Trading journals can be very helpful, and they also play a major role in the trading plans of most professional traders. Things like planning futures trades, documenting current positions, and recording all the emotions that come up can be the deciding factors in developing a profitable trading strategy.
Understanding how to create and use a trading journal is critical to the success of any trader. Without it, a trader can easily lose control of winning and losing positions. Or (even worse) reset your account.
What is a trade journal?
A trading journal is a document in which all trader’s activities are recorded, such as strategy development, risk management, psychology, etc. Keeping a trading journal is really easy. And if used correctly from the start, it will quickly prove its worth. In addition to providing valuable information to help prevent loss of funds, the journal can help you achieve what is called native.
At least the following speaks in favor of the trading journal:
- You get reporting.
- You become more disciplined and consistent.
- You can define profitable trading strategies.
- You know your strengths and weaknesses.
- You analyze potential trades more closely.
Successful traders carefully plan all their trades and document the successes and failures of their trading activities. By creating a trading journal and using it properly, you can become a successful trader regardless of market movements.
How to create a trading journal
You can find a free trading journal template in the next section, but still learn how to create one yourself. Customize the log in one format or another to suit your trading style and needs. Once you have this valuable resource for planning and documenting your trading activity, you will be truly ready to trade.
First, for a trading journal, you need to create a spreadsheet (eg Google Sheets, Microsoft Excel) and a text document (eg Google Docs, Microsoft Word). They are needed to record accurate trades and your thoughts accordingly. You can insert a text document as the second sheet of the table if you prefer (see template below).
Secondly, you should know what exactly you need to write down on a daily basis in order for your trading journal to be as useful as possible. Examples of trade journals can be found online. But regardless of the template, your spreadsheet should have columns with the parameters of each deal. These columns may include:
- Entry date
- release date
- trading pair
- Duration (long/short)
- Entry price
- Position size
- nominal cost
- Stop loss
- Take Profit
- exit price
- Trading commissions
- Profit/Loss (P&L)
- Profit/Loss Ratio (P&L %)
Notes:
Some traders add timeframes, screenshots of the market position and everything else that they consider important. The main thing is that the information is useful.
In a text document (or other tab), you should have a section for each day, where you could write down all your thoughts and ideas, and then organize them.
A text document is a place for the free creativity of a trader, while a table helps to measure the profitability of his activities. Both formats are extremely useful when creating and using a trading journal.
That’s all! However, creating a trading journal is not a difficult task. The main thing is to learn how to use it. If you have a solid understanding of the basics, you will be able to use your trading journal like a real pro in no time.
Trade magazine template
Good news! Binance Academy has prepared a simple yet effective trading journal template for you. All you need to start using it right now is to click File and Copy!
➟ Binance Academy Trade Journal Template (Free!)
Note that in this example we are using the second tab of the table as the text document, as discussed above. To track the decision-making process and the results of transactions, you can write there all your thoughts and comments.
How to use a trading journal
It is one thing to create a trading journal, another thing is to know how to apply the information received in your trading. A trader who uses a trading journal effectively will begin to profit from trades faster.
You must have a good reason to open any trade. This is where a text document comes in handy.
Every day when analyzing the market, you will be overwhelmed with ideas and a wide variety of feelings. You need to write them down, noting anything that can help or hinder your trading activity. Such information includes market behavior, past trades, current and potential trades.
In the text document, you will also argue whether your particular trade idea is a good one. Your trading ideas should be analyzed and critiqued so that you can identify the strengths and weaknesses of each one.
When your feelings and sensations are written down, the turn of the table will come.
A spreadsheet is not a creative space (unlike a text document), but a logical one. This is where you will record all your trades. It is extremely important that you write them down accurately and in a timely manner.
A factor in the success of a trading journal is also the accurate measurement of successes and failures. In the table, you should keep detailed records, evaluating how justified the ideas set out in the text document.
It is a good habit to write down trades as soon as they are executed. They will be fresh in your mind and you will save time in the future.
Another good habit is to review the trading journal spreadsheet every day. This way you can get a bird’s-eye view of your portfolio of trades, get an idea of how effective you are, and whether you have the resources to enter other trades.