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Dr. Elder has an excellent section on record keeping in this book. |
Record Keeping
Yes, it sounds boring, but keeping good records is an integral part of being a successful stock trader. There are two documents that we'd consider essential for every trader: · The Trading Log (we call it the Share Register); and · The Daily Trading Journal The Trading Log The Trading Log is where you record your purchases and sales. It should show your open positions (purchase, no sale), the current value of each position and your total equity, realized and unrealized profits. There is no standard format – some people use a book, we prefer a spreadsheet - and no standard list of contents. |
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However, if you would like to prepare your own, for each stock it should as a minimum contain: · Tracking code, optional (can be used if, e.g., you select stocks using more than one system) · Date purchased · Number of stocks · Price · Buy brokerage cost · Total cost · Dividends received · Date sold · Number of stocks · Price · Sell brokerage cost · Net proceeds · Stocks on hand (open positions) · Current price · Portfolio value · Profits - realized and unrealized (split them if you want) · Losses - realized and unrealized (ditto) · % Profit or loss |
If you trade CFD's, you will need to use a different format for your trading log - go to our CFD page.
The Daily Trading Journal
If the Trading Log is the place where you record the ‘what’ of your trades, the Daily Trading Journal is where you record your ‘why’. Use a separate page or pages for each day, and record the details of any trades you make that day – how was your mood, what was in your mind when you made the decision, what was the trigger that caused you to ‘push the button’? If it formed part of your decision, attach the stock chart. If you can’t update the Journal at the time you are doing the trade, do it as soon as possible afterwards.
Why do we keep this Daily Trading Journal? Because the greatest part of our growth as a trader comes from reviewing both our successes and our failures. We usually have no trouble remembering our successful trades, but we would rather forget the unsuccessful ones as quickly as possible, because they are PAINFUL! However, if you keep the journal you can at least get some benefit from these bad trades. Why did the trade go wrong? Is there a learning point for the future? As a personal example, we used to have a lot of trouble adhering to our stops, but after reviewing trade after trade where the losses mounted unnecessarily because of our failure to get out at the point we said we were going to when we first took the trade, we realized that the pain of ignoring our stops was much worse than taking the hit – hence the trading maxim ‘the first loss is the best loss’. The point is, if you just ignore your losses you are never going to learn lessons like these – relive them through your Daily Trading Journal.
If the Trading Log is the place where you record the ‘what’ of your trades, the Daily Trading Journal is where you record your ‘why’. Use a separate page or pages for each day, and record the details of any trades you make that day – how was your mood, what was in your mind when you made the decision, what was the trigger that caused you to ‘push the button’? If it formed part of your decision, attach the stock chart. If you can’t update the Journal at the time you are doing the trade, do it as soon as possible afterwards.
Why do we keep this Daily Trading Journal? Because the greatest part of our growth as a trader comes from reviewing both our successes and our failures. We usually have no trouble remembering our successful trades, but we would rather forget the unsuccessful ones as quickly as possible, because they are PAINFUL! However, if you keep the journal you can at least get some benefit from these bad trades. Why did the trade go wrong? Is there a learning point for the future? As a personal example, we used to have a lot of trouble adhering to our stops, but after reviewing trade after trade where the losses mounted unnecessarily because of our failure to get out at the point we said we were going to when we first took the trade, we realized that the pain of ignoring our stops was much worse than taking the hit – hence the trading maxim ‘the first loss is the best loss’. The point is, if you just ignore your losses you are never going to learn lessons like these – relive them through your Daily Trading Journal.