“Dear Readers, Today’s article is about “ TRADING JOURNAL – A successful trader’s must have tool” . Trading business in market is different from running any other form of businesses as there is no product to sell, no employee to manage, no customers to attend to and no office place to maintain and so no-one like a BOSS will point a gun towards you and ask about your performance & no-one is there to fire you in case you don’t perform.So it’s all about you & only you to monitor your own performance in this trading business, as result of your performance will come in as monetary profit or loss before you only – The best way to monitor yourself is KEEPING & FOLLOWING a TRADING JOURNAL on everyday basis as a watchdog for your trading business.IN other way it’s like a BIG BOSS show going on where you are the only participant to play & your activities are getting recorded each day basis & after the day ends or month ends you sit with all your trading videos to analyze yourself so that you realize the characteristics of your trading and improve yourself. It’s a key component of any trader’s arsenal if they intend to improve their trading career.
What is a trading journal?
A trading journal is a diary or notebook or spreadsheet, where a trader keeps a record of each trading day’s activities.It is really crucial to keep a trading journal to help you to understand not just the actual trades you take, but also why you have taken that trade with the chart screenshot for each trade, how you feel before making the trade, what lessons have you learnt from the trades and how you can avoid the mistakes if you do encounter the same scenario again. Over time this will help you spot trends in your trading, trends in what you do well, and trends of common mistakes that you make. A trading journal will also improve your efficiency, help you master your emotions, identify the trade setups that are most profitable for you, and give you a framework to improve your profitability. After a while, you will see that your trading journal is the best and biggest teacher you could ever have. It will save a lot time in your analysis and will help you become a good trader much faster. If you made a bad trade instead of running away from it,figure out what you’ve learnt from that bad trade. Analyze your bad trade and try not to make the same mistakes next time. Traders who ignore trading journals don’t know their past and also they don’t see their progress.We cannot know where we are going if we do not know where we have been.”Trading journal is the key to making consistent money and keeping long term success in the markets.Trading is not just about losing or winning in market.At the end of the day, it boils down to your emotional reaction to each win or loss, which will ultimately determine your trading success or failure. By keeping a trading journal, it will not only force you to check on your emotional response to trading, but also show you the logical and illogical reasons that you have for making the trades. Think about noting down all your financial day-today expenses and having a overall look after a month on it – You can figure out which part of your daily expense is unnecessary & which part of expense should be taken care of by choosing alternatives. Same way a trader is suppose to maintain a daily trading journal to find out individual trading strengths, weaknesses and biases. There is a old saying, “Those who do not learn from the past are condemned to repeat it.” And this shows the importance of managing a trading record book for our self-evaluation.By trading journal a trader can understand his weaknesses and turn them into strengths.
Trading is a discipline game and writing trading journal helps you to stay in discipline to play the game well enough.Writing journal is like watching yourself in a mirror which shows the real you while trading the market. Writing daily journal for trading is like working out for your health – You do not see the effect right after you started exercise, but with daily routines eventually you’ll notice the positive effects on your health of your hard work.
The same applies while writing Trading Journal as it’ll be boring & time consuming trait for initial few days when you start & also you wont see immediate outcome in your trading result. But if you stick with it & make it a daily habit of recording information that could be useful,over time your data will reveal patterns of wins, losses, and errors in judgment that you can reflect on for better decisions in the future.
Now I’ll disclose my own way of managing a trading journal. I’ll first explain my way of trading so that it becomes easier to understand the kind of terms I’ll use while explaining my TRADING JOURNAL format.I trade based on pure price action and do not use any form of indicators ( except 20ema ) on my chart.So it’s a plain candlestick chart only.I believe “trading should be simple” & price action allows you to keep it simple.In my trading journal first thing comes my “DAILY chart setup” & here is the detail :
DAILY CHART SETUP : everyday morning on desk, firstly I go through all my favorite stocks,index,currency and commodity charts & make a note on each about the kind of formation or pattern I see for the day with the levels to watch for BUY/SELL signal. It takes almost an hour for me as i’m trading some of the international markets too apart from trading indian markets but this part of action helps me to stay tune with the overall market happenings on daily basis and this daily activity really turned around my trading career towards success.
Trade type : Most of the traders are confused on this point thinking that the initiated trade should be kept intraday or positional and most of them do a common mistake – once he enters a trade with an intraday view & eventually if he is stuck with his positions in it then he converts the trade into positional and carry it for next day.As a trader one must realize the trading patterns & analysis are completely different when finding trades for intraday or positional.So DECIDE FIRST : whether you’re putting a trade in the system with intraday view or positional view and write it down in your journal column of “trade type”.
Stock name: Write-down stock / commodity / currency pair name you’re trading.
Entry date: Note down your date of entry in journal
Entry B / S: your entry is a BUY or SELL position – note it down
Planned Stop and Planned Target : you must know your stoploss and target level before you enter the trade – note this point too in your journal.
Possible Risk(in Rs): How much money you’re risking on this single trade ? ( each trade must carry same amount of risk in rupee term)
Possible Reward(in Rs): How much money you can make on this single trade when your trade goes right? ( each trade must carry minimum same amount of profit amount in rupee term)
Position size (lots) : As per your risk:reward capacity how much should be your LOT SIZE? note down & follow it while trading.
Exit Price: Have you decided where to book profit or book loss? Note down in journal & stick to it.
Chart screenshot : Have you captured your chart setup & entry level screenshot & saved it in a folder with the trade’s date? You must do this action when your stoploss/target will be hit again so that you keep on collecting sufficient data for self-improvement later.
Total P/L: Once a trade is closed,note down how much profit/loss you made out of that.
Trailing SL/TGT : Have you trailed your stoploss or target level during a running trade? If you’ve done it note down the reason so that you can find out whether there was a valid logic behind trailing SL/TGT or just because of fear or any other emotional factor you trailed it.
Planned R:R Vs Actual R:R : Note down whether you’re able to catch your planned target/stop-loss or you got emotionally biased and exited the profit making trade earlier or still sitting on the trade which already triggered your planned stop-loss.
Lesson learnt from the trade : After closing the trade,write down a small summary on the entire trade overview regarding the kind of setup you traded-the kind of emotional factors you went through-your trading a/c balance updation as per profit/loss for this trade etc.
Last but not least,Trading journal must be reviewed on weekly and monthly basis & trader should work on the problems found via monitoring the journal history.Also make a habit of noting down two more points “MONTHLY TRADING PROGRESS SHEET” & “WEEKLY TRADING PROGRESS SHEET”. Habit of writing a trading journal will also help you to realize the percentage of your winning and losing that you have achieved for the month and how you can walk the talk to show others that you are actually consistently making money from the market.
Find out your trading mistakes and KILL it before those mistakes come ahead and KILL your trading a/c.For years writing trading journal helped me to turn my trading around & I hope it does the same with you.If you want to learn more about “how to manage & follow a trading journal” and how it can help you to march towards the road of trading success join my TRAINING COURSE & learn it with live market everyday.