Why most journals fail
The usual journal records entry price, exit price, and profit or loss. Your broker already has all three, in a better format, without you typing anything.
What the broker does not have — and what actually determines whether you improve — is why you took the trade and what you were thinking. A record of outcomes tells you that you lost money. A record of decisions tells you which kind of decision lost it.
The second failure is length. A journal with twenty fields gets filled in for a week and abandoned. A journal with six fields gets filled in for years. The one that survives is worth more than the one that is thorough.
What to record
Six fields, written before the trade where marked, and the rest immediately after the exit.
- The setup, in one sentence (before entry). "Retest of the level that broke on Tuesday, holding from above." If you cannot write it in one sentence, you do not have a setup, and that discovery alone justifies the field.
- Entry, stop and size (before entry). The three numbers from the sizing calculation.
- Grade: A, B or C (before entry). Your honest assessment of how well this matches your criteria. This is the single most valuable field in the journal, for reasons that become obvious in review.
- What you felt (before entry, two words). Calm, impatient, unsure, tempted. Two words is enough.
- What happened (after). Result in R, not rupees.
- Did you follow the plan? (after). Yes or no. Nothing else. This field is independent of whether you made money.
That last pairing — result and plan-adherence recorded separately — is what makes the whole exercise work. It produces four categories of trade, and they are not equally interesting.
The review that does the work
Weekly, thirty minutes, and only two questions:
- Which trades did I follow the plan on, regardless of result? This is your process score. It should improve over months. It has nothing to do with P&L.
- Of the trades where I did not follow the plan, what was the common circumstance? Not the common instrument — the common circumstance. After a loss. Late in the session. When a position was already open. On a Friday.
The four categories are worth naming, because people habitually pay attention to the wrong one:
- Followed plan, made money. Good. Nothing to learn.
- Followed plan, lost money. Also good. This is what a positive-expectancy method looks like from inside. Nothing to fix.
- Broke plan, lost money. Painful and instructive. This is where the lesson is.
- Broke plan, made money. The dangerous one. It rewards the behaviour you most need to remove, and it is the category almost everybody stops recording first.
Record the decision, grade the decision, review the decision. The profit and loss is your broker's job and it has never taught anybody anything.
What you will find
Almost everyone who keeps this journal honestly for three months discovers the same three things.
- A small number of setups produce nearly all the profit. The rest is activity.
- Your losses cluster in identifiable circumstances, not across instruments. Usually the hour of the day or the state you were in.
- Your own pre-trade grade predicts the outcome. You knew. You took the C-grade trade anyway, and the journal is what makes that undeniable.
Journalling only the interesting trades. The big win and the painful loss get written up in detail; the forty small chopping trades in between are skipped. Those forty are the sample. A journal of the memorable trades is a scrapbook, and it will confirm whatever you already believe about yourself.
Read it yourself
- You graded a trade C before entry and it made 2R. What goes in the review?
- Over 40 trades your plan-adherence is 60%. Is that good?
- Your A-grade trades are profitable and your C-grades lose. What is the fix, and why is it harder than it sounds?
Show answers
1. That you took a C-grade setup and got away with it. The profit is not the finding — the finding is that a trade you yourself rated poorly was entered anyway. Record it under "broke plan, made money" and treat it as a warning, because the next one will be identical in every respect except the result.
2. It is a starting point, not a verdict. 60% means four trades in ten were improvised — which is a lot, and it also means you now have a measurable number that can go up. Most people have no idea what theirs is, which is worse than having a poor one.
3. The fix is to stop taking C-grade setups, which is trivially easy to state and hard to do because the C-grades are not taken for analytical reasons. They are taken out of boredom, impatience, or the need to be doing something. Removing them means tolerating long stretches of no activity, and that is a different skill from reading charts. The journal cannot fix it, but it can make it impossible to pretend it is not happening.
Terms used
- Process score
- Proportion of trades where the plan was followed, independent of result.
- Setup grade
- Your own pre-entry assessment of how well a trade matches your criteria.
- Plan adherence
- Whether the trade was executed as written. Recorded separately from the outcome.
- Outcome bias
- Judging a decision by its result. The habit a journal exists to break.