Many trading journal fail because the trader decides to include a large number of metrics, which then becomes a burden. Not using the journal consistently is an immediate way to fail.

A trading journal is key to a trader’s path to success. Trading success is statistical, and humans psychologically have difficulty with randomness. Training in certain games, such as poker, can improve this intuition.

The Trading Journal is a powerful method to gain statistical intuition. There are three aspects to a successful trading journal:

  1. Tracking (keep the important things only)
  2. Charts (train the visual sense)
  3. Review (the most critical part of the journal)

Tracking

Here are recommended metrics to track, because software can calculate any subsequent performance parameters (i.e. Net Profit, Win Rate, Average RRR, etc.):

  • Symbol
  • Quantity (lots)
  • Direction (Long or Short)
  • Setup open (your trade plan)
  • Setup close (your trade plan)
  • Time trade opened (used in hold-time calculations)
  • Time trade closed (used in hold-time calculations)
  • Planned take profit (used in RRR calculations)
  • Planned stop loss (used in RRR calculations)
  • Actual price open (used in net profit calculations)
  • Actual price close
  • Description (your notes on the environment, trigger, psychology)

Notice that net profit doesn’t need to be recorded, because software can calculate this from the symbol and price changes.


Recommended Tools

  1. Free: Google Sheets http://drive.google.com
  2. Free: Decisive Alpha Trading Journal http://app.decisivealpha.com/journals/

Charts

Charts and screenshots are the most important aspect of a trading journal. As a trader, you study charts and take trades based on charts, so the trading journal needs to track the right charts to provide proper review.

You likely will not remember the trade you took 35 days ago, so here are the recommended charts to include:

  • Context: A higher timeframe chart than what you’re trading (i.e 1 hour chart if you are trading the 5-min charts)
  • Trigger: A screenshot of your timeframe at the entry
  • After: After you exit, where did the trade end up? Did it hit your stop-loss and then your target? Or vice-versa?

Recommended Tools

  1. Free: Imgur for screenshot http://imgur.com

Reviewing

The review process is the most critical aspect of the trading journal. There are two review intervals, whichever is first:

  • After 50 trades
  • After 1 month

If your trading plan is perfectly consistent with no mistakes, 30 trades is enough. However, 50 trades is the best for new strategies or new traders to provide statistical significance to the trade journal review.

Metrics to review during the review process are:

  • Net Profit
  • Planned and Actual RRR
  • Hold Time (in minutes or hours)
  • Best Setup
  • Worse Setup
  • Best Instrument
  • Worse Instrument
  • Win/Loss Ratio
  • Average Win Size
  • Average Loss Size

Let software calculate the above for you. For those who want to do it yourself, here is a link to a Journal Review Google Sheet: Link to Google Sheet

Recommended Tools

Conclusion

Now you have the methodology and tools to get you started.

Decisive Alpha has free public trading journals (Journal Analysis is in beta testing), so if you want to easily get started, make a journal here: http://app.decisivealpha.com/journals/

Here are all the recommended free tools in one place:

Categories: Trading