TRADING JOURNAL — ALL YOU NEED TO KNOW, BENEFITS, AND SOFTWARES FOR 2021
Peter Drucker (the inventor of modern business management) is often quoted saying that “you can’t manage what you can’t measure.” What this means is that you can’t know whether or not you are successful unless success is defined and tracked.
Trading is a business, whether Forex, Stocks, Cryptocurrency, etc. so it should be well managed. You aren’t getting into it for fun but to make a profit so treat it like you’d handle every other business. Literally, every area of our lives requires tracking. From our goals, finance, fitness, and health, etc to enable growth. As a trader, I understand the importance of keeping track of my trades and the enormous benefits that follow. I started by keeping records of my trades daily on sticky notes to creating a document to MS Word and progressed to using excel sheets. It helps in planning futures trades, documenting existing positions, and recording any emotions you may have in a particular trade which can be a lesson to enable you to make better trading decisions.
Whether you are an intraday, day, or swing trader, knowing how to create and use a trading journal is crucial to any trader’s success. Are you struggling with the fluctuating market price, clumsy data, and reports? A trading journal will be your partner in your trading business.
What is a Trading Journal?
I will simply define a trading journal as a document that shows your trading plans and activities. 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. By creating a trading journal and using it correctly, you can become a successful trader regardless of how the market moves.
There are several important reasons why keeping a trading journal is beneficial, some of them include:
· It keeps you accountable.
· It makes you more disciplined and consistent.
· It helps you spot profitable trading strategies.
· It documents your strengths and weaknesses.
· It makes you more careful when analyzing potential trades.
· It helps you develop your strategies.
· It will help you master your emotions.
How to create a trading journal
There is no perfect trading journal so you don’t have to worry about meeting anyone’s standards. Every trader has a routine that works for them. There is no particular order as to how a trading order should be created, it can be 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. The following steps will guide you to getting started;
· Create a trading sheet: You can create a spreadsheet with Google Sheets, Microsoft Excel, and a written document (e.g., Google Docs, Microsoft Word). This will be used to record your trades and thoughts or lessons. You can use these tools separately or as one.
· Know what you’ll be recording: Your spreadsheet should have columns related to each trade. This is where your creativity comes to play. Your spreadsheet is less of a creative space than your written document and more logical space. Your written document is where you will be making arguments whether a specific trade idea is good or not while the spreadsheet will be recording all your trades. The written document is where a trader lets loose their creativity while their spreadsheet helps to measure the profitability of their creativity. Some of the things needed to highlight are;
· Entry date
· Trading Pair/Symbol
· Entry price
· Position size
· Exit price
· Direction (long/short)
· Take profit
· Profit/Loss (P&L)
· Profit/Loss Percentage (P&L %)
· Comments
· Commissions or Fees
Some traders may also add the time frame, screenshots of the setup, chart studies, and anything else they may deem important. The bottom line is for the information to work in their favor.
Attached is a link to my trading journal to help you get started HERE
Best Trading Journals for 2021
These tools also help you keep track of your market moves, measure your progress, and serve as a benchmark for trading performance. Some of them are free and some can be used at a fee so you can decide what works best for you.
· Tradevue
· Edgewonk
Note: You can create these journal sheets monthly or use the same document for the entire year, whatever works for you.
How to use a trading journal
Learning how to create a trading journal is the easy part, though. Knowing how to use a trading journal is something you’ll need to get good at over time. Using a trade journal effectively can turn an unprofitable trader into a profitable trader. When you look at the market, ideas come to mind from general market behavior, past trades, present trades, and potential trades, these ideas need to be documented to help spot anything that can either help or hinder your trading performance.
· keep it neatly organized and up-to-date: you will be recording all your trades here so it is very important that it stays organized and neat for future use. You don’t want to get confused sorting out why, what, and when some things are the way they are when you are supposed to be prompt and smart decisions.
· A good habit to get into is to record your trades the moment after you execute them. That’s when they’ll be fresh in your mind, and you’ll save yourself time in the future.
· An important factor in having a successful trading journal is measuring your successes and failures accurately. Do not leave any data out no matter how bad it makes you feel, there is always something to learn from it.
· Review your trading journal spreadsheet every single day.
· Stay positive: you will need to train your emotions because there are no guarantees that you’re always going to have good days. Do not give up on the bad days.
Becoming a trader is a challenging endeavor and without planning and documenting your trading performance, you’ll be moving through the markets aimlessly and making the wrong decisions. Learning how to create and use a trading journal is to your advantage that can pay very high returns.
Remember that trading is a battlefield and you are the warrior fighting for your account (lol). Yes, I meant what I said. Your trading journal is one weapon that can help you stay alive in the trading game and hopefully thrive. Any time you trade, you’re taking a risk, you can’t change that but you can work on how to manage your risk. The goal is to grow and make profitable decisions.
Disclaimer: The content provided is for informational purposes only. I am not a financial advisor therefore you should consult a financial professional before making any financial decisions.
Stay Winning!!