Record Keeping for Successful Trading 2016

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What does a trading plan and trading diary prescribed to new traders years ago look like to an older trader who has more than 15 years of experience? I went through an article ‘Record Keeping For Successful Trading’ I wrote for print magazine INVEST years ago (see below in blockquotes) and decided that it deserves an update.

Is it still valid? Yes it is still valid I totally recommend new traders to put it into action.

1) I had a plan on paper at the beginning just like I prescribed in the article. It was tremendously helpful at that time because trading was new to me, I was excited, I tried all sorts of stuff that failed – I was going in all sorts of direction that were not thought through and did not fit very well. After all a lot of ideas came from stuff I read and now looking back, some of them were ‘theoretical’ and many others were just myth. After realizing that mistake of going in all kinds of direction, I put down what I really want to achieve and sort of described a roadmap.

2) There was more than one roadmap because along the way, the first one got revised, junked, done differently all over and then repeat that revise-redo cycle over again many times. In my mind I roughly knew where I want to be by step number 10 and I roughly knew what steps 1 and 2 looked like but everything after 2 was hazy. Again when you are young, inexperienced and so many elements have to converge for something to go right, the inevitable outcome was a lot of changing and improvising.

3) Do I still have a plan now? You bet! It’s just I won’t put it down on paper anymore. The good thing is once you have done something like this – to have a plan, to have the discipline to execute accordingly, it becomes a habit.

4) Dear reader, if you are young or new to trading, I still encourage you to follow the steps i.e. create a plan that describes the process of trading, the desired outcome of your trading and maintain a trading diary. This is absolutely a must if you are trading by yourself without oversight/control from anyone else. For those who have the privilege to do this with someone else especially someone close like a sibling or spouse, the better thing to do is to make a plan together and commit to carry it out together. A plan benefits when there are more heads and especially when there is also someone to kick butt in order to enforce the plan.

5) Finally even if you did not have a plan, a trading diary would still be immensely useful in a very practical way. Any kind of information to improve your trading should be pursued. Using that information readily available from your very own personal trading diary is as easy as plucking low hanging fruit.


Forex performance can vary depending on which day of week
Forex trading performance can vary from day to day which a trading diary will reveal
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Record Keeping For Successful Trading

A trader should have a trading plan and maintain a trading diary, says our contributor

In any successful enterprise, record keeping is an essential activity. Its functions are tracking, measuring and controlling. All these ensure that unfruitful or damaging activities can be identified and eliminated while productive activities can be duplicated.

Where trading is concerned however, few traders record their trades diligently. This is because of three main reasons:

  1. Trading is often an individual enterprise.
  2. There is no oversight since trading is done alone.
  3. Trading platforms with real-time quotes empower and in fact encourage traders to take immediate but sometimes rash action.

This analogy is very appropriate: give a speed-hungry driver a Ferrari and allow him to make the traffic rules at the same time. Now obviously we know that’s a recipe for a traffic accident but where personal trading is concerned, well there isn’t a traffic department.

Therefore it is the individual responsibility of each trader to create an environment for fruitful and responsible trading. There is no big brother watching so you are on your own. Create a framework for tracking your own activity, measuring the success of each action taken and impose controls for success. This article will show you how.



A trader should have a trading plan and maintain a trading diary. They are critical for success but unfortunately there is no formula. Rather it requires a personalized approach. We will still look at the critical elements so that you, the reader, can proceed to create your own.



The trading plan is a big picture roadmap. Consider it your trading strategy. Here are the critical elements:

  1. Describe the process required to reach the destination.
  2. Describe the outcome of trading

Here is a simple way to understand the trading plan. Imagine the strategy of an army. You will probably encounter the battle plan in this way: Men! Tonight we will drive out the enemy from there. We will set off with so many troops from camp at midnight and we will move along these routes. Then we will so on and so forth… By tomorrow morning, none of them will be left in the area.



In this portion, qualitative statements describe the step-by-step process to reach the outcome. As an example from the Forex Tflow® System course that I teach for forex trading, four statements describe the process. First, identify the flow and go with the flow. Second, identify the optimum zone with the flow. Third, identify market levels. Four, apply the triggers.



In this portion, the outcome of trading is usually stated in quantitative or numerical terms. These include risk measurements and target achievement for evaluation purposes. It is very similar to management reporting and is that portion where the trader can sit back on a non-trading day and review his own performance.



Now that you got your trading plan described, it is time to record your activities daily and check whether you have adhered to your plan. Use a spreadsheet and create a table with the fields on top. Here are the fields that I use for my table:

  1. Date and time of trade
  2. The counter (stock) or pair (forex) traded
  3. Direction (buy or sell response)
  4. Entry level (in dollars and cents)
  5. Stop or cut loss level (in dollar and cents)
  6. Target level (in dollar and cents)
  7. Was the trade with the trend (yes or no response)?
  8. Was it done at the optimum zone (yes or no response)?
  9. Was a proper trigger identified and used (yes or no)?
  10. Did the trade fulfill a minimum 2: 1 reward to risk ratio (yes or no response, record also the accomplished ratio)?
  11. Did I intervene of change the stop or target levels along the way (yes or no response)?
  12. If the response to field 11 was yes, what was the reason? (Record two to three sentences to justify why)

Fields 7 – 12 onwards are very important because they recorded whether my trades followed the trading plan. Field 10 recorded the outcome of the trade. It is statistical and could be used immediately to measure my performance. Fields 11 and 12 recorded whether I haveover-ridden the initial reasons for my trade and what the reasons for doing so.



I hope that the use of the trading plan was explained clearly. I also hope that the trading diary is useful to you. The last step is to take out the records and evaluate them regularly. How often? Doing it weekly is good for a start because you can go through them on weekends when there is no trading and when your actions during the week is still fresh in your mind.


When you conduct your review look out for the following:



A minimum reward to risk ratio is usually two (2) times. Two concepts are involved. The trader must establish a target level or earning before the trade and he must establish a maximum loss. The target earning must be at least twice as much as the maximum loss in order for the strategy to be robust. From a statistical point of view, if you insist on twice the reward versus risk in each trade, you will still be profitable if you get the trade right only 50 percent of the time.



Having a stop loss in any form of leveraged trading is a must. It also stops the trade from becoming a specu-vestor. What is that? What is a person who sets out to trade but when his position sinks into the red, he convinces himself to be an investor to hold on to the losing trade.



Regular adjustment to the stops and targets of a trade throughout its duration is no good. It is a hint that you did not plan thoroughly before a trade, got cold feet or greedy along the way, or you did not have strong conviction to the plan. It could also be all of the above. If you realize that you are doing this often, be mindful to correct it. To round up this article, I encourage everybody to treat trading just like the way you treat your career or enterprise. That is the right way to go.


Those of you who want a print friendly format, this links to a PDF version.