Trading Journal: The invaluable tool for traders

Mastering Your Trades: The Essential Trading Journal Guide

Updated May 15, 2024

We will start by listing a series of quotes from recent market updates. If you have not kept a trading journal, then while you read these excerpts, jot down what comes to your mind or try to visualize how you felt during the past few months, especially on down days. The geopolitical landscape has changed forever, and from now on, geopolitics will have at least a 30% impact on market action.

There is going to be no fixed formula that will work in the future. Why? The big players have so much money now that they delight in creating new narratives and generating new outcomes. Market Update December 27, 2021

This does not mean one cannot make money in the markets, and one can still determine optimum moments to go long or short using M.P. and Technical analysis. However, one needs to understand the difference between bottoming/topping action and timing the top or bottom. Timing the precise bottom or top is an act best reserved for fools.

Unleash the power of MP with a Trading Journal.

M.P. is not based on a set formula. Mass Psychology analyses the erratic nature of this creature, otherwise referred to as the human. Human beings are notorious for letting their emotions do the talking. When emotions do the talking, money flies out of one’s pocket and into the pocket of the top players. Instead of fighting the top players, ride on their coattails. Market update January 11, 2022

It appears likely that the market will experience two corrections this year. The first one, which could already be underway, is expected to occur in the 1^st quarter. The 2^ndone is more likely to occur towards the end of the 3^rd quarter to the 4^th quarter. Which crash ended the market? Which crash proved to be the end of everything? Ask yourself that question to yourself the next time you panic. Every crash proved to be a tremendous long-term buying opportunity. There is not one person, alive or dead that can prove otherwise. Market update January 11, 2022

The anxiety gauge has moved into the hysteria zone, almost touching the extreme zone of madness; this happened only once in March 2020. Bullish sentiment is at an unheard level of 18. Right now, 82% of participants are either scared or sitting on the sidelines, waiting for a better tomorrow. Market Update January 24, 2022

Investors win while speculators fry

The difference between an investor and a speculator (though most will deny being speculators) is that speculators monitor their portfolio daily and view 12 months as long-term investing. Additionally, when the stocks they dreamed of purchasing pull back, they baulk and wait for even lower prices. Their lives are nothing but a never-ending loop of regret. If one examines their results over ten years, these chaps almost always severely underperform the markets. Long term investing is not based purely on timelines but on trends. If the trend is positive and the masses are in a state of disarray, pullbacks should be embraced. Market Update February 1, 2022

This week’s bearish sentiment hit a new multi-year high. So we have two revolutionary developments taking place within one week of each other. Experts are overreacting to the possibility of minor interest rate hikes, and the market is now trading in the extremely oversold ranges on the weekly charts. Suppose the markets experience another wave of selling next week. In that case, it could push the needle on the anxiety gauge even deeper into the madness zone than it did in 2020. Market update February 1, 2022

Is volatility here to stay?

While we expect higher volatility this year, we also expect to accumulate many outstanding companies. In 24 months or less, individuals will be shocked at the gains some of these plays will produce. Remember, we got into GOOGL at 1300 and closed a position on a multi-billion dollar company for a profit of 75%. We expect similar opportunities and more over the next 24 months. Market update February 1, 2022

The Russel 2000 is filled with more speculative stocks, and it tends to top and bottom before the other indices. The selling is almost done as most speculators are undisciplined and have no staying power. The typical pattern for the MACD indicator is to swing from oversold to overbought ranges (bullish and bearish cycle). We refer to the above pattern as a triple-bottom MACD formation. It never completed the normal cycle. Hence it is likely that the next bullish MACD crossover will lead to a strong upward move. Market update February 17, 2022

The MACDs are dangerously close to completing a bullish crossover on the weekly charts. This crossover takes time to complete, which suggests that the markets should rally for several weeks on completion.

Stronger Deviations Should be embraced.

Until the trend changes, the stronger the deviation from the norm, the better the buying opportunity. That is the end of the story. Market Update February 28, 2022

The best way to determine the onset of Operation Massacre will be to monitor sentiment levels. If the masses are euphoric (extremely high bullish readings), it would indicate that the end is nigh. Market update March 9, 2022

On a separate note, the number of New 52-week highs refuse to take out their Jan-Feb lows, so we have yet another positive divergence signal. Market update March 9, 2022

The needle on the Anxiety gauge is now at the same level as it was during the peak of the covid crash, a striking development indeed. Market update March 9, 2022

Conclusion

keeping a trading journal is an essential tool for successful investors. Today, it remains just as crucial. Imagine being a Tactical Investor subscriber, and while reading the quotes and notes in your journal, you can make detailed cross-references. A trading journal gives you a clear picture of how you feel at any given point, which is invaluable in making informed decisions.

Without a trading journal, it’s easy to fall prey to the mass mindset, which tends to manifest during periods of extreme stress or volatility. You can avoid falling into this trap by keeping track of your emotions and decision-making process. Becoming aware of this process takes practice, but a trading journal can help you develop the necessary discipline.

A trading journal can still be helpful even if you’re not a Tactical Investor subscriber. It provides a historical record of your trades, allowing you to track your progress over time. By reviewing your past trades, you can identify patterns and mistakes and adjust your strategy accordingly.

The last few months have been an ideal time to maintain a trading journal, given the extreme market volatility caused by the pandemic. By keeping track of your emotions and thought processes during this time, you can learn from your experience and improve your trading skills. A trading journal is a valuable weapon in your arsenal, and by using it consistently, you can become a better investor.