Tracking your Trades on a Trading Journal

Why It’s important to Track all of your Trades

One of the most important things a trader has to do is to keep track of every position they have taken, the levels they entered at, the targets and stop levels, the pattern they traded, and the rationale behind the trade.

Every experienced trader will tell you that if you don´t allow yourself some time during the trading week to review your setups and positions (both winners and losers) you will never detect what´s working for you and what isn´t. This includes which markets are you making money on and which markets are bleeding your trading account out.

Now it’s true that most brokers will provide you with historical trade records, but bear in mind that these record don´t tell you why you took the trade and your thoughts at the time – and they will most certainly never tell you your thoughts after the trade closed; you will only get a series of entries, exits and profits and losses from them. This is not enough to make you understand where and what you are doing wrong to stop it and what you are doing right to build on it.

There are 3 main reasons we need to record our thoughts and the data from each trade to verify your system: 1) to create a habit when you trade to only look for the setups that have been verified; 2) a planning tool and instrument filter (if we get a higher percentage of winners with GOOG than with the EUR/USD we will have more focus on GOOG because it´s a more profitable asset for us); and 3) finally as a historical record of your overall PnL (profit and Losses)

Before we go into detail on how to build a trading journal, let´s go in depth into all 3 main reasons to start documenting our trades.

System verification

There are traders that get their setups from extremely mechanical systems, meaning that every single rule within the system has to be aligned with the setup in order for them to take the trade. These kinds of traders are less prone to keep a journal because their systems have been back tested overtime.

But if you are more of a discretionary trader that uses a set of indicators to understand the actual market conditions, and trade off levels and monitor various markets, you need to carefully document every single trade and the thoughts behind the entry so you can then go through them, fix your mistakes and choose your better setups.

Create a habit

Emotions can get the best of any trader out there, experienced or not; and here´s where keeping a journal will come handy: it will teach you to create a habit to always plan your trade and trade your plan.

It sounds that this is not the kind of thing you would expect from keeping a detailed journal of your daily trades but in fact this will give you confidence in your setups and your overall trading, avoiding you to be irrational and closing trades too early (both losers and winners, which will make you pile losses and leave profits on the table).

Historical record of your PnL

It may sound redundant because your broker might give you a detailed PnL of your trading activities if you ask them but here you will be able to see the periods of times when you had a draw down and see exactly what cause it; bad decisions, emotional trading or just normal bad streaks.

You will get this information by just looking at the overall balance fluctuation and your notes of each trade.

I think we are getting an idea of why it´s important to keep a detailed journal of your trading sessions but now we need to know what data must be collected in order for trading journal to work properly.

What data should I collect?

The easiest way to keep a journal is using an excel spreadsheet and the data that we must use is:

  1. Date we entered the trade
  2. Asset or instrument
  3. Entry price
  4. Stop loss
  5. Profit target
  6. Risk to reward ratio
  7. The results
  8. Your thoughts and comments.

This is how a trading journal looks like:

trading journal

As you can see it´s not only important to keep a journal for record keeping but it´s also an important tool when it comes to evaluate your overall performance and risk management.

Adam

More About

Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

View Posts - Visit Website

Leave a Reply