The article is about how traders can use a trading journal to bolster their trading success.

A trading journal is a tool for traders to track their performance and trading risk management. A trader can use this journal as a way of measuring how they’re doing and what they could do differently.

It also serves as a way to look back on decisions and find any patterns or mistakes that need to correcting.

A trading journal can help traders prepare for new market conditions and risk factors. It can help traders measure progress and plan for the future.

What is a Trading Journal?

What is a trading journal? A trading journal is a means to track trading performance. It is an essential tool for any trader, it is difficult to perform if you don’t measure your performance.

A trader’s journal is used to bolster trading success. It helps a trader understand their emotions and how they affect trading decisions.

When you trade live in the market you don’t have time to reflect on what is happening. Certain mistakes that you make you may not notice. You may not realise what works and doesn’t work in your trading. A trading journal seeks to rectify this problem.

Your trading journal may also provide notes on why you didn’t trade a particular session.

There are many ways to keep a trading journal. Some traders use Excel or Google Sheets, others might use software designed for trading journals.

You could even keep notes using a pen and paper if you wanted to. The benefits of using a spreadsheet or software is that you can calculate figures. For example, you might want to know the average size of your winning trades.

Benefits of a Trading Journal

There are a number of benefits to keeping a trading journal. These range from understanding and refining your trading, to controlling emotion and discipline.

Below are some of the major benefits of keeping a trading journal

1. A Trade Journal Will Help You Develop Your Strategy

What happens when you don’t reflect on your trading is that you don’t know what works and what doesn’t.

Finding trades with the best success rate, allows you to focus on and refine that strategy.

You might think a particular type of trade is most successful when in fact there are better setups working for you.

If you find which parts of your strategy work you can build on that skill. Understanding what’s not working will help you eliminate those weaknesses.

This will help you build a stronger trading strategy with fewer weak points. You make your decisions based on data, not your opinion which may be biased or just wrong.

2. A Trade Journal Will Help You Measure Your Strategy

Along the same lines, a trading journal will help you measure how well your trading strategies work.

You will be able to put percentages and dollar figures to your performance.

This can tell you whether you’re meeting your trading goals. You can track this performance along your journey to visualise your improvement.

3. A Trade Journal Will Define Your Strengths and Weaknesses

No 2 traders are alike, we all have our own strengths and weaknesses. It’s important to know what those strengths and weaknesses are.

Using your trading journal, you will be able to identify patterns. You’ll notice what leads to your winners and to your losses.

Is there a particular area you need to work on? What strengths should you be focusing on? Do you need to drop something from your strategy entirely?

4. A Trade Journal Will Help You Build Discipline

You should already know the rules of your trading strategy and be able to identify when you do the wrong thing.

Being truthful and committing mistakes to a trading journal will force you to acknowledge those mistakes.

This is your chance to analyse why you made that mistake and what you should have done differently.

5. A Trade Journal Will Keep You Accountable

Be honest with yourself and think about what you did wrong in a trading session. This will ensure you are aware of your mistakes and help you accept that you own those mistakes.

When you consistently review your trades all mistakes and rule breaking is on display. If you’re honest with yourself you have nowhere to hide from them.

It’s especially important to ensure you follow the rules of your trading strategy. If you identify that you have broken a rule, note the emotion that caused you to break it.

6. A Trading Diary Will Help Control Your Emotions

A trading diary is an importnant part of your trading journal, it help you understand your emotions.

Looking at why you made a mistake is as important as identifying that you made it. If you don’t know the reasons for your mistakes it is difficult to eliminate them.

7. A Trade Journal Will Improve Risk Management

A risk management system in trading is highly important. Risk management is often the difference between being profitable or not.

A trading journal will help you understand what risk you put into the market and what reward you reap.

If you notice an imbalance between what you are risking and what you are making, you know you have a problem.

Calculate your average winners and losers and ensure the winners are larger. Doing this makes it easier to become a profitable trader.

Adjust your risk if necessary, so that you take smaller positions. Without a trading journal you might not recognise when you have larger losses than winners.

How to Create a Trading Journal

At the end of this article you will find a link to your free trading journal template to get you started.

This is an example of how I would lay out a trading journal, everyone is different. It’s a good idea to also know how to make one from scratch.

Your trading journal may be different based on the type of trading you do (day trading vs swing trading) or the markets you trade.

The reason to use a spreadsheet or specialised software is that they provide calculations. You want to be able to store your data but also quantify certain things.

Free Trading Journal Template

To get you started with creating your own trading journal you can download our trading journal template.

Feel free to add, remove, or change any of the contents of the trading journal to fit your trading.

If not matching your trading entirely, this template should at least provide you with a good starting point for your own trading journal.

download your free trading journal template

Tips for Using Your Trading Journal

Identify common factors for winning trades

A trading journal isn’t a doom and gloom tool used to point out your mistakes. Look at the things you are doing well as well as the things you are not.

Is there a certain trading pattern that you have a high success rate trading? Focus on finding that set up.

Congratulate yourself on what you are doing right

Identify common factors for losing trades

If you’re noticing similarities in your losing trades, that’s good. It will be easier to work on eliminating those factors.

There are a few things that you can consider when thinking about your losses.

Create summarised information (key statistics)

It’s useful to create a sort of ‘dashboard’ with a high overview of important information.

Rather than trawl through entries of data, it’s nice to get quick figures. You might want to know your average winner and average loser for example.

If you have months’ worth of data in your journal it will be very difficult to find quick answers to certain statistics.

Trading Journal Bottom Line

One of the first things beginner traders should do when learning to trade is to have a trading journal.

It’s likely that a beginner is learning more than one or two trading patterns or set up and they need to know which work best for them.

A trading journal is a must if you want to understand the context of your trading, and how you’re actually performing.

To summarise, you use a trading journal to:

  • Log your trading activity
  • Develop and test different trading plans/strategies
  • Pinpoint strengths and weaknesses in your trading
  • Develop discipline
  • Understand your emotions and psychology of trading
  • Track and improve trading risk management
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