Table of contents:
A trading journal, diary or trading plan is used by every professional trader. Here you learn how to create it immediately (+ example and software).
If you read this, you are on a good way to become a successful daytrader.
Because most beginners (and also slightly advanced) don’t see the sense and necessity of a trading journal or diary… and never become successful.
But you are interested in it. This is important and right.
In this article we will present a simple but very effective Trading Journal.
You will also learn what should be integrated into a Trading Journal. For this purpose you will be presented with a pattern or example, which should serve as orientation.
So let’s start!
Why do traders need a Trading Journal?
I often hear beginners say: “The broker is my “journal”, because I have listed all trades in the history here.
This statement is absolutely correct, but unfortunately the provision of historical data is not helpful if you do not know how to interpret it.
If you just want to know if you are profitable or not after 100 trades, you don’t really need to keep a diary or journal. This will show you your account balance relentlessly.
But if you want to know which of your setups performs best, which assets bring in the most profit, which time of day brings in the most winners and which thoughts keep getting in the way, then you definitely need a journal.
A good trading journal should not only record your current trading data, but also provide information about what your plans are for each trade.
In short, you should always have the journal with you and start filling out orders BEFORE you start trading!
This feature allows you to think about each trade before you press the order button.
You plan exactly where you want to enter, how much risk you want to take on the trade, where your profit target will be set and how you will manage the trade.
In other words, the diary becomes a way for you to record your thoughts in real numbers and it has three major advantages in total:
- less actionism and senseless trading
- compliance with the trading setup or strategy
- learning effect through regular follow-up
So the phrase “plan your trade and trade your plan” makes sense 😉
The nice side effect of a Trading Journal
Another important side-effect is that over time you will review your methodology and strategy.
You will see how well your system performs under changing market conditions. It will answer questions:
- How did my system perform in a trend market and different time frames?
- Is the placement of stop loss and take profit too narrow or too wide?
One of the most useful features of the journal is the concrete help to change your habits from destructive to constructive.
If you learn how to trade your trading plan in a disciplined manner, you will develop a higher level of confidence and this is extremely important.
Your profitable trades will no longer feel “random”, and your losses will be “planned” and therefore they will not change your psyche in a way that puts a lasting strain on you.
A very important mental and emotional factor in trading is self-confidence. Confidence is the antidote to the fear and greed cycle that many traders are caught up in.
Fear and greed is a natural, deeply rooted emotion for most people. Somehow thousands of years ago it was a useful protective factor. But in trading, it’s as limiting as press freedom in North Korea…
So a journal protects you from yourself for a while and provides you with the feedback you need to develop your trading skills.
We will now discuss how you can create your own Trading Journal in a few minutes.
In 3 steps to your own Trading Journal:
Before we start to create it, we have to clarify a basic question:
Do we keep the journal in analog or digital format? Of course I can take a notebook and document everything by hand. However, I then have the problem that I can hardly make efficient evaluations.
I therefore recommend starting with a simple Excel spreadsheet.
- create a table with Excel, Numbers and Co.
You don’t have to complicate things at the beginning. Keep it simple and keep the most important parameters. These are for example:
- Asset (FX pair, stock,…)
If necessary, use other parameters that better suit your trading style. Excel also offers you many options for sorting and evaluation.
I advise you to record your thoughts as detailed as possible. On the one hand, this has a liberating effect, on the other hand you become aware of certain behaviours and can stop them.
- store the document in a cloud
If you use several devices for trading, you should also be able to access the Trading Journal from each of these devices (PC, laptop, smartphone).
Cloud solutions like Dropbox or OneDrive help you with this.
From now on, you really must record EVERY trade you have made in the document. Even if you end it after 10 seconds because it did not match your setup and you just slapped yourself.
It’s the first step to more disciplined behavior and the only way to improve your performance in a close manner.
- make weekly evaluations
Most full time traders do daily reviews. They use the end of the trading day for a review, relentless analysis and simultaneous preparation for tomorrow’s trading day.
I realize that you lack the time besides work and family, so it’s okay to do a weekly analysis. I like to use Sundays for this, because it is a quiet day without fidgeting and I can prepare for the coming week at the same time.
Alternatives to the table (trading software):
Depending on the objectives of your project, you can also use other media. An almost unknown, free Trading Journal is tradeinsights.net. Here you can upload your trade history and get useful evaluations.
Of course, there is also the possibility to use a paid Trading Journal software like Trading Diary Pro. Many providers offer free trial periods.
However, I don’t think this is absolutely necessary for the beginning.
Myfxbook.com also offers a free option. Especially for FX traders who use the Metatrader it makes sense to connect the trading account with myfxbook.
Here various key figures like best asset, best time of day, Sharpe Ratio, Drawdown, etc. are provided.
However, there is no possibility to log his thoughts comprehensively and logically, so that one should see myfxbook as a supplement.
Finally, a professional tip for scalpers and daytraders: The Videoscreener
I always use a video screener at risk events and literally film my chart. This is very helpful for traders with a short-term trading perspective who trade in volatile times.
It has the charming advantage that I can express my thoughts, especially ideas and fears. You can also see what is happening in the market and analyze it again afterwards.
There are free video screeners and paid ones. Here Google is your friend and shows you a selection with corresponding ratings. It can sometimes happen that the software affects your PC performance. This is of course bad for risky events. In this case, ideally use different hardware. Trading on a PC and screening on a laptop, or vice versa.
In addition to a trading journal, we have also created a trading plan as a sample template, which you are welcome to use.
This plan is specifically designed to determine the right parameters for a trading strategy and to document your behavior per trade.
It can also be kept as a supplement to a journal.
A trading journal is and remains a fundamentally important tool for traders. You will only be successful if you identify sources of error and bad strategies and turn them off accordingly.
A diary or journal does not have to be “fancy” and overloaded with useless functions. Much more important than single performance indicators is the relentless documentation of your thoughts.
The difficulty is not to create a trading journal or other types of reports, but to use them in a disciplined way, day after day, year after year.
So as always it’s up to you 😉
What additions do you have for us or what tools do you use? Use the comment function!