|What is a trading journal?|
What is a trading journal? The trading journal is a table where you can record your trading information. Using a trading journal, traders receive feedback from their past trades, and can use this information to evaluate their performance. The use of a trading journal is recommended to all forex traders. You can evaluate your performance using the trading journal, and use this information to improve your trading approach. Using a transaction journal is a very efficient way to record a history of transactions.
Benefits of trading journal
The following are the most important reasons for using a trading journal:
- It helps you find your weaknesses and strengths
- It can increase the stability of your trades
- Using a journal increases the validity of your trades
- Using the journal you can find your best trading strategy
Generating a trading journal is very easy, and it allows you to effectively promote your trading program. A trading plan is a number of rules and policies that you follow in your trading. A trading plan includes strategy, risk management criteria, trader psychology, etc.
How to create a trading journal
Creating a trading journal is very simple and you can set up a trading journal according to your trading goals and trading style. The steps mentioned below represent the steps you need to take to generate a trading journal:
- You can use a notebook or a spreadsheet to record your trading information. We recommend using a spreadsheet.
- Specify the information you want to record (for example: the date of the transaction, the asset traded, the volume of the transaction, etc.)
- After each trade, carefully record your trading information.
- After a certain period (daily/monthly/weekly) review your data and draw conclusions.
First step: choosing a notebook or spreadsheet
We suggest using a spreadsheet (such as Excel software). Because in these softwares, there are features that can help you in extracting the final conclusions.
Second step: select the data you want to record
The standard format of the trading journal contains the main indicators listed in the following table:
The example mentioned above is an example of a very simple and standard trading journal. This journal can help you study your performance over time and get detailed statistical information about it. The information you can add to this journal for a detailed study of your transactions are:
- Reason for trading: The reason for your trade can be derived from technical analysis, fundamental analysis or a combination of these two. When you have made a number of trades, you can review this information to see if your reasons for making trades have yielded favorable results or not. This information can also help you understand which strategy will give you better performance.
- The degree of certainty of the analysis: The degree of certainty of the analysis can determine how confident you are about your analysis. If you are trading based on technical analysis and your analysis confirms several parameters, you can enter your confidence level as "high". However, if the technical or fundamental analysis you have done has not given you a definitive answer, then your level of confidence can be low or moderate in relation to the trade you have made. By noting this factor, you can calculate your success rate relative to how certain you are about your analysis. Then you can see if you're better off taking trades you're more confident about, or if your success isn't directly related to this factor.
- Other items: You are free to add any factor you wish to the table in your trading journal. Some traders also record their emotional stance on the trades they make. Recording any factor that helps you understand your trades can be used to improve your trading approach.
Third step: recording trading information
Try to practice to immediately record each trade after making it. Record its information directly in your trading journal. By doing this, you no longer need to remember your reasons for making a trade. Always remember to do this after setting the stop loss and take profit levels.
Fourth step: analysis and review of data and conclusions
After a certain period of time, preferably several months, in order to have enough data, you can analyze and review the data in your trading journal.
For example, if you recorded your confidence for each trade, you could count the number of successful trades you made with "high," "medium," and "low" confidence. Once you have this information, you can understand whether paying attention to this factor will help you in trading or not.
For example, if in 10 trades, your confidence level was high, and you were successful in 8 of those 10 trades, this represents an 80% success rate based on confidence level. If in 10 trades, your confidence level was low and you were successful in only 2 of those 10 trades, this represents a 20% chance of success. Therefore, it can be concluded that with this statistic, you should trade only when you have high confidence about it.
The same process can be done on each recorded parameter. Finally, you can conclude by summarizing the data in each column and use it to increase your performance.
Trading journal software
One way to set up a trading journal is to enter it yourself in a notebook, or a spreadsheet (such as Excel software). But there are also softwares that make it a little easier for you. Some of the best trading journal softwares, suitable for working in the stock, options, futures, forex and crypto markets are mentioned below:
- TraderSync: The best trading journal in every way
- Tradervue: The best journal for professional traders
- Trademetria: Simplest design along with pricing information
- Power E*TRADE: Contains the best trading simulator
- Chartlog: Simplicity and widely used tools
- Edgewon 2.0: Broad accessibility
Apart from the fact that you produce your trading journal yourself, or use ready-made software, there are various ways that you can use to analyze your information and get closer to success in your trading day by day. The important thing is to use the recorded information in the best way.
One of the first steps traders should take is to learn how to set up a trading journal. Having a trading journal can help traders find their best trading strategy and understand what trading approach has been most effective for them.
One of the main functions of a trading journal is to test the effectiveness of trading strategies. In summary:
- The trading journal is used to record trading information on a daily basis.
- Using a trading journal helps traders to test their strategy and trading plan.
- Using a trading journal also helps traders identify their strengths and weaknesses.
Aron Groups Broker currently serves more than a million active clients allover the word. This forex broker provides services in several financial markets such as forex, energy, index, stocks market, metals, cryptocurrency and now has made it possible for traders to trade on famous cricket and football players.
Written by: Mohsen Mohseni (Aron Groups).