Tuesday 24 July 2012

Investing Diary Or Trading Journal – Complement To Your Annualised Returns

You know what? 

I suspect the reason why many investors and traders get so interested or hung-up on their annualised performance in percentages is because they are right-handed.

Right-handed means left-brained, and that’s the domain of numbers and analytical skills.

I always have a laugh when I see people write their performance down as in + 10.23%

A 10% rounded is not good enough… Must also include .23… Well, I guess 10.23% beats someone who got 10.21%

So competitive! 

Let’s take a hypothetical example of Mr X’s annual investment/trading returns:

Year 1             =          + 100%
Year 2             =          - 50%
Year 3             =          + 30%
Year 4             =          - 23%

Those good in math will know immediately that this person – after spending 4 years in the market – has “lost” to someone who has put the same money in a savings bank.

So by looking at the numbers, how can Mr X improve his performance for next year?

Eh… (Of course can but with lots of assumptions! And the usual platitudes like let your winners run and cut short your losers, etc…Don’t you want to puke if you hear another hackneyed book “advice”?)

Unless you have the memory of an elephant, may I suggest an Investment Diary or Trading Journal to complement your addiction to numbers?

You can just Google or search in Youtube for the many suggestions on how to go about it.

Choose a medium and format that suits you.

I personally use a spreadsheet. This way, I have the database of individual trades, and I can have summaries on the monthly and annual performances in money with the aid of formulas in different worksheets.

I use the insert comment function to add the reasons why I entered into that position, and my exit plans, if any.

Put down in words

By writing in words, together with recording in numbers, we get to use both sides of our brain.

You’ll be surprised what little lies you tell yourself when you review your diary/journal looking back.
The amount of detail to record is entirely up to your pleasure. Some may want to write a thesis on their positions, some just bullet points.

When I started out, I wrote under 3 sub-headings:

  1. The macro environment – Economic outlook, political situation, etc.
  2. The position itself – The reasons why I initiated this trading position. For core investment holding positions, I also add how I go about building a sizable position. All in or scaling in, for eg.
  3. My mental state – Whether I am sanguine, nonchalant, stressed, angry, happy. How I was feeling that day when I made the trade/investment.
That was then. 

Now I don’t need to write on my mental state anymore. If I not in an optimum frame of mind, I stay out of the market. And my writings are now shortened to a few key words as memory aid. But that’s after many years of self-reflections and reviews. 

It’s like adjusting the radio. Your turn left, turn right, and finally turn a bit left again. Optimum! So don’t worry if you find yourself writing too much or too little in the beginning. You’ll know the right level of detail for yourself soon enough!

As an investor, even if you hardly make any trades in a year, if you review your portfolio every quarter or half-yearly, you can record down your thoughts during these periodic reviews. For example:

Why are you not trimming your positions when some of the reasons you have bought have started to deteriorate? 

Why are you not adding to positions when market is offering your same positions at a much lower price?

It’s no magic bullet

Depending on how honest you want to be to yourself, looking back at your own trades and positions, you can better see your strengths and weaknesses. 

And to focus on your strengths or weaknesses is again up to you ;)

It’s sort of like putting muscles and flesh to the numbers skeletons we are so fond of.
Soon, you will be your own cheerleader and aunt agony :)

Trading and Investing is not a group adventure.


  1. Even better blog your trade and your thought, LOL!

    1. CW8888,

      I prefer to keep my trading journal to myself - this way, I write to myself only; less incentive to impress others ;)

      Having said that, I don't do it does not mean I have to prevent or "debate" with others who do :)

  2. Don't need to bother with percentages, just need to know earn or lose, i.e.
    Year 1 -- +
    Year 2 -- -
    Year 3 -- +
    Year 4 -- -


    1. Momoeagle,

      Now that's math I can understand and identify with!

      I love what you've shared in valuebuddies recently - squeezing the trigger is the hardest thing, so some people focus on "recording" and keep moving the goal posts ;)

      It's so much safer to be NATO!

      All the best to your tuition centre! Young entrepreneur!

    2. Amazing power of decimal point!


      Marketing and Sales folks all know too much

    3. CW8888,


      Some numbers are great for giving the illusion of "value".


  3. Yalor.

    Just blog I have made $XXXK from trading.

    Top hit soon!

    1. CW8888,

      So that's your sore spot! LOL!

      No wonder you keep twisting the bayonet... Naughty, naughty!

      A very gentle poke:

      I wonder who is the one sharing he got multiple 10 baggers?

      Eyes blinking innocently at you :)

  4. are you serious? writing so many things just for a trade?

    "oh, i went long cos smol was short, cannot stand him any more, keep boosting about his winning."

    "haha, covered at a profit of 2k, smol must be pissing in his pants, can't wait to tell him."

    haha, what kind of journal is that?

    1. just kidding ok, trade journal, in my terms has to be function in a few way.

      1, risk management,

      2, money management,

      3, position management.

      4, memmory management.

      5, system management (ajustment of system).

      6, overall management (p&L)

      work based on these functions.

    2. you can have one spread sheet cover all of the above, i can't, so i had 3 spread sheets.

      its better to design your own spread sheet, it should form part of your overall trading system.

    3. but again, this are very personal. every trader has his own style. but don't forget the purpose of it, is to assist you in your trades and always having room for improvement.

    4. my top priority is no 3, position management which directly relates to 1, risk management. no 6 p&L is the least important, if everything from 1 to 5 function properly, no 6 will take care of itself.

    5. oh last one, they are all numbers, numbers, numbers haha.

    6. coconut,

      Oooh... I'm shaking! I'm shaking! You... LOL!

      That's why I recommend others to Goggle or search in Youtube and customise a medium and format that suits them.

      Somehow I am not surprised on your record keeping.

      For me, the goal of the journal is not record keeping per se.

      It's to alert me to patterns of self-destruction and light up the paths to Nirvana :)

    7. agree, numbers (or price) will tell me everything.

      who say that it is for record keeping. the individual trades records i only keep for 3 weeks there about, after that its gone.

      main purpose is to keep track of risk (over and under) exposure you dammy haha.

  5. I did most of what you said.

    I use excel, track all the trades, dates, market sentiment, my decision, my plan, balances, XIRR of each counter, P/L of each counter within a year and across all the years for that counter, XIRR of portfolio, Dividends, company key info, managed fund, exposure amount, realised profits and unrealised profits, portfolio value/cost etc ...

    ofcourse they are relatively automated. Is fun.

    1. Yes Cory,

      Anything not fun I don't do (if I can help it) :)

      It's amazing how often I caught myself cheating, lying, bending, breaking the rules I've set myself...

      Not to mention the numerous times I lost myself in the illusion of straight line extrapolation...

      Nowadays, I record the numbers so I don't have to remember. I write the words so I can find myself ;)


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