The Importance of a Trading Journal *NEWBIES READ*

I thought i’d take some time of my day to try and hammer home a point which has recently become a bit of an “awakening” for myself. And I think its advice any newbie could benefit from. THE TRADING JOURNAL! DUN DUN DUN DUHHHHHHHH

Scoff. Laugh. Mock. But seriously, its a key component of any traders arsenal if they intend to improve their trading management, entries, and finesse.

I used to keep a detailed journal, and then somehow, I stopped along the way sometime last year. I didn’t think much of it… it was just a stupid excel spreadsheet right? It couldn’t actually have an effect on my trades… i mean I knew what I was doing, and no spreadsheet would’ve helped one bit. Well, thats not entirely true.

The truth of the matter is i’ve found it to be an integral part of my recent success. The journal has little effect on my entries, but plays a large role in my trade management and profit taking, which in my opinion are the crucial element of trading that separates the winners from the losers.

How many times have you been in a winning trade and you knew in the back of your mind you were supposed to wait for something to happen before you got out of the trade. An indicator was supposed to cross, a resistance level was supposed to be hit, a candlestick pattern was supposed to form… but you bailed. You thought to yourself, “Self: I have profit here… I want to take profit and feel safe because I will have WON!”. Don’t lie, we’ve all been there. My guess is a lot of you are still there.

Whats worse is your systems that everyone in here trades has been backtested by yourself. And in that backtesting, you adhered to a set of rules, you won’t exit until X happens. But now that its live, and its real, and its happening, you find yourself lacking the courage to commit to your decision. This is where the journal comes in.

Each trade I take, I list the time, date, pair, timeframe, and in then i list in a comments section the reasoning behind the trade - did I have everything going in my favor. Immediately, if that isn’t the case I have to write it down, which means I have to process the thought that I have done something I know I shouldn’t have. I gambled. The journal made me realize this thought that might go otherwise unnoticed. More importantly, i follow up each trade with continued comments on my management.

My trading style requires me to manipulate stops and take profits at certain profits levels. However, it can be sooooo tempting to jump out half of your contract 5 pips before that target is hit… We don’t want to miss it do we? But if I did that, I have to write about it in my journal, and I have to admit to myself that I have broken my rules - the rules that I built to protect myself, and make money.

A trading journal forces yourself to be held accountable for your actions. Its one thing to put on a position, do everything right, and have the market move against you. But your conscious is clear. You did everything you could’ve, and it just didn’t work. I can live with that. Its a much worse feeling to put something on you shouldn’t have in the first place, or worse, start getting jiggy with your profits due to a “feeling” instead of sticking to what you KNOW.

By journaling your entries you keep a dialog of introspective honesty that holds yourself accountable. And in a business where you make or break yourself, I can’t think of much else that is more important than that.

Long story - short… Journaling provides a structure to force yourself into adherence with the rules you already claim to be following. And at the end of the day, week, month, and year, it will add to your P/L, I guarantee it.

Novel Mode Off…

Cheers!

1 Like

good advice. thank you

Could you share what your current journal looks like? Thank you.

Here is an example…


I have tried to journal and just keep getting away from it. I have just recently decided to only enter two different trades maximum and therefore will have time to journal and post comments while the trade(s) are in progress. 10 minutes ago I violated one of my own rules to never answer the phone while trading. I missed moving my TP ahead of the bars and gave up almost 15 pips between two trades. I have journaled that now. Thanks again, d

For some reason I am not having success opening the attachment. The system keeps asking me for the login Id and password. Would you please repost? … Maybe take another snapshot of your journal and post that one instead.

Thank you!

Great post deadalus, curious how many traders, especially new traders follow such advice.

I keep a excel spreadsheet journal and a pen and paper notebook journal stating everything you said above (time stamp, date, pair) plus much more in my case

  • Pairs ADR - time trade put in - Risk to Reward ratio - Entry price - Stop Loss price - Full Target Potential - Actuall dollar potential -Dollar Potential Loss - % account risked - potential % gain - Exact amount per pip - are there any major news coming out for said pair?

and finally, I explain to myself exactly what conditions will bring me to want to execute my trade, and I find that when I have 3-5 validations according to my system for taking a trade on paper and analyzing the charts…there is no longer an excuse NOT to take a trade, and I would deprive myself of the opportunity to make a profit for my efforts.

It’s a great feeling to take a trade that meets all these requirements and NOT REGRET your decision to execute (be it a profitable or non-profitable outcome) because you KNOW you followed all of your rules and steps to a T…and if you do this consistently, you can do beyond well for yourself :slight_smile:

It sounds like a bit much at first, but if one forces themselves to do the math and write down what is actually happening on screen everytime they even THINK about making a trade , overtime you become very used to it and everything I stated above will take you no longer then 10-15 minutes to put on paper.

You’ll start to realize how profitable it is for you to keep records of yourself and your progress, and after a few weeks/months, it becomes second nature.

Again, great post deadalus, off I go…God, Pablo Fransico is one of the funniest dudes alive

I’ve learned the hard way how important it is to keep a journal. I review it almost every weekend, dissect it and determine where I went bad…that’s IF I can determine where I went bad.

My journal looks much different then yours, though. Because I primarily use price action to enter and exit trades I like to take a snapshot of the chart I’m trading and then make notes on the chart. By doing that I have a visual representation of my trades and the PA signal that I took as valid. I do the same for winning trades too as I can see where I went right.

My “journal” as it were is one of my most valued trading tools.

Excellent advice… and well written. Thank you!

Kudo’s on bringing up a very important topic… I just finished reading a book by Michael Toma, “The Risk of Trading”… He goes over several specific items he recommends as part of anyone’s Journal and how to use the information to help minimize your risks and maximize your gains… One of the things he emphasizes in his book is compliance with your Trade Plan rules, and the Trade Journal being part of those rules… I highly recommend it…
DaAggie

Trading journal is something that majority of traders over look including me. Even I don’t have any trading journal to date. It is something that keeps a track record of trades of a trader.

Its not the recording of trades that is important, mt4 will do that for you. What really needs recording is the reasons for trading, what caused the price to move (especially if it went horribly wrong), how you felt during the trade, and what you would do different next time

If you have a journal and if you go through it after about 6 months, you will realize that there is a lot of stuff to be learned from your own trading journal so the improvement level is very huge if you have a trading journal.

Keeping a journal is really important. At first i never saw the need of keeping one. But with time i realize i had to record my record my trading activity over time. With a trading journal i can some times able to detect what went wrong in a bad trade and so prevent such mistake from happening in the future.

It happens, in start every newbie trader neglect the importance of a trading journal but if once they start keeping one, they will surely get to know its importance.

Great post! One tip is to use an online solution that offers a lot more than excel such as trademetria, tradebench and traderdiarypro.