Trading journals can be very useful, and they play a central role in the trading plans of most professional traders. Things like planning futures trades, documenting existing positions, and recording any emotions that may pop up are essential factors to be aware of when building a profitable trading strategy.Therefore, knowing how to create and use a trading journal is crucial to any trader's success. Without it, a trader could easily lose track of his winning and losing positions. Or even worse, they could blow up their account.
In this article, we will show you how to make trade journal and how does a trading journal work. Please read on.
What is a trading journal?
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. While it can bring valuable insights that may prevent your account from blowing up, it can also be the reason for your account to go to the moon.
There are several important reasons why keeping a trading journal is important, including:
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.
Successful traders plan all of their trades meticulously and document the successes and failures of their trading performance. By creating a trading journal and using it correctly, you can become a successful trader regardless of how the market moves.
How to make trade journal
You can find a free trading journal template in the next section, but it’s also important to learn how to create one. You can customize your trading journal 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, you'll be set.
First, you need to create a trading journal spreadsheet (e.g., Google Sheets, Microsoft Excel) and a written document (e.g., Google Docs, Microsoft Word). You'll be using these to record your exact trades and your thoughts, respectively. If you prefer, you can include the written document as a second tab in the spreadsheet (see template below).
Second, you'll need to know what you'll be recording daily so your trading journal will have the highest possible impact on your success. You can find several trading journal examples online. But regardless of the template, your spreadsheet should have columns related to each trade. These columns may include:
Entry date
Exit date
Symbol
Direction (long/short)
Entry price
Position size
Notional value
Stop loss
Take profit
Exit price
Trading fees
Profit/Loss (P&L)
Profit/Loss percentage (P&L %)
How does a trading journal work
It's one thing to create a trading journal, but it's an entirely other thing to know how to implement what you learn from it into your trading system. Using a trade journal effectively can turn an unprofitable trader into a profitable trader.
Before you enter any trade, you need to have a good reason for doing so. This is where your written document comes in handy.
Every day when you look at the market, ideas are going to be popping up in your head, and feelings will be flowing through your body. You need to get these ideas and feelings written down so you can spot anything that could either help or hinder your trading performance. This could include general market behavior, past trades, present trades, and potential trades.
Your written document is also where you'll be making the argument over whether a specific trade idea you have is good or not. Your trade ideas should be turned upside down and inside out, so you can spot the strengths and weaknesses of each one.
Once you've got your thoughts and emotions written down, it's time to turn to your spreadsheet.
Your spreadsheet is less of a creative space than your written document and more of a logical space. This is where you'll be recording all of your trades, so it's important that you keep it neatly organized and up-to-date.
An important factor in having a successful trading journal is measuring your successes and failures accurately. With your spreadsheet, you should ensure you keep accurate records so you can gauge whether the ideas you've developed in your written document are profitable or not.
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.
Another good habit to get into is to review your trading journal spreadsheet every single day. That way, you can get a bird's-eye-view of your portfolio of trades, which can give you some insights into your level of exposure as well as if there's room to enter any more trades.
Closing thoughts
Becoming a successful trader can be a very challenging endeavor. Without carefully planning and documenting your trading performance, you'll be aimlessly moving through the markets. And that's a situation that rarely ends well. By learning how to create and use a trading journal to your advantage, you'll be able to identify patterns and market trends more effectively. Writing down detailed notes to record your ideas, emotions, and trades is an easy investment that can pay very high returns.
Now you've known how to make trade journal and how does a trading journal work. Hope this article can be helpful for you.
