Thu 3 Jul 2008
How I keep my journal
Posted by ray under Generic Success
WHY do we as traders need to keep a journal?
With a balance of self-discipline and cognitive flexibility, rules can be applied to enhance trading performance.
This self-discipline includes:
1. Start every day fresh. Think of a mantra : “There’s a bullet coming toward my head today, and I’ve got to figure out where it’s coming from and how to stop it.” This mantra can bring down overconfidence, instill humility and encourage preparedness.
2. Invest an amount of money that is comfortable. If we invest on money that is on the line, or what we stand to gain, then judgment will be impaired. When emotions become overwhelming, ‘throw a maiden in the volcano.‘
3. Plan and Invest :Linda Bradford Raschke counsels, “Know what you are going to do BEFORE the market opens.” Mark Cook remarks: “Planning is the objective part of trading. Start with the worst case scenario and work from there.”
4. Learn from past mistakes. Keep a psychological journal. Journaling is the most commonly prescribed method as trading psychologist Dr Brett Steenbarger points out. Keeping a decision journal is an important part of a trader’s daily training and practice. While athletes exercise their bodies and hone their physical techniques, investors need to be aware of defects and advantages in their mental game. If athletes must spend hundreds of hours in practice and training for each hour of actual competition, journaling process may seem excessive and time consuming, but this is the price traders have to pay.
Some Questions for template of Psychological Decision Journal:
1. Pre-decision : What are my qualitative reasons for investing in this security? What is my level of confidence in this decision? What is my advantage? What objective changes in conditions will change my decision? What are my specific criteria for a buy/sell?
2. Post-decision : How am I feeling about the pre-outcome?
3. Post-outcome : Was it accurate ? Any flaws in the decision process? Can I find patterns to compare with my previous decisions? Did I deviate from my investment philosophy? What were the most successful aspects of this decision.
CONCLUSION
This psychological decision journal template should be used in conjunction with a spreadsheet journal with quantifiable statistics. They include style of trading, eg swing trade, intraday trade, long-term position etc. Also stop boundaries for both time and price and objectives including expected risk/reward probabilities, number of losing and winning trades, to find evidence of loss aversion.Biases towards periods of favorable sentiment can be detected on both templates BUT by dragging this out into the light of day, one can then try to solve the problem/s to become a better trader.
ANA aka IDKIT
Ag Moderator
July 3rd, 2008 at 12:21 am
#Cross ref www.awanginvest.com
From the page of J Wyckoff - The Importance Of Knowing What You Don’t Know
The headline of this educational feature may be a bit confusing, but I will explain what I mean shortly. First, I want to reiterate that trading futures, stock and FOREX markets is not an easy undertaking.
It disgusts me that there are a few unsavory people in our industry that portray trading as an easy, get-rich-quick scheme, or as some endeavor for which there are “secrets” to be learned from those who hold “trading secrets.”
Folks, the plain truth is that there are no trading secrets and no easy paths to quick success in trading markets. Beware of anyone who tries to tell (or sell) you such.
One of the biggest obstacles to success in trading markets is a lack of knowledge and understanding of the process of trading. The “process of trading” includes understanding financial leverage, market behavior and trader psychology.
Understanding the process of trading can be achieved with perseverance and a willingness to continue to learn.
UNQUOTE
By idkit on Jul 3, 2008
July 3rd, 2008 at 12:33 am
From the page of Ray Barros:
Unless a market reaches my zone, I pass on the trade. Once in a zone, I look for setups and entry patterns. This approach of using context and zones to filter my setups is a distinguishing feature of my style of trading. The setups I use aren’t all that unique. But my insistence that the market must first reach my zones allows me the luxury of being able to exit some trades that are ‘wrong’ without loss.
These trades Pete Steidlmayer called ‘free exposure’ trades. It is the knowing (over a large sample size) of how a trade ought to behave after entry that provides me with my edge. Once I am in a trade, I ask the three questions:
1. What does the market have to look like for me to remain in a trade?
2. What does the market have to look like for me to exit immediately?
3. What does the market have to look like for me to stop and reverse? In this case, the stop out would tell me something about the trend of my time frame. UNQUOTE
The above three questions are Ray’s famous refrains, which are useful to ask when writing my journal.
ANA aka IDKIT
Ag Moderator
July 3rd, 2008 at 3:27 am
Cross ref www.awanginvest.com
From DanB
I agree - I’ve been keeping a journal (http://www.traderslog.com/forum/forumdisplay.php?f=79) and it helps a lot in giving you perspective.
By Dan Blystone on Jul 3, 2008 | Edit
July 3rd, 2008 at 9:40 am
Hi Ana, I couldn’t spell psychological so i called it Bio-Feedback.:) I used to under-estimate the importance of this.I thought i’ve had big bets at the races,casino etc etc: its just another bet with improved odds with the trend. Well, you get a few losses and you start to question your judgment(fear).You have got to be brutally honest with yourself.I have found many weaknesses in my character,so my way of solving it was to research data and my notes,then i mechanized those areas where i was weak.It’s probably going to sound crazy but what started out as a grubby little money- making motive 22 years ago,has turned into the getting of wisdom and understanding on various levels.
Plus if you don’t keep a journal,Ray will get annoyed and he knows karate.cheers baz
July 3rd, 2008 at 10:26 am
Baz
If you go to Traderfeed at http://www.traderfeed.blogspot.com/
you will find Be Prepared well received:
* Triple Bottom? - Trader Mike finds this and other worthy topics among his link updates.
* Missed Opportunity - GlobeTrader offers unusual insight into the dynamics of missing trades.
* Being Prepared - Ray Barros, with an excellent post on the value of contingency plans.
So, perhaps, you can pull some strings for me and get me the ‘ray’s’ much needed.
There is a Chinese saying: a scholar uses his brain wave not his brawn!– not that Ray will ever use violence against a lady and a student who has been so hard working, too!
ANA aka IDKIT
Ag Moderator