On this webpage, we are going to give you the full DEFINITION OF TRADING JOURNAL AND HOW TO USE CASES, ADVANTAGES OF A TRADING JOURNAL, HOW TO KEEP AN EFFECTIVE TRADING JOURNAL, IMPORTANT ELEMENTS TO ADD IN A TRADING JOURNAL, WAYS TO CREATE A TRADING JOURNAL?
There is no easier way to lose money while trading than “emotional investing”? Study more to learn how to cut emotions and be a better trader, Definition of trading journal, advantages, Important elements to add in a trading journal and more.
TABLE OF CONTENTS
- Definition of trading journal
- Advantages of a trading journal
- Measure your weakness and strengths
- Measurable performance
- Identifying behavioural patterns
- Develop consistency in strategies
- Avoid automatic trading
- lmportant elements to add in a trading journal
- Date and time
- Trade direction
- Entry price, Exit price and stop less
- Trade size
- Profit or loss
- Ways to create a trading journal?
- How to keep an effective trading journal
- Review the trading journal regularly
- Use price charts to envisage performance
- Write down key takeaways after each trade
Considering how to be successful trader on Google, many results will appear starting from using XYZ indicator to “multi screen monitor are the way to go”.
Specially, ignoring the majority of these hacks and tips can increase your trading profit. So, there is one simple tip that makes you a better trader, one that disconnects emotions from money, runs on discipline, which really reflects on trading performance: having a trading journal.
DEFINITION OF TRADING JOURNAL
Trading journal is a record of one’s trade which shows a summary of the trading journey and performance.
It should not be taken as statement from brokerage account as a journals utility stretches way beyond that.
And it includes good details like why one opted for trade or out of one. From logic behind trades to pattern awareness, journals are deadly weapon in a traders aresenal.
Maintenance of trading journal is not a complex application or program. It can be a simple Excel or Google sheets.
ADVANTAGES OF A TRADING JOURNAL
MEASURE YOUR WEAKNESS AND STRENGTHS
Trading journal helps traders to measure their weakness and strengths. For a beginner, a trading journal is the best way to measure their trading performance and identify their strengths and weaknesses
Assessment can be made by observing the following.
- “Did my swing trades fail more than my long position”
- “Are my shorting trades not worth the effort”
- “Am I missing out on more money by HODLing rather than booking profits?”
Trading journal puts everything clearly and more importantly, in numbers. This helps traders to measure their performance, check their strategies, and change trade setups in the coming sessions.
IDENTIFYING BEHAVIOURAL PATTERNS
Traders can check on their trades and identify patterns that might subconsciously be developing.
Emotion or behavioural trading patterns, profitable or not, can be a misguide if not identified while trading because behaviour-driven trading patterns actually have upper limit and traders often are deceived. So, leaning back on a trading journal and identifying patterns helps.
Traders to have their strategies performance-driven rather than emotions or behaviour.
DEVELOP CONSISTENCY IN STRATEGIES
The trading performance should be measured and disconnected from emotions, trades are clearly driven by strategies that are backed by numbers.
This makes it repeatable and with enough practice, it grows into consistency in trading. Consistency in trading strategies helps traders to remain calm even during bear market and other uncertainties in the market.
AVOID AUTOMATIC TRADING
Trading journal limits traders from going out of their way to make money in the market. This happens when a consistently profitable plan stop working correctly unexpectedly.
And this is generally an emotional and compensatory act for the one-off loss. It should be noted that trading without any serious thought do more harm than good,and the loss compounds.
But having a trading journal helps traders to take emotions out of the system. Unapproved trades can easily be avoided as listing them down makes the trade more conscious and less likely to add an impulse trade in a book of profitable ones.
IMPORTANT ELEMENTS TO ADD IN A TRADING JOURNAL
Now that the benefits of keeping a trading journal is clear and well known, let’s find out what details that needs to be included.
You have to mention the instrument you are trading. The platform on which the trade was conducted should be mentioned
Example: Bought Bitcoin on the lightning network. Sold $MATIC on Binance CEX.
