In this week’s episode of Money Mondays, were going to be explaining the very important topic of keeping a trading journal and studying your trading stats.  

What is a trading journal?

  • A trading journal is a tool/resource professional traders use to log their trades, plan their entry, stop-loss and targets and also write notes about their trade before and after it is completed.

Why do we need a trading journal?

  • A trading journal is necessary as it provides a resource to build a routine around study and review for your trading business.  It’s also the lifeline to understanding your business metrics in terms of performance.
  • Every business has a plan, but the successful businesses also have a way to monitor their activity, progression and use this for studying to increase performance.

How do we use a trading journal?

  • Most traders use a trade log/journal to document/import all their trading activity.  This is just the 1st step. Once all the trades are logged each day, then the trader usually writes comments pertaining to all activity of each trade.  Some important inclusions are:
    • Why did they enter?
    • Why did they exit?
    • Was there any errors on the trade?
    • Was there any room for improvement?
    • Did they break rules?
    • Was it a trade following the plan?
    • Was it a good trade?
  • These types of discussions are just the starting point.  Many traders have much more extensive categories they use for critiquing the trades as they know their profits and business success depends on good analysis and risk management.

Advanced Trade Journaling

  • Once a trader has built a routine around trade logging and review, this is where the real benefits can be extended.  After you have a trade record of a certain number of trades then you can start to identify the following:
    • Performance Metrics
    • Drawdown Metrics
    • Risk Parameters
    • Marker Patterns
    • Ways to reduce risk
    • Ways to increase reward
  • All of these are ways advanced traders study their performance.  Once you have a history of trades, you can then go into the data to look at specific key KPIs and performance metrics to enhance running your business like a honed professional.

Using Industry Professional Grade Resources

  • The reason using professional tools is necessary is that many businesses specialise in providing resources for active traders/investors by way of their trade journaling software/toolsets.
  • These are far more advanced tools than simply using a standard excel spreadsheet. Not only can you make your loggin procedure fast and effective, they have built in trade metrics and tools for advanced journalling and review.