Psychological Journal

Journaling as a trader is imperative.  I won't get on my soap-box here.  I'll cover journaling in a broad sense at a later time.

Today we're looking at a type of psychological journal entry.  I'll cover where I learned this, the basic idea, and how I personally applied it in my own journal today.

It's a journal entry that was inspired by something I read in Brett Steenbarger's book, "The Daily Trading Coach". The concept is from Lesson 14 - "Keep A Psychological Journal", and it's something I've found quite useful.

At first a psychological journal is simply a tool for recognizing our own patterns as traders.  These patterns can be:

• Behavioral - A tendency to act a certain way in given situations
• Emotional - A tendency to get in a certain mood/state in reaction to certain events
• Cognitive - A tendency to a specific thinking pattern/frame of mind in the face of personal or market related situations

Why repeat patterns when we're aware of the consequences?  Steenbarger says, and Mark Douglas would agree, that we're using strategies from earlier phases of life; one that helped in prior situations.  The problem is... these don't help in trading.

The first step is to simply begin to notice our patterns, ways of thinking, feeling, and acting that interfere with sound trading decision making.  Write down these observances at the end of the day as you review your session.  Steenbarger suggests to write down what happend, how you felt/acted, and then the consequences of that thought/emotional/action pattern.  He says, "When we clearly link maladaptive patterns to negative consequences, we develop and sustain the motivation to change those patterns." and I believe him.

So, how did I apply this in my own journal today?  For those of you that have been on some of the live webcasts of my trading sessions, I've gotten shaken out of several good trades for no good reason over the past two days.  I made a journal entry today that pointed out the occurrences when I scratched the trade for no good reason, and then linked that pattern to the negative consequence of how far the market ran immediately in my favor after I exited too soon.  Eventually, with this type of focus and light-shedding, the desire to actually book those profits will outweigh the desire to scratch a trade early because of fear of a loss.

Here's the actual entry (sorry it's not neater, I hadn't planned on sharing it when I wrote it!)

Happy trading,

-IT7