Did you know that you can boost your trading performance and increase your success rate even with your current trading strategy?
The solution is simple yet effective – By keeping a trading journal.
Trading journals are designed to help you spot any weaknesses and mistakes you make while trading. Imagine what impact cutting the number of your losing trades by only 10% could have on your bottom line.
In this article, we’ll take a closer look at what trading journals are, the advantages of keeping one and what they should include. I’ll also give you some great tips on how to keep journals to make your trading day much easier and more productive.
So, let’s begin …
What is a trading journal?
Trading journals are written records of all the trades you take in the market. They consist of journal entries, each of which represents an individual trade you opened.
While journal entries can include a variety of information a trader may find useful when assessing their trading performance, the main elements are always the same. This includes the traded instrument, date and time, trade direction, position size, entry and exit points and the result of the trade.
Some traders like to include certain additional elements into their trading journals, such as charts with technical levels, market commentary or the reasons why they’ve taken a trade (i.e. entry trigger.)
That said, these elements aren’t necessary for a trading journal, they might indeed help you to better understand your trading and to identify certain behavioral patterns that increase the probability of losing trades.
While you can access your entire trade history in your broker’s trading platform, keeping a separate trading journal provides much more flexibility and allows you to add additional fields that aren’t included in your platform’s trading history.
Advantages of keeping a trading journal
Trading journals are a great way to track your performance and identify which part of your trading strategy generates losing trades. They provide valuable insight into your trading behaviour and can help spot any weaknesses in your trading strategy.
To get the most out of trading journal, you need to perform regular retrospectives of your journal entries and analyze why certain trades worked well, while others didn’t.
- Are there specific chart patterns that produces an unusually high number of losing trades?
- Do some currency pairs you trade at certain hours cause you a loss?
- Are your entries and exit points the main weakness?
Answers to these questions will help you to fine-tune your trading strategy and boost your performance.
Main elements of trading journals
As we already mentioned, certain elements are necessary to be included in a trading journal. Those elements are:
- Date and time. One column of your trading journal should be reserved for the date and time you took a trade. This makes it easier to filter through your most recent trades, if you’re using a spreadsheet software like Excel, for example.
- Traded instrument. Naturally, your trading journal should include the instrument that was traded. You can also add a separate column dedicated to the financial market you’re trading, such as stocks, currencies, commodities or cryptocurrencies, in case you’re trading more than one market.
- Trade direction. In this field, insert the direction of the trade. Was it a short or long trade? A market order or pending order?
- Entry and exit prices. This field is reserved for the entry and exit prices of the trade. Consider using 3 columns for this – entry price, SL and TP.
- Position size. To make later journal retrospectives easier, your journal should include the position size that you’ve taken. This will make it more efficient to analyze and fine-tune your risk management rules.
- Trade result. Finally, once a trade is closed, enter the result of the trade. Was it a losing trade or winning trade? How much have you made or lost? You can use this column later to filter all losing trades and identify the mistakes that led to their opening.
Additional elements of trading journals
Some traders prefer to add additional elements to their trading journals, such as the reasons for taking a trade, a chart in graphic format or general market commentary. While these fields are not mandatory, they can indeed play an important role when you perform a journal retrospectively.
By writing down the reasons for taking a trade, you’ll be able to spot whether you’ve been taking trades based on emotions or rational decision-making. Even if you’re not aware of it, a large portion of your (losing) trades may be the result of trading on gut feeling without proper trade confirmations.
In addition, by taking screenshots of the charts, you’ll be able to analyze your taken trades in much more detail and identify certain price-action patterns that generate lower success rates than others.
Having a separate field for market commentary can also help you identify which market environments work best for your trading strategy. Does the majority of your losing trades come during ranging markets? Or do you take trades during major market news and shifts in risk appetite? These comments work great in conjunction with chart screenshots.
Tips on how to keep a trading journal
Now that you know what trading journals are, their main elements and what additional elements you can include, let’s see how successful traders keep their journals tidy and clean.
Tip 1: Consistency is key.
To get the most out of your trading journals, you need to be consistent in keeping it. Enter your journal entry as soon as you take a trade, or there is a high chance that you’ll forget about it later. Think about journal entries as valuable tools that will help you fine-tune your trading strategy.
Believe me, you’ll miss all those trades that you haven’t entered into your trading journal that could have provided valuable insight into your trading progress and performance. It takes 21 days to build a habit, so try to stick to it until it becomes second nature to you.
Tip 2: Make your journal part of a trading plan.
Besides your strategy, risk and money management and trading style, your journal should be part of a well-round trading plan. Some traders prefer to have a written trading plan so they can refer to it whenever they find themselves struggling in the markets.
Tip 3: Perform regular retrospectives.
Trading journals have no real value if you don’t study their entries on a regular basis. That’s why journal retrospectives are so important – they prevent trading journals from being a dead letter. Only by making regular retrospectives will you be able to spot and remove any trading mistakes that cause losing trades.
Check your traded markets, entry and exit points, charts, entry triggers and all other elements of your journal entries and try to fine-tune your strategy accordingly.
Make your own trading journal in Excel
To make keeping trading journals easier, you can create them in Excel or any other spreadsheet software. Simply add all the fields mentioned above into separate columns, which allows you to filter through each of the fields once your trading journal grows.
Also, add some of the additional fields if you feel that they can help you evaluate your trading and keep chart screenshots in a separate folder named by the date you took the trade.
This entry has all the necessary fields to help you in your journal retrospectives and improve your trading strategy. In addition, we’ve also added 2 additional fields that we find quite helpful – Commentary/Reasons for taking a trade and charts.
Trading journals are an effective tool for spotting any weaknesses of your trading strategy and, if used properly, can help to avoid them in the future. Journals keep all your market entries in one place.
This makes it easier to go over them from time to time and spot recurring patterns that lead to losing trades. If you don’t have a trading plan yet, make sure to create one and include keeping a trading journal as part of your plan.
Nevertheless, even the best trading journals won’t help you much if you don’t perform regular journal retrospectives. You can decide how often you’ll go through its entries. It can be on a weekly basis, monthly or even quarterly, depending on your free time and how many trades you take.