What is a trading journal and how to use it

 Trading journals are extremely useful and they play a central role in the trading plan of most professional traders. Things like planning futures trades, recording existing positions, and recording any emotions that may arise are all important factors to pay attention to when building a profitable trading strategy.

Therefore, knowing how to create and use a trading journal is crucial to the success of any trader. Without it, traders may not be able to track their profit and loss positions. Or worse, their account could be ruined.

What is a trading journal?

The content of a trading journal consists of a document that records everything you perform as a trader, including strategy development, risk management, psychology, and more. Keeping a transaction journal is very simple, but if created and used correctly it can come in handy. It can lead to valuable insights, prevent your account from getting bloodbathed, and it can also be the reason your account skyrockets.

Keeping a transaction journal is important for several reasons, including:

1. It makes you responsible for your transactions.

2. It makes you more self-disciplined and persistent.

3. It helps you discover profitable trading strategies.

4. It can record your strengths and weaknesses.

5. It makes you more cautious when analyzing potential transactions.

Successful traders carefully plan all of their trades and record successes and failures in their trading performance. By creating a trading journal and utilizing it correctly, you can become a successful trader no matter how the market moves.

How to create a trading journal

You can find free trading journal templates 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 suit your trading style and needs. As long as you have a place to plan and record your trading activity, you’re all set.

First, you’ll need to create a transaction journal spreadsheet (e.g. Google Spreadsheet, Microsoft Excel) and a written document (e.g. Google Docs, Microsoft Word). You’ll use them to record your exact transactions and your thoughts respectively. If you prefer, you can also include the written document as a second tab in the spreadsheet (see template below).

Next, you need to know what to record each day so that your trading journal can have a significant impact on your success. You can find some examples of trading journals online. But no matter which template you use, your spreadsheet should contain columns relevant to each transaction. These columns may include:

Entry date

Exit date

Contract code

Direction (long/short)

entry price

Position size

nominal value

stop loss

Take profit

exit price

Transaction Fees

Profit and Loss (P&L)

Profit and loss percentage (P&L %)

Remark

Some traders may also add time frames, screenshots of settings, and other things they deem important. The most basic requirement is that the information be useful to traders.

In your written document (or another tab), you should set aside a section for each day to write down all your feelings and thoughts so that you can organize them easily.

Written documents allow traders to express their creativity, while spreadsheets measure the profitability of their creativity. Both are very useful when creating and using a trading journal.

It’s that simple! Learning how to create a trading journal is only the easy part, though. It will also take a while before you understand how to use a trading journal. However, as long as you have a solid understanding of the basics, you’ll be using your trading journal like a pro in no time.

How to use the trading journal

It’s one thing to create a trading journal, but it’s another thing entirely to know how to apply what you learn from it into your trading system. Effective use of a trading journal can turn an unprofitable trader into a highly profitable trader.

Before entering any trade, you need to have a good reason for making the trade. This is where written documentation comes in handy.

As you watch the markets every day, many thoughts will pop into your head and feelings will flow through your body. You need to record these thoughts and feelings so that you can detect anything that may be helping or hindering your trading performance. This may include general market behavior, past transactions, current transactions, and potential transactions.

Your written documentation can also help you clarify whether a particular trade idea is good or bad. You should look at all aspects of your trading ideas so you can discover the strengths and weaknesses of each idea.

Once you’ve written down your thoughts and emotions, it’s time to use a spreadsheet.

Your spreadsheets are not for creative expression but for more logical recording than paper documents. This is where you’ll record all of your transactions, so it’s important to keep it organized and updated.

An important factor in keeping a successful trading journal is accurately measuring your successes and failures. You should make sure to keep accurate records in your spreadsheet so you can measure whether the ideas you present in the written document are profitable.

A good practice is to record your trades immediately after you execute them. At this point you will have a clear impression of the transaction, which will save you time in the future.

Another good habit to develop is to review your trading journal spreadsheet every day. This way, you can take a comprehensive look at your trading portfolio to gain insight into your level of risk exposure and whether more trades are likely to be made.

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Summarize

It doesn’t matter if you are a swing trader or a day trader. Becoming a successful trader is very challenging. If you don’t carefully plan and record your trading performance, you’ll be flying around the market like a headless fly. This situation rarely ends well.

By learning how to create and use a trading journal, you will be able to identify patterns and market trends more effectively. Writing detailed notes to capture your thoughts, emotions, and transactions is a simple investment that can pay huge dividends.