Human beings accomplish amazing feats.
We’ve split the atom.
We have traveled to outer space and beyond.
But despite all our achievements, we still struggle to be honest with ourselves.
And when it comes to our trading, too many of us rely on a foggy memory rather than data to judge performance.
But you know what?
The turning point in my trading occurred when I started journaling. Instead of making decisions based on a hunch, I started to make them because I had a quantifiable edge.
Honestly, ask yourself… do you journal?
I mean, do you keep a real journal of your trading activity?
Not one that only shows the trades you “meant” to take. A journal that shows every click you made.
Most of us find this simple task incredibly difficult. We’d rather ignore what we know lies underneath. While others don’t even know where to start.
I’ve seen plenty of traders break down in tears once they read their real results.
Believe me…it’s a humbling experience. No one wants their failures thrown in their face.
A trade journal doesn’t have emotion. It doesn’t care about your feelings. The journal shows you what happened, trade for trade, in black and white.
When you finally give over to the journal, you feel a sense of relief. A weight finally lifts off your shoulders.
How do we get to that point?
To the place where we hold ourselves accountable?
Let me show you how to create your own trading journal.
So that you can stop trading off hunches and start trading off an edge.
Let’s walk through the key elements of a trading journal.
Remain Subjective – Without a shadow of a doubt…the hardest part of journaling is remaining unbiased.
You cannot let your emotions dictate how and what you write. Quite honestly, if you can’t do it at the moment, jot down some notes and come back later.
Think about professional athletes. Plenty spend countless hours with psychologists to hone their games. Why would you expect trading to be any different
Take pictures of your setups – You won’t glean everything from just tracking your trades. Charts give you invaluable context. They let you see not just the trade, but what came before and after.
Most computers have a “snipping” tool with them that works great.
Categorize your setups – You’ll go through plenty of setups as you figure out your style. Mark the different types. Are they crossovers or TPS? Do you follow trends or try to pick swing points?
Note the details of the trade – It probably goes without saying, but write down the actual trade. Include a few key elements
- Time frame
- Symbol (I’ve forgotten this before as dumb as it sounds)
- Time of day, day of the week,
- Entry and exit price
- The amount you traded along with total capital
- Targets and stops
- The type of market you’re trading in (bull or bear)
Mark your winners and losers – Not only do you mark what you won and lost, mark how much it ran past your levels. You may see your stops are too tight, or your targets to close.
Don’t trade for a profit goal – Focus on your decisions. When you make the right decisions over and over, the profits will follow. Targeting profit puts way to much pressure to perform rather than learn.
How it led to TPS
Each piece you learn builds on the last. When I first started, I would see each chart as a blank canvas.
Walk with me through how I actually created my TPS System.
Clear your minds…
Imagine you knew little about charts and saw the one below.
Gut reaction – what’s the first thing you see? Actually describe it out loud.
“I see a stock that started at the bottom left. It jumped up a lot one day.”
Great! That’s exactly what anyone should see. What’s it doing now?
“It’s not moving as much. But, it’s still moving up and to the right.”
Bingo! Look at the arrows we’ve drawn. That, my friends, is a trend. It’s really that simple.
The first thing I noticed when I began journaling were trends. Whenever I traded with the trend, I did better than against the grain. That cleared out all strategies that try to pick tops or bottoms.
How about patterns?
Let’s clear our minds again…
If you were to draw straight lines around clusters of candles, what would it look like?
Yeah, it looks like my kid drew it. But stick with me here. Notice how the recent trading starts to look like a triangle coming together?
Congratulations! You just found a consolidation pattern!
Patterns are subjective in how we draw them. The main goal of the consolidation pattern is to identify when stock trading ranges start wide and become narrower.
Why? Because that tends to lead to large moves. Want proof?
Let me back out of this chart and point to the same phenomenon.
This is exactly what I saw. Over and over, I looked through chart patterns. Through trial and error, I found that when I combined consolidation patterns and trend following, my odds increased.
But something else was missing…the squeeze.
This is where the journal proved its worth.
Like many of you, I read through countless strategies. My journals told me that these patterns worked.
So, I started with every indicator on the chart I could think of. I read about what they did and meant. Why did charts suddenly break out of these patterns? What did the leading indicator tell me?
After journaling for a while, I noticed two indicators that popped off the page: Bollinger Bands and Average True Range.
Bollinger Band Squeezes are a pretty popular method that gets a lot of attention. But where did it cross with Average True Range?
As I dug into the topic, I found a guy named John Carter (no relation to the bad Disney movie). His work on the Squeeze indicator I use became the last domino to fall.
You don’t need to start at the beginning
The journey took a long time. I’ve known people who followed the same journaling process but never discovered success.
90% of traders blow up accounts in the first 6 months…I don’t want that to be you.
I’ve kept my method simple and easy. It gives you a foundation for solid trading that you can build on.
I don’t just spend the time in these emails helping folks. It’s important to me to help everyone at every skill level.