In our last lesson we began our discussion on how successful traders leverage trading journals in order to learn from their past mistakes and successes. In today’s lesson we are going to wrap up our discussion on trading journals with a look at what to look for when reviewing your trades.

Simply writing the days activity down in your trading journal is the first step. The next and equally important step is to review your journal on a regular basis to see what is working and what is not. This way you can leverage your journal to help you improve in areas where you are weak and make sure you continue to leverage your strengths where you are strong.

There is a great article from Brett Steenbarger at Traderfeed.com which addresses some of the major things that traders should analyze when reviewing their trading journal. In this article Dr. Steenbarger says:

• Number of long and short trades – I correlate this to the trend condition of the market to see if I’m trading with the current or against it; if I’m trading in a one-sided way in a range-bound market. The number of trades also tells me if I’m overtrading.
• Number of winning and losing trades – When I’m trading well, I have more winning trades than losers by a reasonably healthy margin. When the ratio dips for more than a short time period, I need to re-evaluate my trading and my trading strategies.
• Time holding trades – I’m a short-term trader, and I tend to have a relatively narrow time band in which I hold trades. Moving beyond that band tells me I’m either cutting trades short or going for home runs—and neither of those have worked for me in the past.
• Time holding losing trades versus winners – It is very hard to make money over time by holding losers. Eventually, the size of the losers becomes greater than the winners so that even a trader who has more winning trades than losers can end up in the red.
• Profit/Loss broken down by long and short trades and broken down by market condition. This tells me if I’m trading ranges better than breakout movements; whether I’m doing better on the long side or the short side. If my performance is significantly worse in one mode than another, I start to examine my trading for needed improvements.

I would add to this list average profit on profitable trades vs. average loss on unprofitable trades and largest drawdown or loss the account suffered before returning to profitably.

That completes our lesson for today and also wraps up our course on the basics of trading. In our next lesson we are going to begin a new course which covers the basics of Forex Trading so we hope to see you in that lesson.
As always if you have any questions or comments please leave them in the comments section below, and good luck with your trading!

What's the difference between a short trade and a long trade?

To my understanding, long is buying just before a uptrend and short is selling just before a downtrend


Don't those two things happen simultaneously in a trade?

Dear David,

Is there an Excel Document/template that has been created that new trader could use?

Great job on your site.

Respectfully,
Dean

P.S. Here is my email address...[deleted], I don't want to miss you reply.

Hi prolog

I'll start with explaining it in a stock trade-
When you go long on stock, you are buying the stock and then selling it later hopefully at a higher price.
When you short a stock, you are hoping the stock goes down in price. So you sell the stock 1st (by borrowing the shares from your broker) and then buy the stock back later at hopefully a lower price.

With forex, it has to do with the base currency. So if you go long the Euro/dollar pair, you are buying the dollar and selling the Euro, with the hope that the dollar will rise in relation to the Euro.

If you go short the Euro/dollar pair, you are selling the dollar and buying the Euro, with the hope that the dollar will drop in relation to the Euro.

The concept of selling short can be very confusing at first, so I hope this clears it up.

"Don't those two things happen simultaneously in a trade?"
Yes they do, but by 2 different people. One person is going long (the one buying) and the other is going short (the one selling).

Cheers
Tek

I still don't get it bro

if
long = buying dollars just before an uptrend
short = selling dollars just before a downtrend

then
don't both short and long constitute a trade?

Hi again prolog

I tend to ramble on so forgive me if this explanation is too long and goes over stuff you are not asking lol.

"long = buying dollars just before an uptrend
short = selling dollars just before a downtrend"

I think you are confusing/combining 2 things. Long is buying dollars, but it does not have to be in an uptrend. Short is selling dollars but it does not have to be in a down trend. The trend is just the overall direction of the stock or currency.

It is easier to explain with a stock example. I'll use yahoo.
Since last March, yahoo has been in a downtrend (Lower highs, lower lows). However, the stock does not consistently go down, it goes down some, then back up some then down more, etc. However, the overall trend is downward (see chart I posted)

Most people feel you should trade with the overall trend; however, some people like to trade counter-trend (see charts).

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To answer your question now lol-
If you are going long on the euro/dollar pair, you go long to open the contract, and short to close it out (you buy the pair and then sell the pair)

If you are going short on the pair, you go short to open (you sell to open) and go long to close (you buy back to close).

The general statement of "I am long" on something or "I am short" on something refers to which way you open the contract.

Also, since a contract transaction takes 2 people, a buyer and a seller, each transaction is one person going long and one person going short.

Sheesh I wrote a book. Hope that clears it up and doesn't just confuse you more lol

Cheers
Tek

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Hey Dean,

Glad to hear from you and welcome to the community. Below is a great outline of a trading journal that one of our members recently posted:

The 10 Components of a Successful Trading Journal

Have a look at that and let me know if that is not what you are looking for.

Best Regards,
Dave

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Disclaimer: Trading is risky and can result in substantial financial loss. As always my posts are simply one traders opinion and should not be taken as trading advice. I am not a financial adviser so everyone please do their own analysis and take responsibility for their own trades.

Thanks for your patient explanation

I hope I'll have firmer understanding after I start trading