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Creating A Trading Journal

A Guide To Your Progress

We touched on the importance of keeping a trade diary or journal in our article Building Your Trading Plan in which we noted the importance of maintaining a historical record of your trading and progress, that you can look back on for guidance and inspiration. The trade journal will show how well or not you have stuck to your trading plan, and to some extent whether that trading plan was well thought out and or appropriate for your trading style. For example, whether you were honest about your approach to the markets and realistic about how you were going to execute that plan.

What Should Your Trading Journal Contain?

Perhaps the first thing the trading journal should contain is a summary of your trading plan or approach, in a statement of intent, listing the type of trades you are intending to pursue. For example, you might note your intention to pursue swing trades in equity indices or FX majors. You should also note your minimum risk-reward ratio and money management rules, such as the percentage of your overall capital you will commit to a trade and the number of concurrent open trades you will allow yourself. Having these guidelines and rules at the top of the journal will act as both a reference and reminder to you going forward and allow you to look back after a period of trading to determine how well you have followed your trading plan.

Notes and Context

It goes without saying that the journal should contain a record of the trades you place in the market and their outcome. However, this will become little more than a table of figures that says very little to you six months down the track, unless you add notes for context. When considering comments about prevailing market conditions and your motivation and thinking behind a particular trade, you may, for example, write something along these lines:

Asian equity markets bottomed and rebounded overnight on hopes of trade war compromise. Today, I am looking to trade export-led equity Indices in Europe should they move to the upside.

Adding a date and time to your statement will place in its proper context, as and when you refer back to it at a later date, particularly if you are looking chart data as you do so. The journal should also contain a description of your trades, such as:

"Going long one lot of the Germany 30 index on a break above 12300 looking for 12330 with a stop loss at 12285 a risk reward of 2:1", along with a time and date for the trade.

Your Trading Platform Can Help With Record Keeping

You should record the outcome of the trade as and when you close it and state the reason why it was closed. Perhaps you were stopped out, or your take profit level on that trade was hit, whatever the reason, make sure you capture it.

The good news is that you don't have to record this data by hand (though it is a good discipline to do so) because your trading platform keeps a log of all your trading activity. You can\export this as a report or statement which you can then copy and paste into a spreadsheet to give you a table that looks something like this:

This summary table creates an ideal ‘end of the period’ record to which you can add to your journal daily or weekly allowing you to keep track of your activity and outcomes at a glance. You can find your trade history in MT4 by selecting ‘View’ in the toolbar, and then ‘Terminal’ from the drop-down menu. The terminal appears at the bottom of the screen and account history is the third tab from the left.

Best Practices For Maintaining Your Trading Journal

When maintaining your journal, it’s important that you remain true to yourself.Your trading journal should be an honest account of your trading activity, your motivations and methods, and, your moods and feelings. This is more important than you might think: our psychology and emotions can have a tremendous impact on your trading performance. Trading in anger, out of boredom or when you feel the markets owe you a return are three of the quickest ways to lose money. So, note your feelings down. If you’re bored, say so in your journal and take a break to do another activity. If you are happy or optimistic about the day ahead, say so. If you had a blazing row with your partner, make a note of that too, after all, it may give you a chance to cool off.

Don’t be shy of adding links or images to your trading journal. If you read an interesting article or a piece of research, or even a thought for the day or quote on social media that struck a chord with you, then record it. Similarly, if you see a chart that speaks to you then save that image and add a link or a screenshot to your journal. Don't be shy of annotating that image either, or adding some descriptive notes that highlight why you were drawn to it.

Summarise how you feel at the end of the trading day, week and month. Were you pleased with your performance? Annoyed that you missed an opportunity? Were you glad that you respected a stop loss rather than letting a losing trade run on? Highlight the good and the bad points. Much like a teenager’s diary, the trading journal should contain your innermost thoughts. You’re likely to be the only one who reads this so don't hold back.

This sounds obvious, but don't forget to back it up. Ensure that wherever you’ve saved your journal you have a backup or it’s saved to the cloud or on portable media and you can password-protect the journal to restrict access. Having gone to the trouble of creating the journal and recording your trading self in it, you won't want to lose it.

Keep your journal updated. Note down the details of a trade and the motivations before you push the buttons and update the details of the outcome once you close that trade alongside your observations, thoughts or feeling at the time. At the end of the trading day or week, make sure your journal is updated without gaps in the information it contains.

Review it regularly. The purpose of the journal is to create a trading history, along with notes and observations that you can look back on and compare against your original trading plan. This is not set in stone, of course, and if it's not working or you are not following it, then it may need to be revised to best suit your needs. However, don't fall foul of factors such as outcome bias. That’s judging something on its results rather than the journey to them. If you made three or four trades that deviated considerably from your plan, but which made good money, that’s not necessarily a reason to change your plan, without first considering how and why you made those trades and why they went your way.

A trading journal is a great way to help you stay in control of your trading and why you do it. It’s an essential tool in being able to add additional insight to your trading history and one that no trader should do without.