Short-term trading is a tough zero sum game. Every extra penny in my pocket is a penny less for my trading counterparty.

I am always on the lookout for tools that improve my trading. A trading diary tops my list. I have little doubt other traders will sharpen their own trading skills by following my lead.

There is nothing glitzy or high-tech about my diary. It is just a ring binder with three separate pages for each trade.

Page one is prepared the moment I open a position. I print a graph of the price trend for the last year or two on the top half of the page. The graph includes all relevant moving averages and support or resistance lines I was monitoring at that moment.

I often place hand-written notes directly on the graph, adding circles or arrows to highlight reference points that were particularly relevant when I made my purchase.

Key administrative details get posted just below the graph. These include the date of the transaction, the bid/ask price and the number of shares traded. I also post my targeted exit price as well as a stop-loss price in case the trade turns sour.

The rest of the page contains a jumble of opinions and facts that influenced my decision. There is nothing formal about these entries. Some issues merely warrant a word or phrase. Others
get a sentence or two. I have little doubt that an English professor would be appalled.

My comments vary in scope. Some are quite brief, merely acknowledging the trade was triggered by advice from a friend. But others fill the entire page. One recent posting included references to an unexpectedly large volume spurt and a potential breakout above a rather pronounced area of chart resistance. I also noted the company’s low price/earnings ratio, a recent director’s purchase and my expectations about an upcoming earnings report.

I often jot down my subjective feelings and emotions if they are out of the ordinary. Was I rushing to place the trade because I thought prices were about to change? Did I feel very optimistic? Any concerns about next week’s trading statement? Any worries that I was jumping into this position too early?

Page two of my diary is prepared the day I sell. It contains an updated version of the earlier graph. Arrows indicate where the original purchase was made. I also note, again informally, my reasons for selling. It might be that my price target was reached or that some fresh news triggered a re-evaluation of my position.

Page three is most important of all. It gets prepared several months later. The main feature is a fresh version of the original price graph. I add arrows to mark where I entered and exited my position.

This exercise forces me to confront errors of judgment and focus on my failures. It is human nature to forget about a slew of bad trades if you just traded a big winner. But it is harder to ignore bad judgments if you are forced to stare at them.

I constantly review my diary and frequently get good insights on ways to improve my trading performance.

For example, I recently noticed the track record of one specific investment bank analyst was quite impressive. But my profits from tips provided by several others were disappointing.

Another interesting morsel highlighted a problem with my early-
morning trading. When I chase a share and jump in after a sizeable opening bell advance, the odds are better than 50:50 that I could have got a better price by holding off and trading later in the day.

I also spotted several recent instances when an unexpected earnings update caused prices to spurt soon after I closed my position. I now go out of my way to research when the next management statement is due before closing a trade.

Page three deserves a special mention. It often draws my attention to broad issues that can significantly affect trading profits. I used to sell too soon during bull markets. Small windfalls could have been much bigger had I been a bit more patient and controlled my urge to sell.

But bear markets require a different approach. Thanks to page three, my compulsion to hit the sell button and grab a quick profit has been right on target in the last 12 months.

There is an obvious moral to this story. Tabloid newspapers are not the only source of provocative page threes.

Stock market historian David Schwartz is an active short-term trader. Send any comments or suggestions to tradersdiary@ft.com