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A journal is used to keep a systematic record related to a specific field or subject. It helps to track and trace different altercations that might have occurred over time. However, trading is an extensive venture, and if you lose track, you might have to endure hefty losses. So, here is the solution.
How to Keep a Trading Journal?
Traders need to note position type (buy or sell), entry and close price level, and comments to keep a trading journal. Traders need to state the reasons why they created the position and why they closed. All emotions, news, fundamental and economic indicators must be explained in the trading journal.
Trading journals are a handy tool that helps you record all the trades that you indulge in. Many traders use these journals to analyze and monitor their trades and find room for improvement or prudent moves if any. This record-keeping tool will transfer all the data in the form of rows and columns, so you don’t have to worry about remembering everything.
Advantages of keeping a trading journal
Here is why you should keep a trading journal:
- They help you with the SWOT analysis of your trading journey
- It enables you to keep accounts of various trades that you do
- Point out the best trading strategy that will work in your favor
- It helps to enhance consistency
Keeping a journal is simple yet very effective if you look to boost your trading business by acting as a resource in creating a plan. A plan helps create a pathway that includes procedures, steps, guidelines, etc., that you can follow to manage the risks involved and maximize the profit.
How can I create a trading journal?
The creation of a journal involves simple steps that can be customized according to the creator’s preferences. Here are the steps that you need to follow if you are looking to create a trading journal-
- You have two options, a book or a spreadsheet. A spreadsheet is more convenient as it is electronic and has many automated features.
- Identify the type of information that you want to keep track of. (trade, date, assets, size, etc.)
- After placing your stop losses and taking profits, head to the journal and record the transaction immediately.
- Once you have recorded these trades over a specific period, analyze them to find the weak and strong points.
Step 1: Choose between a book or spreadsheet.
A spreadsheet is primarily preferable for keeping a journal. It is because you won’t have to do anything manually, except for entering data meticulously. The built-in functions can help you in making comparisons too.
Step 2: Identify the type of information that you want to record
Here are some things that you should include in your journal.
Why are you trading
This can be due to technical or fundamental analysis and evaluation; you might even do a mix of both. After indulging in various trades, you can compare and contrast the information and evaluate the trades that garnered results.
Your judgments
This includes the reason behind your feeling against or in favor of a trade. For example, is this trade in line with the code of conduct, does it comply with the technical pattern you follow? If these points check out, then the conviction is ‘high.’ Otherwise, it’s ‘low’ or ‘medium.’ This will help you keep a record of the trades that were most profitable for you in each category. Then you can continue the trade with the category which is the most convincing.
Other things
Other criteria might include how you perceive a trade with a particular asset, your emotional feelings, etc. It depends on you, as the trade journal belongs to you.
Step 3: Recording the trade
A trade should be recorded as soon as it is completed to avoid forgetting any crucial detail. This should be made only when you place stop-loss and take-profit.
Step 4: Collect the data and analyze
After a week or a month, you will have ample data to compile and analyze your trade data.
If you have a conviction or judgment criteria in the journal, you can tally your data from high, medium, and low categories. Then you can check if you see which conviction benefits you the most in trading.
For instance, if you had 20 trades, and 18 were successful and profitable, that converts to 90% profitability on historical trades. However, if the conviction was low, say, only 8 out of 20, that converts to the low success of trade (only 40%). Hence, you can pan out that it will only be prudent to trade when the conviction is high.
Conclusion
If you have been looking for a sign to log in to your trade, then this is it! A trade journal should always be a priority for traders. This journal can help set up a course of action and find out about suitable strategies for the business.
To conclude it all, trading journals are used for.
- Helps in keeping a record of all trading activities
- Test different strategies to find the most suitable one for your business
- Finds the shortcomings and overcome them through a thorough study
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
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