Last updated on October 19th, 2020
Many successful and professional traders talk about how important it is to keep a trading journal spreadsheet.
In the “boss-less” environment of the at home trader, keeping a trade journal keeps you on your toes knowing that at the end of the day, your results are still being measured even outside of your trading account.
But are you getting the full potential of your trading journal?
What Is A Trading Journal
Long gone are the days where you simply jot down your trade entry and exit price and calculate your profit and loss. That was more of a trading log and while some information is better than nothing, nothing beats the valuable information we can get in today’s world:
- Overall expectancy of your trading system
- Profit factor
- Trade expectation
- Which setups are making you the most money
- Best days and time of day to trade
All this information can be processed and let you know if the trading system and trading plan you are using has long term potential. Documenting each trade that you take is crucial in any type of trading.
This is an example of an old excel spreadsheet trading journal I used to use and what it looked like before becoming a little more “high tech”. You can see that it gives a lot more information than a simplistic reward risk ratio (although it did calculate that as well)
All I did was input the various trade details into the first page of the spreadsheet and the wonders of excel did all the important calculations for me.
From this stage, I was able to tweak the trading strategy and improve on the results over time. I was tracking every detail of the trade including:
- Type of setup used
- How I exited the trade
- Direction and entry/exit times each trade
If you trade Forex, you’d want to ensure you are even logging the currency pair you are trading. Currency trading has so many crosses and tracking which ones give you the bulk of your profits could help you cut back on the number of trades you take.
You may find the risk reward for some currencies or futures markets are just not worth trading.
This decision making process can only be done by using a trade journal spreadsheet that does all the intricate calculations for you.
A trade plan is only powerful if you stick to it and follow it religiously. I also keep track of all discretionary decisions when I’m trading to make sure all decisions are backed up with statistics.
How And What To Write In Your Trade Journal
While you want to include all details about the trade itself, writing in your trading journal should go much further. You want to use your journal as a “self-help” guide as well:
- How were you feeling when you placed the trade?
- Did you exit according to your plan and if not, why didn’t you?
- What thoughts were going through your mind when the trade went against you?
Use A Trading Journal To Evaluate Execution Of Your Trade Plan
This type of information will help you zero in on mental issues that could harm your overall trading results. There are a few day trading books that can help you get control of the negative thoughts that all traders go through.
Keeping Track Of Important News
News events can influence the markets and, especially with Forex trading, you want to know how the various releases (Non-farm payroll, FOMC, Crude oil inventory reports) and different holidays affected your trade. From there, you may find something to add to your trading plan to help you deal with these events.
Long Term Trading Impact
All of these notes can make an impact on my trading long term.
For example, if I want to know how the market reacts to different holidays throughout the year then I will want to document key statistics around those holidays. I track volume numbers and ranges for those holiday sessions so I can go back in time to see what the historical results have been.
The same is true for I how I track any big news events like an FOMC statement on interest rates or an employment report that are released.
How To Use Your Trading Journal
I covered the bulk of how to use your journal so let’s hit home on some important aspects of using your trading journal
You will want to make sure you document every trade that you take. While it seems like a lot of work, it only takes a few minutes each day. Think about any other business out there and you will see that it’s important to track your numbers.
Just because we don’t have a boss looking over our shoulder holding us accountable doesn’t mean we can get lazy and not track our results in a detailed manner.
The notes you make on the mental aspects of your trading will help you give yourself an honest assessment of your performance as a trader.
Ask yourself, “Would YOU hire yourself to trade YOUR money?”
If that answer is no, then you are going to have to up your trading game with the help of trading professionals like the ones at Netpicks.
Don’t Set And Forget Your Journal
Like any journal, the only way you can benefit from this record keeping is to review it on a regular basis.
Take a day each week or month and go to the local coffee shop to review your journal. Take note of areas that are working/not working and make adjustments when needed. This will give you a plan of attack going forward of things that need to be improved on.
If you aren’t using these steps in your own trading, then you are making a big mistake in my opinion.
Keeping a trade journal has made a huge difference in my profit loss column over the last number of years. I am now able to back every trading decision with statistics, instead of just placing a trade and hoping for the best.
Sure it takes time to do this on a daily/weekly basis and for many of us time is a scarce commodity.
However, I find that is one of the most important steps to becoming a consistently profitable trader. So take the time, go grab a cup of coffee and start putting your trade journal together.