Create and Use A Trading Journal

Are you using a trading journal where you log not only your trades, but your mental condition?

If not, you should be.  Many successful traders talk about how important it is to keep a trading journal spreadsheet.

Being your own boss as a trader, some tend to let some things slide and from our experience, it’s generally the use of a trading journal.

But here’s the thing:  What is measured can be improved so if you are not keeping a journal and not seeing results, it’s time to step up.

Even if you have a log and journal, are you using it to the full potential?

What Is A Trading Journal

A trading journal is a document where you record everything you do as a trader.  It records everything you do as a trader, from strategy development to risk management.

If used correctly, keeping a trading journal is very effective.

Times have changed and the days of only jotting down your trade entry and exit price and calculate your profit and loss, are over.

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 strategy 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 that was used 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 that information is there as well)

All we did was input the various trade details into the first page of the spreadsheet and excel did all the important calculations for me.

From this stage, you can track every detail and make improvements on many variables of the trading plan:

• Type of setup used
• How I exited the trade
• Direction and entry/exit times each trade

This decision making process can only be done by using a trade journal spreadsheet that does all the intricate calculations for you.

Using these types of journals and logs takes the hard work out of keeping your trading history.

How And What To Write In Your Trade Journal

If you want to use this trading journal template, you can download it here.

While you want to include all the 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:

1. How were you feeling when you placed the trade?
2. Did you exit according to your plan and if not, why didn’t you?
3. 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 fewday trading books that can help you get control of the negative thoughts that all traders go through.

There is nothing worse than taking revenge trades and losing.  Writing out what triggered you to take the trade can help you avoid the mistake in the future.

For me, those trades that were outside my plan were usually a result of a winning trade cut short.

It was FOMO on the bigger moves.

The good thing was I was cured of that after seeing decent gains being ripped apart by a trade outside of my plan.

Keeping Track Of Important News

News events can affect the markets and you want to know how the various releases affect your trades.

A running log on the various events and how they affect the market may give you something to add to your trading plan to deal with these events.

All of these notes can make an impact on your trading long term.

For example, if you want to know how the market reacts to different holidays throughout the year then you will want to document key statistics around those holidays. Track volume numbers and ranges for those holiday sessions so you can go back in time to see what the historical results have been.

From FOMC releases to Fed talks, those can be market moving events so knowing the effect they have, could help you profit from them.  This is especially true for a day trader.  Those events can turn a green day into a red day.

How To Use Your Trading Journal

The list is endless but bottom line:  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.

Trading is no different than any other business.

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.

Be Consistent With 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.