What is a trading journal?
A trading journal is a kind of "diary" in which you keep track of your trades. Keeping track of a journal is a decisive factor in whether you will become a consistently profitable trader or not. It does not matter if you are a swing, day or scalp trader. Becoming a successful trader can be a very intensive and challenging objective. Without careful planning and tracking your trading performance, you will move forward without a goal through the markets. A situation that can never end well.
An athlete has a journal to keep track of his diet, weight and strength. Scientists are using a journal to keep track of their latest inventions and results of experiments. A gamer has a journal to record his games and his thought process during the game. And the same applies to traders. They use a trading journal to keep track of all their trades so that they can evaluate them.
The importance of a journal
A trading journal can be very useful because, in most cases, they have a crucial role in the trade setups of the professional traders. Unfortunately, many inexperienced traders do not know what this is and how to use it in their advantage. Factors such as scheduling trades, tracking current positions and recording all of their emotions that may arise are essential to be aware of when you are building a profitable trading strategy.
Therefore, it is important for a succesful trader to know how to create and how to use a trading journal. Without a proper journal, a trader could easily lose track of both winning and losing positions. Or in the wordt case scenario, they can blow up their entire account.
The fact is that the perfect trader does not exist. No one is only winning without losing once in a while. If you can discover which strategy works best for you and which one does not, it will help you to become a better trader and develop yourself in this. If you have a trading journal, you can look back on your trades and determine which patterns are costing you money. Stop trading this way as soon as possible. When you know how to shift the focus to the patterns that are valid and profitable for you, you can take advantage of this to make more profit.
Tips to create your own trading journal
Use a spreadsheat for your trading journal
To get started you can use a spreadsheet to create a journal like Excel, and/or a written document like Word. You will use these to record your exact trades and thoughts at that moment. When you are going to create a written document, you should have a section for each day where you can write down all of your thoughts and ideas. The written document is where a trader unleashes his creativity while his spreadsheet helps measure the profitability of his creativity. Both are very helpful when creating and using a trading journal. If you keep your journal consistently up-to-date, you can eventually evaluate it to improve your trading results to increase your profits.
Factors to record
Next, it is important to know what you want to keep track of. This ensures that your trading journal has the greatest possible impact on your success. You can find many examples of different logs online. Regardless of the template, the spreadsheet must contain columns. These columns can show the following information: start date, end date, symbol (coin), direction (long/short), buy price, sell price, position size, stop loss, take profit, fee, win&loss (P&L), win&loss percentage (P&L%), etc .
Some traders also keep track of the Tradingview links, the timeframe, a screenshots of the setup and all other relevant information.
What can i do with my trading journal?
- Identify patterns that lead to your losses.
Among the various trade set-ups, there can be some that will make you lose constantly. So check your trading journal and identify the worst performing setups. Stop trading the setups that will generate you the most of your losses. This simple adjustment will reduce your loss and eventually will increase your net profit.
After you have identified your best trading strategy, you will still make losing trades once in a while. So look through the losers of your best trading strategy and ask yourself: “How can I minimize my losses?” You may be able to limit your losses earlier, use a filter that reduces your loss or avoid trading at a certain time of the day.
- Identify patterns that lead to profitable trades.
Next, you would like to identify your best trading strategy. These are trades that structurally make profits. So look in your trading journal to identify the best setups and then focus on that. You do this if you want to find more trading opportunities, trade on multiple markets, trade on a new timeframe or a combination of these.
Look through your best trade setups and ask yourself, “How can I maximize my winnings?” For example, by scaling up part of your trade and letting the rest run from patterns that lead to winners. If you can do these things, then you are already one of the better traders.
On Binance Academy it is possible to download a free logbook (Excel) and adapt it to your personal preferences.
We at Margin Traders NL advise inexperienced traders to use paper trading first. Paper trades are made with fictive money in order to test a strategy and prevent actual loss. If you want to start trading, we recommend purchasing a course on technical analysis and make as many paper trades as possible. Try to become one with the graphs. Make trades, gain knowledge and experience to learn from your trades and their setup. This also applies to experienced traders: keep a trading journal! Use a journal and learn from your own mistakes and successes!