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 journalTrading 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.Ask yourself:
- 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?
Main elements of trading journalsAs 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.