The right way to build a trading journal

Apr 14, 9:29 am
Trading Journal

Most traders have, at some point embarked on a journey of maintaining a trading journal. Some start off with a public blog or starting their own trading journal thread on a forum. Despite starting off with the right intentions, most of the trading journals often tend to die out within a few months at most or when a trader ends up in a losing streak of takes a big hit to their account.

Some traders on the other hand, completely despite the idea of having to maintain a trading journal as they find it to be cumbersome and well, downright futile.

So, should traders make a habit to maintain a trading journal or is this something that is overrated? This article helps readers to understand the importance of a trading journal and more importantly, the right way to keep a trading journal.

Why start a trading journal?

A trading journal is meant to be your own personal trading notebook. The purpose behind maintaining a trading journal is so that traders can keep tabs of their trades so that they can fall back on these archived trades in order to see what has worked best for them and what didn’t.

A trading journal is important regardless of whether you follow a trading system that is based on rules or discretion based trading system.

For both the approaches to trading, a trading journal helps you identify the trades that have worked the best as well as trades that have failed.

This ensures that you have your very own ‘detailed’ forward testing database to look up to, when you want to iron out the bugs in your trading system.

How to log entries to you trade journal?

A quick glance at one of the many trading journals that one comes across various forums, and you can easily tell that the focus of the set ups is usually incorrect.

Having a disciplined entry or approach to maintaining a trade journal helps in easy referencing of past trades. There, spend more time towards creating a ‘template’ that you can follow when journaling your trades.

The most important aspect of all being that besides the chart screenshots, you should also mention various other factors that you might not consider.

An example trade journal entry would ideally include the following points:

  • Your general state of mind and environment
  • Your views on the markets at the time you entered the trade
  • Background about the currency pair or instrument you are trading
  • Your opinion about the currency or instrument you are trading
  • What do you think will happen
  • Your reason for placing the Stop and take profit levels
  • Indicator levels (ex: 50 EMA crossed below 100EMA before my entry)
  • Chart patterns and any other relevant information
  • Why you think the trade worked
  • Could you have done better/could you have done worse
  • Conclusion

The above points might seem a bit exhaustive but it is only meant to offer you some starting points towards maintain a journal the right way.

What do you gain from having a trade journal?

Maintaining a trade journal helps you in your journey to become a better trader. This is probably the simplest way to explain why. When you have been maintaining a detailed log of your trades, over time you end up building a fairly good database of trade entries. This ensures that when you are in a losing streak (which is more important) you can simply look up to your past trades to see why your current trade set up is failing. It also helps you to identify weaknesses in your trading system or approach that often misses the eye when you are too busy trading.

In this first series of articles, we have touched upon the basic why/how of maintaining a trading journal. In the next article, we take a look at how a trading journal can help you improve as a trader and also point you to some tools (both free and paid) to help make your journaling a bit easier and a lot more fun.

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