How to make your jounal valuable

It’s rainy season in Los Angeles. We live in a desert. We very rarely get precipitation from the sky. Oftentimes you might wake up and see that there’s moisture on the ground, but it’s very interesting here because most Angelenos learn to drive in what is effectively summertime for most people because the weather here is normally amenable.

I grew up in the northeast and so we had to learn to drive in four distinct seasons. That means dew on the road in the morning, it means black ice in the winter, roads that aren’t paved, roads that are paved, but not completely salted. Rain, wet leaves. So there’s a million different combinations. So you learn very quickly that it’s one thing to drive. It’s another thing to know how to handle a car. What happens when you go into a skid, for example. Typically you have to turn into the skid, let your foot off the accelerator. You don’t hit the brake, and you kind of steer your way out of it that way.

And it reminds me about journaling. We talked about journaling. I think it’s a very unique situation in trading. What I find when a lot of people journal is what they’re really doing is keeping a General Ledger. That means at 7:51 AM on Wednesday, I put on a trade XYZ at this position, at this price, yada yada. And then when you get offset for gains or losses, you enter that way. I think writing it in a form of a diary can certainly be helpful. I think if you, right, because now we’re speaking today about managing the trade on some level and what can you dissect from that experience? Put it down in writing because as they say, a short list is better than a long memory.

People tend to forget from day to day to day. So the things that I would include in the journal entry would be how did you feel putting on the trade? Were you excited about the prospect of making money? Did you have a great sense of anticipation? How can you describe emotionally the work that you did or didn’t do? Right? If you’re winging it, put that in there. If you’re shooting and taking a flyer, testing an idea, put that in there. So that this way, if you were a detective and this was all the data that you had from your investigation, what could you conclude from that? Because that’s the only way that you’re really going to grow, is by being your own teacher. In a lot of ways. You could talk about your expectations, as I like to say, and I certainly didn’t invent this. Expectations have built in disappointments.

But nonetheless, people do things with their money that you can’t really explain. You could talk about where did you originate the idea? Is it something that you did from the screening processes that I showed you? Or did you pick this idea up in social media or TV? So this way you get to track everything because then as you look at your p and l and you see the number of trades you can kind of reverse engineer where and how can you possibly develop a trading edge, if at all possible? You see? So this is very valuable information, but I would approach it journalistically as much as I would like a diary so that this way you have quantitative and qualitative information that you can go to school on yourself. Now, personally, I don’t know if you’re going to see anything valuable in a week. Maybe you can, but you want to think about doing this, Maybe writing for five minutes before the open when you’re about to start trading and adding risk.

And then at the end of the day, as a follow up, what was your beginning thoughts, your ex anti expectation versus your ex-post realization? What happened versus what you thought was going to happen? And then you can reconcile that because then when you can find out the variance, like what happened? Was it your behavior? Was it the market? And then how can you adjust your behavior to take into account the unforeseen, the numerous, unforeseen things that can occur? And remember, we make our money and lose our money mostly because of position sizing. So you don’t have to worry about your entries so much. I’ll say this as an aside, if you’re worried about 10 cents of slippage, your account is probably too small because that’s the cost of doing business.

Don’t let that get you hung up. If you’re trying to trade for $10 or $15 in gains for stocks and several points for futures, a few ticks here and there isn’t going to be a material percentage of what’s on the table, you see. Anyway, that’s how I would approach journaling. If you have a phone, you can use your microphone and record it, then you can go to a transcription service if that’s better for you. If you don’t know how to type or if you don’t sitting writing into a notebook or some other people, they can’t even read their own handwriting.

But that can be very, very helpful. You can also write down what was happening in the world. What did the market do overall? You see what was going on in the world? What are some of the macro factors that are going on for your trading? All that can help because when you read it back weeks and weeks later, you can kind of see patterns from reading all of your notes that you’ve kept along the way. And that might help you ideate a new process or help you hone an existing process to be closer to one that serves you right? Because at the end of the day, you want to have something (a trading plan) that’s compatible with you financially and emotionally.

This is a computer generated transcript.

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