DATE AND TIME
Time and date in trades are very important in a journal. Comment section can be added to this element and state if any time specific factors that made you set up a particular trade.
For instance; I entered a swing trade-shorting Bitcoin (BTC) at 11:00 hours IST on 1 Feb 2022- to leverage the uncertainty prevailing around crypto in India as the union budget session begins.
The position to hold in a trade, either long or short should be recorded. To be more accurate, timeframe should be added.
ENTRY PRICE, EXIT PRICE AND STOP LOSS
Entry price is the price at which one enters the trade, Exit price is the price at which one exit the trade stop loss: Is a tool to reduce downside on trades when the trade goes against you.
This is the percentage of one’s tradable amount going into a particular trade; and it should be included in the trading journal to assess the risk being undertaken in a trade.
For example: If ones tradable amount is $100 and the person decide to swing trade on Bitcoin using $70, it means that the person is risking 70% of his tradable amount on a single trade.
PROFIT OR LOSS
The total profit or loss for a particular time frame like a week or month be recorded.
Fundamentals and external news of the traded instruments, tools used for that particular trade like support and resistance etc should be remembered.
WAYS TO CREATE A TRADING JOURNAL?
Any sheet of paper or mobile application where one can fill in the above-mentioned can be a trading journal.
For more efficient journal, screenshots of the annotated trading charts should be attached.
Calculations are made on Excel to save time while trading. Having a “Total” cell for the cumulative total of trades, profits, and/or losses, percentages are compulsory. They can answer questions like:
- How does my daily or weekly performance look?
- Which is my best and worst trading instruments?
- Trades of which timeframe have performed the best for me.
An ideal “trading journal template” is a myth. Trading journal are personal and need to be customized.
HOW TO KEEP AN EFFECTIVE TRADING JOURNAL
Reviewing the trading journal regularly is a must for traders to note their weaknesses and be better traders.
USE PRICE CHART TO ENVISAGE PERFORMANCE
Price charts are a great addition to the trading journal that can help one to imagine his performance.
Price chart reduce the time taken in recording the journal after each trade.
Imagination of performance is a better way to understand your trading psychology and how to set your trade up, and also a great source to lean back on while setting up similar trades in the future.
WRITE DOWN KEY TAKEAWAY AFTER EACH TRADE
Other Information that can enhance the use of journal.
Firstly, one has to write down his feeling while entering the trade and what influences him into doing it. If you delayed your exit, write down the reason you did so.
If an external factors like a news headline on inflation rate or a tweet by Elon Musk influenced you, write it down so that it can be a guide anytime such news breaks out.
Secondly, on technical basis, if you feel a technical indicator is not enough to back your trade , write it down.
Example: Stochastic Oscillator is actually momentum-driven. Volume-based indicator should be to make a good technically analysis.
DEFINITION OF TRADING JOURNAL AND HOW TO USE CASES, ADVANTAGES OF A TRADING JOURNAL, HOW TO KEEP AN EFFECTIVE TRADING JOURNAL, IMPORTANT ELEMENTS TO ADD IN A TRADING JOURNAL, WAYS TO CREATE A TRADING JOURNAL?
Trading journal is a key weapon for traders to improve their performance in the market. It is a simple way to remove bias and emotions from trade and allow trading to flow by performance and numbers.
Besides maintaining a trading journal analysis of a trading journal it is very important because it allows one to reflect on his/her trade, identify weaknesses and areas to work upon in order to improve as a trader.
I believe this article helps you to become a better trader and improve your efforts in the market.
The full DEFINITION OF TRADING JOURNAL AND HOW TO USE CASES, ADVANTAGES OF A TRADING JOURNAL, HOW TO KEEP AN EFFECTIVE TRADING JOURNAL, IMPORTANT ELEMENTS TO ADD IN A TRADING JOURNAL, WAYS TO CREATE A TRADING JOURNAL?
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