The Road to Successful Trading

The Trading Journal-your best friend 
Most traders work in isolation. In fact, many seek the independence that trading offers. However, 
isolation can be dangerous because there is nobody else to point out mistakes or present new ideas.
There is only the trader and his/her protective ego. A lone trader can become easily trapped within 
their own reality of how things are. Some traders realize this weakness and justify the expense of 
having a trading mentor who monitors every trade and provides some sort of “objectivity” to the 
trading experience.
However, most traders aren’t quite so pragmatic or can justify the expense even though just one 
good observation a month can easily pay for the mentor’s services. Luckily, the trading journal is an 
effective and inexpensive way to bring in much needed perspective and the ability to make self 
corrections. But regardless of whether or not you take on a mentor, performing the task of trade 
postmortem must become part of your trading procedures.
By trading, you are paying for the potential lessons provided by each trade but if you don’t take 
advantage of the opportunity, you don’t capitalize on that value you are paying for anyway. 
 
Key Questions to ask yourself 
 
Simply put, a trading journal forces the trader to analyze each trade and ask some key questions 
such as: 
1. Did I implement the system properly? If not, why not? At least at the beginning of your 
trading career, it’s a good idea to use a checklist to walk thru the steps used in your trading 
system. This helps to condition yourself to the procedural flow. After a while, you will 
probably cut this step out, but if you find your results aren’t what you expect, go back to 
using the checklist to make sure you haven’t subconsciously cut out some important steps. 
Remember, you want to remove any variations from the implementation your system. The 
more mechanical, the better. 
How to Design and Construct An Effective Trading Plan 
50
2. How did I do on the trade in terms of ROI? Return on your investment (ROI) is your 
systems performance report card. Normally, traders will already have an idea of what the 
potential profit might be before entering into a trade. However, the proof is in the profit or 
loss and when you exit the trade either your system (not you) will be validated or not. 
Another important aspect of ROI is also considering if you had your stop loss in the proper 
place. Are you using a support level or a percentage of estimated loss as your stop? One of 

---

the important keys to being a successful trader is limiting losses and overcoming your 
ego’s need to be correct. 
3. What could I have done differently to improve the ROI or avoid the loss? This is where the 
growth comes. First, accept that you will not be correct a certain percentage of the time. 
You learn what to expect from your system by doing a significant number of paper trades-at 
least 100 trades. But, if things aren’t going the way you want them, either the system is off 
key or you are doing something wrong in how you implement it. By doing everything the 
same way, you hope to isolate any problems to the system. If you find that you are 
following the procedures and not getting the results, it is time to stop trading and rework
your system and then paper trade until you have a good feel of what to expect. (75% win-
loss, for example). 
Also, as you close-out and record each trade in your journal, re-examine it to look at what 
happened after you closed out the position and if you left a lot of money on the table. If so, 
what could you have done differently to optimize the trade?
If you had a losing trade, make sure to spend time dissecting what happened. Make sure to 
WRITE OUT IN YOUR JOURNAL WHAT ERRORS YOU MADE. UNDERLINE or 
HIGHLIGHT THEM so you can pick them out quickly when reviewing your journal.
The trading journal is all about learning, looking for patterns and finding ways to optimize 
results.