Another thing which you will fail at trading if you do not do it
|trading journal key words|
Your Trading Journal
Why do I think so? “You need to run a trading journal” is clearly among top pieces of advise, consistent accross good books on trading and in forum posts and stories of sucessfull traders.
Read on to see what it is, how I maintain it and what you get out of it.
What is a Trading Journal?
It can have many forms, but as a minimum, I believe you should record
- each trade, give it a number
- market, e.g. EURUSD
- reason why you took this trade, this can be just a system name or a more (e.g. what price action, if there was a key level, what indicators showed, what was the trend, higher timeframe trend, etc.
- chart screenshot at a moment you placed an order, i.e. how the market looked like when you decided to trade. You can also add a higher timeframe chart, too. This is a chart you will look later on to asses if this was a high quality trade, in line with your system, or not
- chart screenshot at a moment the position was opened, i.e. order was filled. Of course, if you opened at market, this is the same chart as “when you placed an order”. But if I used limit or stop order to enter, it will be different.
- chart screenshot at a momemt the position was closed, either at loss or profit, OR, if you deleted the order before it was filled.
- learning, i.e. your comment on what you learned from this trade, e.g. “do not trade against ther higher timeframe trend”, etc.
- assessment, i.e. was it a high quality trade or not. Based on your system / strategy / method. Your trading system tells you if and when to trade. Here you assess if you traded in line with the system or not. Also, did you manage and close the trade in line with your strategy (e.g. set & forget, or take profit half the position and trail the rest, etc.)
- trade outcome in your account currency, i.e. the loss or gain.
The above is minimum, but there is more you optionally can do
- charts showing how you managed the position, e.g. moved the stop in the direction of the trade (you never move it against the trade)
- trade outcome in pips
- date of open and close, day of the week
- any additional criteria to mark in the journal, such as trend, level (yes/no), price action (what kind of, e.g. pin, engulfing, outside bar, inside bar, etc.)
- position size and position sizing method used (e.g. equal dollar risk per trade)
- anything else you can find useful (but do not overdo becasue then there is a risk you will not have discipline to maintain all data, I suggest you start small)
How to practically manage it?
Here is how I do this.
- My trading journal is a spreadsheet, in openoffice format, created and updated using LibreOffice 4.1
- To take screenshots I use GadWin printscreen tool. Here is the link to the tools I use.
- The file resides on box.net and I use synchronizer to have the always up to date file on two different PCs that I use.
- I create an entry for each trade, and fill in the data.
How to use your Trading Journal?
Ok, one you have some trading history, here come the KEY thing, i.e. how to use it.
- Every 20-40 trades I do the full review of the journal.
- I look at each trade and assess its quality, and look at the chart to see what happened later.
- I look for common patterns of errors or things I can improve, such as: shall I place stops a bit wider, shall I take profits earlier or later, shall I skip some kind of setups, etc.
The learning is priceless.
And all of this you can do for free if you trade the demo account, or risking very little money if you use micro live account with 0.01 lot size.
Any other documentation to maintain?
Yes, on top of the trading journal, I have:
- system description, for each system I trade, a 1-2 pages description of the entry, closing, etc. I always create this myself, even if based on some other material
- setups catalogue, a file with 20-100 setup examples, high quality trades from the past charts, ones that paid and ones that did not, but showcasing the setups of the system
- equity chart, monthly equity and balance of each of my live trading accounts. And I chart it and calcualte monthly gain or loss. I also see this in myfxbook.com tool, by account, but I like to have my own spreadsheet with top level data.
That’s it for now, and, if you take just one thing out of this post it is this: maintain a journal with all your trades, incl. why you opened it, how it was closed and learning.
Happy to discuss & learn from you.