I am continually surprised to find that there are some traders who do not keep full and accurate records of all their trades. Whether this deficit is due to laziness, or a genuine belief that such accounting of their activities is really not required I do not know. However, I am quite certain that proper record keeping is very much part of the business of being a successful trader.
Making money consistently, is a question of trading in a consistent manner. If a trader does not keep full and complete records of all their trades, how can they determine whether or not they are attaining such consistency? Certainly not by looking at the bottom line; we all know only too well that the markets being the fickle entities that they are, doing the right thing does not always guarantee the right result, and so the result in itself is not necessarily an indication that we did the right thing!
Keeping good trading records then, helps us to maintain a consistent approach in our trading, but the benefits go well beyond that. How many times have you placed a trade, believing that everything you are doing is absolutely correct, only to see the trade turn into a miserable loss? It happens to us all. After taking the loss, there is a natural desire to look back at the trade and try and figure out what went wrong. However, immediately following the losing trade is not the best time to analyse it; the trader is still too “close” to the action to look objectively. If they have been keeping quality trading records, they can go back and re-examine the trading session at a much later time, and view what went on from a more detached perspective.
Personally when I log trades, I tend to note down quite a lot of information. I don’t just record entry and exit prices, times and so on, but also the setup type, a rating of how closely the setup matches a textbook example, and even how I am feeling before, during, and after the trade. Before each trading session, I review the previous days trades, and I review the whole weeks worth at the end of the week, and longer timeframes periodically beyond that. In this way, patterns of what is working and, equally importantly, what is not, very quickly become apparent and so I can work on eliminating bad habits or losing setups, and concentrate on what is working.
There’s one extra benefit of keeping accurate trading records as you go along, and that is that you have much less work to do when the tax man comes knocking on the door wanting to know what you’ve been up to all year!