The Trading Journal

Trading Course (Get Started In Trading) The Trading Journal

It’s an absolute must to have a trading journal.

In this lesson, we are going to look at the trading journal. We’ll answer the following questions:

What is a trading journal?
What should it include?
Why, how, and when should you keep a trading journal?

What is a trading journal

A trading journal is a structured and systematic documentation of all your trades. In short, you document key information about each trade, comments, and your own reflections on the trading process as well as the market at large.

What should you include in a trading journal?

There are ready-to-use templates that you may find and use online, and they may vary somewhat as to what they choose to include. When you’re new to trading, it may be wise to start with such a template, and then make adjustments as you get familiar with and used to the process.

Some common things to include are:

Date of sale and purchase
Purchase and sale price
Position size
Transactional costs
Number of days you were in the trade
The name of the market
The name of the financial instrument
The name of the strategy that issues the signal
What type of order you used
The size of the profit or loss in percent and dollars

In addition to the information listed above, it’s also common to include some comments on how well you managed to follow your predetermined trading plan and any potential deviation away from it. You should also include your subjective rating of the trade. One common approach is to rate the trade on a scale from 1-5, where five means that you adhered perfectly to your trading plan.

You may also include your observations of the market action, which will help you spot recurring patterns, which could generate new trading ideas to be turned into new trading strategies.

Why Keep A Trading Journal?

A trading journal is a great tool that will help you grow as a trader. Here are some reasons why this is the case:

You get to see the actual outcome of your trading and detect if any mishaps are due to the trading plan itself, or your own inability to follow it.
Are your results from live trading comparable to your backtest results? Does your strategy actually work, and is the edge still intact? These are questions you’ll get answered by keeping and reviewing a trading journal
You get to notice patterns in your trading that might mean that you have to adjust your trading plan, to be better synced with your personal character.
You get to notice if you fall into psychological pitfalls all the time. As soon as you’re aware of your shortcomings, you get a chance to find a solution to them!
Sometimes you will notice recurring patterns that could give rise to new testable trading strategies.

As you see, there are many good reasons why you should make sure to keep a trading journal. Despite this, many are those who just skip this incredibly important practice!

How To Keep a Trading Journal

One easy and free approach is to just use Excel. You may use the application to calculate the metrics you like to include.

However, there are many good digital alternatives out there. Most of them are paid tools, but a couple offer free plans that are more than enough for most traders. Here are two trading journals that are worth checking out!

Trademetria

Tradervue

How often should you make an entry?

Well, the simple answer is every time you take a trade.

The easiest approach is to fill in as much information as possible when you take a trade, and the rest once it’s exited. If you don’t, you run the risk of having everything piling up, and might quit making entries because of it.

A couple of tips…

Create a solid routine. And most importantly, start right away as you enter your first trade!
Constantly evaluate your journal keeping, and see if there is any information that should be added or can be excluded
Sum up your entries every month, and reflect on the journey so far.
Use the trading journal together with your trading plan! By paying close attention to the trading journal, you may discover that the trading plan needs to be altered, and can make changes accordingly. The effect of these adjustments can then once again be evaluated through the trading journal.

Conclusion

In this lesson, we have tried to bring to light the immense benefits of keeping a trading journal. It might seem like a formal and boring practice, but our own experience, as well as that of other traders, speaks clearly in its favor! The journal not only helps us keep track of numbers but also discover behavioral patterns that might be to our disadvantage and make us deviate from our set trading rules!