In summary…
Keeping a detailed record of your trading statistics enables you to understand exactly how well (or badly) your trading strategy is performing.
Once you have the data, you can perform detailed and useful analysis on your trading performance to identify what is good and bad about your trading process. It helps you measure how well you have executed each trade, and most importantly it provides information to enable you to develop and enhance your trading strategy.
It keeps you 100% honest in terms of your past performance and future expectations – don’t forget, the numbers never lie!
What is a trading journal?
A trading journal consists of a document where everything you do as a trader is recorded, including strategy development, risk management, psychology, and more. Keeping a trading journal is easy but very effective if created and used correctly. While it can bring valuable insights that may prevent your account from blowing up, it can also be the reason for your account to go to the moon.
Although past performance or a previous successful strategy cannot guarantee future performance and positive results; however, you can use this journal as an opportunity to learn from your trading experience and understand why you or the market went in favour or against your initial strategy. With simple words... your learning curve towards better and efficient trading!
Let's take a look at 10+2 reasons on why keeping a trading journal could benefit your trading!
1. Learn, Review ,Identify your strengths , and Work on your weaknesses
Just because some strategies worked for you in the past, that does not mean you should only apply those! At some point (we hope not though) all strategies inevitably fail and must be replaced. As a result, it is important that you still try to find new ones. Through recording all of the specifics of your trades, you will be able to do an in-depth analysis of the trades you have executed so far.
Go through all your trades and see where you went wrong, and try to consider for your errors from now on and when the time comes to go over your trading journal again, compare the results of the two periods to see if you've made any progress. By consistently keeping a track of your trades, you will be able to see where you might be falling short in order to work on them.
2. Helps you set up your Goals
Set targets that are slightly better than your previous ones to avoid putting too much pressure on yourself while you are still learning. A journal is a perfect way to determine what goals you want to accomplish, how you will monitor your success, and what you will do to achieve your next targets.
3. It is used as a virtual portfolio
A trading journal can help you "build" a virtual portfolio. Usually this is implemented by beginner traders where they set up a hypothetical amount of funds to see if they can outperform the market (it's similar when one starts trading with a demo account).
This can also be useful and used as a practice tool for traders who want to expand into a new market and prefer to experiment before stepping into the real trading world.
4. Ideal for monitoring potential growth assets
A trading journal can be useful if a trader is interested to invest in growth stocks or other assets. Instead of buying them, the trader can record all the details about the desired asset , including trends and the risks associated with trading it.
5. Holds you responsible and sensible
When you keep a trading log, you are less likely to make trades that are not part of your trading strategy. Impulsive trading is what usually causes most traders to lose money.
6. Helps you with risk management
A trading journal will help you identify areas where you might be making errors in risk management. It's possible that you're not taking enough risk to make a significant reward by setting the stop loss too close to the current price, or that your position is too small to lead in any kind of real benefit.
7. Helps with trading psychology
Emotions have a critical role in trading. A trading journal will help you see whether you ever get upset after a loss and start making trades or if you were happy after a good earning! It will also help you see if you make rash decisions after a string of good trades (and vice versa). Once you are aware of them, you will be able to monitor them and will be less likely to make rash decisions that will have a negative effect on your trades.
8. Brings consistency
When you are consistent with your trading journal, eventually your bad habits will start to disappear and you will stop losing money as frequently as before. This is due to the fact that you will be able to see the mistakes you are making and you will strive to stop making them in the future. Therefore, it's important to be as accurate as possible in your log to identify those mistakes more easily.
9. Provides historical record and encourages performance growth
The journal keeps track of all your trades over time. It will summarize all of your trades and show you a brief status of your trading account. In other words, it will become your personal archive, allowing you to look back and see how often you traded, how good each trade was, which trades worked better for you, and much more.
The more you study your trading journal, the more you will be able to adapt your results for optimal trading and future performance growth.
10. Works as a planning tool
A useful trading journal should not only document your actual trade and trading details, but it should also include information on your plans for each trade, enabling you to "visualize" how much risk you will take, where your profit goal will be set, and how you will handle the trade as it progresses.
