In trading, having a well-organized playbook can be the difference between success and failure. Most developing traders come into the market with no specific strategy or framework that they are following. They show up each day and shoot from the hip. Is it any wonder that such a high proportion of traders fail? If you want to avoid failure, you need a playbook. One of the most effective ways to build this playbook is through daily trade documentation.
What is Daily Trade Documentation?
Daily trade documentation, also known as archiving your best setup, is the process of recording and analyzing the best opportunities at the end of each trading day - Regardless of whether you were in those trades or not. It involves keeping a detailed log of the easiest money trades, the setups you could have been involved with, the reasons behind each trade, and the outcomes of those trades. This is something that traders should be doing daily. In Mike Bellafiore’s “The Playbook" he mentions “…When you are tired, perhaps hungry or emotionally worn out from a day of trading combat - Staying in your seat and archiving the best trading setup of that session for you is the lonely work required.” This documentation serves as a valuable resource that you can refer back to in the future to learn from your successes and mistakes.
The Benefits of Daily Trade Documentation
Improves Pattern Recognition: By documenting the best opportunities daily, you are reinforcing the neural pathways in your brain that are responsible for recognizing trading patterns. This helps you become more adept at spotting these patterns in real-time, giving you an edge in the markets. I frequently tell 1-on-1 mentorship clients that this method is an effective way to get reps in without actually placing any trades.
Enhances Learning: Reviewing the best setups at the end of the day allows you to reflect on what could have been traded and why. This reflective practice is essential for learning and improving as a trader. It helps you identify potential trading opportunities and avoid missing them in the future.
Builds Confidence: Keeping a detailed record of the best setups and the reasons behind each trade can help you build confidence in your trading abilities. It provides you with concrete evidence that your analysis and decision-making process is effective, boosting your confidence in taking similar trades in the future. When you have seen something pan out hundreds or thousands of times, it becomes easier to execute in real-time.
Creates a Reference Guide: Over time, your daily documentation of the best setups will become a valuable reference guide that you can use to review your progress as a trader. It can help you identify patterns in the market and your trading behavior, allowing you to refine your strategy and become more consistent in your trading. Not to mention, it lays the groundwork for a trading playbook.
Simulates Trading Experience: Documenting the best setups daily is like simulating trading experience. It allows you to gain a deeper understanding of the market and the setups that work best for you, without actually placing trades. This can be especially beneficial for new traders who are still learning to recognize profitable opportunities.
How to Implement Daily Trade Documentation
Keep a Daily Setup Journal: Use a notebook or digital document to record the best setups you identify each day. Include details such as the market conditions, the setup criteria, and the potential entry and exit points. We currently have a pre-built section for this in the Trading Playbook Template.
Review Your Daily Setups: At the end of each trading day, set aside time to review the best setups you identified. Analyze why these setups stood out to you and what you could have done differently to capitalize on them. Archiving even 1 setup per day can give a massive boost to your overall trading performance.
Set Goals for Improvement: Use your daily trade documentation to set specific goals for improvement. Whether it's improving your ability to identify high-probability setups or refining your trade management skills, having clear goals can help you stay focused and motivated.
Stay Consistent: The key to effective daily trade documentation is consistency. Make it a habit to document the best setups you identify each day and review them regularly. Over time, you'll build a valuable resource that can help you become a more successful trader.
In conclusion, daily trade documentation is a powerful tool that can help you improve your trading skills, build confidence, and stay disciplined in the markets. By documenting the best setups you identify each day, you can create a robust playbook that will serve as a valuable resource throughout your trading career.