly. This was a shock to me as those initial winner weighed heavily in my mind – I assumed that timeframe was really profitable for me. At that point I quickly took a step back and reevaluated that new timeframe entirely.

Re-entering Trades

With one particular strategy I trade, there could be a trade in a particular stock that I take that stops out pretty quickly, but then another setup materializes in the same symbol. Do you take that trade? It’s a question I’ve thought a lot about (here’s a specific example).

Re-entering trades is a really good example of something you should be keeping track of. Was this trade the first attempt of the trade or a subsequent attempt? It’s easy to try to draw conclusions from a trade or two but the aggregate is all that matters. Looking back over my journal I see that taking these second or third opportunities actually play out pretty well in this particular strategy.

Is Every Trader Watching This Symbol Today?

Every trading day is different. Some days there’s been nothing on my trading radar while other days there’s literally been 600 stocks that, technically, fit my criteria. That context is really important. Imagine a trade that’s gapping an average amount. If there’s 30 stocks that day that are gapping the same amount or higher that stock is less unusual than if there are just 1 or 2 stocks gapping a similar amount.

If there are a lot of stocks to choose from then a particular trade you’re making doesn’t have every traders’ eyeballs on it. If it’s the only thing moving then you know that it probably has the focus of almost every trader. Those are very different situations and something I wanted to start keeping track of. I started labeling my trades from this strategy with “Premier” if the stock was close to one of the few symbols in the universe that day. Over time I could evaluate performance on these Premier plays separately from other trades in the same strategy. This is insight that just isn’t possible without keeping track this way.

Keep Track of Changes to your Trading System

One of the most important things to record is when you make alterations to your system. For example, you increase trading size, change a rule in your system to take more or fewer trades, etc. It always seems in the moment like I’d never forget making a change like this, but it doesn’t take long to forget these things. Wait – what day did I make that change to the system? That is a really important thing to keep track of and I used to overlook it.

What is NOT Worth Keeping Track Of?

There is no limit to what you can keep track of – the amount of data is endless. I often think that trading is mostly about figuring out what you can comfortably ignore. Your trading journal is only going to be valuable if you put thought into it and track things that have a good chance of being important. If it becomes a chore to track a lot of data points that end up being unimportant then you’re going to be less motivated to go through the effort.

Here are some things that I purposely don’t record in my journal because they didn’t turn out to be valuable to me.

Any Data Point You Can Easily Recreate Later

There’s really no point of keeping track of data that you’ll easily have access to in the future. For example, the amount a stock is gapping, while important, isn’t a data point you should devote a lot of keystrokes to recording for each trade since you can easily retrieve this value in the future from any number of data sources. It’s great if you can automatically capture it, but if it takes any effort at all I skip data points like this one. Again, it’s not because I think they’re unimportant – they certainly are – it’s that it requires so little effort later to recreate them.

Your Feelings, Mood, Sleep, What you Ate, etc

I know a lot of traders are big on these characteristics of yourself in the moment. Some traders even wear Oura Rings to systematically record sleep patterns and vital health statistics. I like the idea of automatically recording these things, but I’ve found that any effort to manually record this stuff just doesn’t turn out to be very valuable.

The precision with which you’d need to record these feelings and such just doesn’t seem possible and even if you could, in my experience, there seems to be little if any correlation with my trading performance. There’s just a lot of other things that have actual tangible correlation with a trading strategy that should have priority over this.

Anything that Likely Won’t Be Important Later

There are a lot of things that seem really important in the moment in a given trade, but in a month when you’re looking back over several trades will not be important. Spend time thinking about what you’re likely to want to look back on in the future and just don’t bother with the other stuff.

What are some things that you track in your trading journal?