To put it more simply is like a way to capture your thoughts in numbers and put them into practice!
11. Methodology Verification
You'll be able to see how the system works in evolving market conditions and will answer some of the questions you may have regarding your methodology (if it works in a trending market and different time frames, the impact of any trading decisions etc.).
12. Trading Journal as a Game Changer
Once you have "mastered" some of your trading techniques, you will gain more confidence and you will be able to alter and differentiate your strategy, thus your profitable trades will finally make sense and your "predicted" losses can be avoided.
As seen from the above list, it is quite obvious that keeping a trading journal has many advantages.
Although it may be difficult at first to keep track of every single trade you make, it is noteworthy that keeping a trading journal is a smart strategy to enhance your performance and gain confidence, while learning how to be disciplined!
How to create a trading journal
You can search online and find a free trading journal template ( or ask me) , but it’s also important to learn how to create one. You can customize your trading journal in a variety of formats to fit your trading style and needs. As long as you have somewhere to plan and document your trading activities, you'll be set.
First, you need to create a trading journal spreadsheet (e.g., Google Sheets, Microsoft Excel) and a written document (e.g., Google Docs, Microsoft Word). You'll be using these to record your exact trades and your thoughts, respectively. If you prefer, you can include the written document as a second tab in the spreadsheet (see template below).
Second, you'll need to know what you'll be recording daily so your trading journal will have the highest possible impact on your success. You can find several trading journal examples online. But regardless of the template, your spreadsheet should have columns related to each trade. These columns may include:
Some traders may also add the time frame, screenshots of the setup, and anything else they may deem important.
final thought
The advantages of having a trading journal are plenty; the reasons above just scratch the surface. Journal entries do not have to be a chore. They can take whatever shape and form you want, as long as you do not forget to include the most important information that is useful for your trading style. Feeling inspired? The best time to start keeping a trading journal is now!
Sources:
binance academy -forexlive-investopedia-medium
Keeping a detailed record of your trading statistics enables you to understand exactly how well (or badly) your trading strategy is performing.
Once you have the data, you can perform detailed and useful analysis on your trading performance to identify what is good and bad about your trading process. It helps you measure how well you have executed each trade, and most importantly it provides information to enable you to develop and enhance your trading strategy.
It keeps you 100% honest in terms of your past performance and future expectations – don’t forget, the numbers never lie!
What is a trading journal?
A trading journal consists of a document where everything you do as a trader is recorded, including strategy development, risk management, psychology, and more. Keeping a trading journal is easy but very effective if created and used correctly. While it can bring valuable insights that may prevent your account from blowing up, it can also be the reason for your account to go to the moon.
Although past performance or a previous successful strategy cannot guarantee future performance and positive results; however, you can use this journal as an opportunity to learn from your trading experience and understand why you or the market went in favour or against your initial strategy. With simple words... your learning curve towards better and efficient trading!
Let's take a look at 10+2 reasons on why keeping a trading journal could benefit your trading!
1. Learn, Review ,Identify your strengths , and Work on your weaknesses
Just because some strategies worked for you in the past, that does not mean you should only apply those! At some point (we hope not though) all strategies inevitably fail and must be replaced. As a result, it is important that you still try to find new ones. Through recording all of the specifics of your trades, you will be able to do an in-depth analysis of the trades you have executed so far.
Go through all your trades and see where you went wrong, and try to consider for your errors from now on and when the time comes to go over your trading journal again, compare the results of the two periods to see if you've made any progress. By consistently keeping a track of your trades, you will be able to see where you might be falling short in order to work on them.
2. Helps you set up your Goals
Set targets that are slightly better than your previous ones to avoid putting too much pressure on yourself while you are still learning. A journal is a perfect way to determine what goals you want to accomplish, how you will monitor your success, and what you will do to achieve your next targets.
3. It is used as a virtual portfolio
A trading journal can help you "build" a virtual portfolio. Usually this is implemented by beginner traders where they set up a hypothetical amount of funds to see if they can outperform the market (it's similar when one starts trading with a demo account).
This can also be useful and used as a practice tool for traders who want to expand into a new market and prefer to experiment before stepping into the real trading world.
