I have coached hundreds of students over the past few years and one constant remains: The students I work with who keep good records do better on average than those who do not. Record keeping can include many different areas, ranging from tracking your equity curve month to month, writing out your trading rules, and keeping a trading plan for each and every trade you enter.

Discipline is an absolute requirement if you expect to do well in the markets. Intelligence, education, common sense, and a good approach help too. But you must be disciplined. In fact, if you stay disciplined and outlast the initial learning curve, you are destined to succeed.

Let’s define discipline the following way: It is disciplined trading if you refrain from emotional trading, overleveraging, and trading against your trading system. The first step is to create a trading plan, write it down, and follow it. The old adage of “plan your trade and trade your plan” fits perfectly here. So what information do you need to keep, and where do you keep these records?

Let’s deal with where you keep records first. I prefer to keep my records on my computer in a spreadsheet. It is easy to enter and keep organized. You can keep them in a notebook as well, but if you do, I recommend you get a notebook that you set aside and only use for this purpose.

Some traders like to keep their records in the trading software they use or their brokerage account. You can make that work, but a word of caution: Being able to go back and look at your trade fills and executions is not the same as keeping a trading journal and writing out a trading plan for each trade. There are very real differences. First, it takes time to track down the old trades and figure out when and where you made the trade. Second, even when you do find them, you may not remember the details of the trade and why you made it. Lastly, it just screams of laziness.

Once you decide where to keep the records, the following information will be needed. Keep in mind that this is just a basic model, and you can chose to track other information as well. However, these are the basic components of each trade log:

1. Trade Number
2. Entry Date
3. Long or Short
4. Ticker
5. Size
6. Entry Price (Including commissions.)
7. Total Cost Basis (The price multiplied by the size of the trade adding in commissions.)
8. Stop Loss/Risk Management Plan
9. Trade Target (What is your goal in profit, pattern, or underlying security price? How are you going to manage the trade as it moves?)
10. Pattern of the Stock. (Basic technical characteristics. This is kept for your own benefit so that when looking back in review, you will remember some of the things you were looking at.)
11. Reasoning Behind the Trade (Why did you enter the trade?)
12. Exit Date
13. Exit Price
14. Total Gain or Loss
15. Final Analysis (Did you execute the trade based on your trading rules? Did you learn anything from this trade?)

You can retool this list to fit your personality and trading system. For example, if you are an options-spread trader, you may want to include columns including maximum risk and margin requirements. But the basic framework above will work for most traders.

The most important thing to remember is that you are putting in this work for your own benefit. Learning from our mistakes is vital. In order to effectively assess where we are making mistakes, we need to log down our decisions in detail.

When you enter the trade, you will need to do some initial record keeping, like you have seen above. Two of the most important things to write out are stops and targets: where you are going to exit on profits or losses. This does not have to be a specific decimal point, but you better have a pretty good idea of what you expect to happen in the position.

A stop loss is an order that you place with your broker that tells the broker when to exit your position. Stop losses can be set on any instrument and traders traditionally use them to mitigate risk. They are very important in a trading system. Some traders tend to set a mental stop, while others write one down on paper, or put it in their trading log. This can work, but most (especially those who won’t be watching the market) will need to learn to place a stop on their trade through the broker.

Placing a stop loss is one way to mitigate risk as it gets you out before more losses occur. It’s not the only way. You can also control your risk through your position size, your strategy selection, and by using vehicles like options and futures creatively to create hedges. If you are new to trading, you will want to focus on stops and position size.

If you decide not to set a stop, you still need to write down in your trading log where you will exit the trade if it goes against you. In my experience, the types of trades that hurt accounts are those where a trader refuses to sell it on a loss. The best advice I have ever been given in trading is to cut losses short and let your profits run. Good trading requires that you sell losing trades. You can not just hold them and hope for the best. Hope is a wonderful thing, but it is not a trading plan.

Targets are set to have some picture of where we want to get out of trades on profits. You will not want to run away from successful trades. Letting your profits run and develop is a very smart thing to do. It will be important that you learn the signals to watch for that tell you when to get out. Setting an initial target is a starting point that can and will be adjusted as the trade develops.

Finally, remember that keeping records and being organized will help you become a better trader. It’s a sign of professionalism and will keep you focused on the task at hand.