Quantitative Trade Journaling

Every one of us keeps a trade journal (or some call it trading diary), or it is highly recommended that we should keep a trade journal :-P Most trading books and websites that teach trading talks about keeping a trade journal. Trade journals serve the following purpose:

• If we keep the screen captures of your charts, we can review and refine your entries and exits (especially after a string of losses). If we record what we are thinking when we place those trades, we can even review our psychology or mentality when placing the trades.


• Allow us track and keep records of our weekly, monthly or yearly performance and results, especially by specific trading strategies or trading systems. A good way to access the profitability of a trading strategy or system is by its expectancy. You can read about this and also about various methods of position sizing from Dr Van Tharp's book"Trade Your Way to Financial Freedom". These useful data are not provided out-of-the-box from our brokerage account statements or history and hence, can only be derived from our journal.

Most trade journals keep track of information such as entry time, entry price, exit time, exit price, lot size etc. Now, may I introduce 2 other useful parameters which I feel should be included in trade journals especially for aspiring traders!

Keeping track of our discipline

In a seminar, Ray Barros introduced his 3-1-0 method of journal keeping. In a nutshell, It is a means to quantitatively access at the end of each month if we have been following our trading plan religiously.

We can use any system for this. For instance, I can grade myself a 'A' if I followed my trading plan exactly for a particular trade. 'B' if I did not follow my trading plan completely. 'C' if I did not follow my trading plan at all. The idea is to get as many 'A's as possible every month!

Tracking our profit potential

Next, we also need a way to quantify how well did we perform for a particular trade. I got this idea from Dr Alexandra Elder's books. He used a A-B-C system to grade how well did he capture profits in a trading channel or Bollinger Band.

So what I did was, I will give myself a 'A' if I capture more profits that what I should get. "Capturing more profits" may mean I took an entry at a better price or I used trailing stops to capture more profits etc. Basically, I got more profits than what I could as per my trading plan.I will give myself a 'B' if I got the amount as stipulated in my trading plan. A 'C' if I got lesser than expected. 'A's and 'B's are fine but I will need to do some self-reflection if my percentage of 'C's is increasing as the months go by.

With a more quantitative method of trade journaling, we could, besides just tracking our performance, have a gauge to access our discipline and move nearer to a having a trader's psychology!