4. Ideal for monitoring potential growth assets
A trading journal can be useful if a trader is interested to invest in growth stocks or other assets. Instead of buying them, the trader can record all the details about the desired asset , including trends and the risks associated with trading it.
5. Holds you responsible and sensible
When you keep a trading log, you are less likely to make trades that are not part of your trading strategy. Impulsive trading is what usually causes most traders to lose money.
6. Helps you with risk management
A trading journal will help you identify areas where you might be making errors in risk management. It's possible that you're not taking enough risk to make a significant reward by setting the stop loss too close to the current price, or that your position is too small to lead in any kind of real benefit.
7. Helps with trading psychology
Emotions have a critical role in trading. A trading journal will help you see whether you ever get upset after a loss and start making trades or if you were happy after a good earning! It will also help you see if you make rash decisions after a string of good trades (and vice versa). Once you are aware of them, you will be able to monitor them and will be less likely to make rash decisions that will have a negative effect on your trades.
8. Brings consistency
When you are consistent with your trading journal, eventually your bad habits will start to disappear and you will stop losing money as frequently as before. This is due to the fact that you will be able to see the mistakes you are making and you will strive to stop making them in the future. Therefore, it's important to be as accurate as possible in your log to identify those mistakes more easily.
9. Provides historical record and encourages performance growth
The journal keeps track of all your trades over time. It will summarize all of your trades and show you a brief status of your trading account. In other words, it will become your personal archive, allowing you to look back and see how often you traded, how good each trade was, which trades worked better for you, and much more.
The more you study your trading journal, the more you will be able to adapt your results for optimal trading and future performance growth.
10. Works as a planning tool
A useful trading journal should not only document your actual trade and trading details, but it should also include information on your plans for each trade, enabling you to "visualize" how much risk you will take, where your profit goal will be set, and how you will handle the trade as it progresses.
To put it more simply is like a way to capture your thoughts in numbers and put them into practice!
11. Methodology Verification
You'll be able to see how the system works in evolving market conditions and will answer some of the questions you may have regarding your methodology (if it works in a trending market and different time frames, the impact of any trading decisions etc.).
12. Trading Journal as a Game Changer
Once you have "mastered" some of your trading techniques, you will gain more confidence and you will be able to alter and differentiate your strategy, thus your profitable trades will finally make sense and your "predicted" losses can be avoided.
As seen from the above list, it is quite obvious that keeping a trading journal has many advantages.
Although it may be difficult at first to keep track of every single trade you make, it is noteworthy that keeping a trading journal is a smart strategy to enhance your performance and gain confidence, while learning how to be disciplined!
How to create a trading journal
You can search online and find a free trading journal template ( or ask me) , but it’s also important to learn how to create one. You can customize your trading journal in a variety of formats to fit your trading style and needs. As long as you have somewhere to plan and document your trading activities, you'll be set.
First, you need to create a trading journal spreadsheet (e.g., Google Sheets, Microsoft Excel) and a written document (e.g., Google Docs, Microsoft Word). You'll be using these to record your exact trades and your thoughts, respectively. If you prefer, you can include the written document as a second tab in the spreadsheet (see template below).
Second, you'll need to know what you'll be recording daily so your trading journal will have the highest possible impact on your success. You can find several trading journal examples online. But regardless of the template, your spreadsheet should have columns related to each trade. These columns may include:
-
Entry date
- Exit date
- Symbol
- Direction (long/short)
- Entry price
- Position size
- Notional value
- Stop loss
- Take profit
- Exit price
- Trading fees
- Profit/Loss (P&L)
- Profit/Loss percentage (P&L %)
- Notes
Some traders may also add the time frame, screenshots of the setup, and anything else they may deem important.
final thought
The advantages of having a trading journal are plenty; the reasons above just scratch the surface. Journal entries do not have to be a chore. They can take whatever shape and form you want, as long as you do not forget to include the most important information that is useful for your trading style. Feeling inspired? The best time to start keeping a trading journal is now!
Sources:
binance academy -forexlive-investopedia-medium
