What Is a Trade Journal, and How Important Is It?

August 24, 2022 0 By The Balanced Trader
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What Is a Trading Journal, and How Important Is It?

A trading journal is a record of your trading activity. Keeping track of your trading activity is the single most important tool to make a dramatic improvement to your trading performance and its why almost all professional traders keep one and why many amateur traders fail early on in their trading career.  

The truth is that what you can’t track, you can’t improve, and what you don’t track, you won’t improve. Think of sports, for example. Footballers, golfers,  baseball players – all of them watch recordings of themselves to analyse their weak points and improve their future results. Even poker players take notes during tournaments.

Failing to journal means that mistakes will be repeated, and specific errors will go un-noticed and repeated until accounts are eeeked away or worse blown to pieces by a single emotional act. A journal is an important part of any process of improvement, these notes and observations on multiple features then need to be reflected upon and reviewed.

Notes, stats and observations are not only about identifying weaknesses, they can be about identifying an edge that can be refined ad improved. Spotting a market phenomenon or repeated behaviour for example during OPEX, month end, bond auctions, FED speakers or what ever it maybe.

Trading journal software or even a simple excel package is essential as it identifies positive and negative patterns and helps build strong habits for self-improvement. Think about this – you generate lots of data while you trade. Why don’t you capitalize on that and extract some valuable patterns for analysis?

These tools also help you keep track of your market moves, measure your progress, and serve as a benchmark for trading performance. Journals can be beneficial to both beginners and professionals. It helps beginners build habits and achieve higher success. For professionals, it will fine-tune their strategies and make it easier to deep-dive in detail and analyse.

How to Start a Trading Journal and What Should It Include?

The hardest thing with trading journals is deciding to start and building the habit of maintaining consistency. It will take some time and trial and error and reflection. Process, edge, markets, and errors are always evolving, and your journal entries will evolve too.

The sooner you start journaling and reviewing consistently the quicker you will reach your end goal of becoming a better trader. An example of how journaling can improve bottom line is the identification of FOMO trading after a loss and implementing a process to stop this behaviour like walking away after a loss or turning. Or how about on a more positive note an observation that bonds tend to sell off on auction days as extra supply needs to be absorbed, leading to a higher conviction trade in that product.

What Tools Do I Need to Start?

A text document, Evernote, an Excel worksheet, a free or a paid third-party service – you have a wide range of options. To narrow down your choices, let’s go through some basic features they may have.

Automated trade history import: This is a convenient feature that will save plenty of time and effort. The most popular third-party solutions have direct integration with brokers and trading platforms. That way, your trade history can be uploaded with just a few clicks.

Report and analysis tools: These features are the most important ones. The automated analysis of your data will help you derive conclusions and extract essential bits of information about your style, mistakes, market moves, and more. That way, you will be more prepared the next time you trade and significantly optimize your overall performance.

Advanced features: Looking at graphs and previous trades is one thing. Having access to advanced features for back testing, trade management evaluation, classifiers, trade optimization, and more can bring your game to another level.

What is the best trading journal?

Tradervue is one of the best trading journals for serious traders and comes at a serious price. All asset classes are covered and includes many advanced features such as automatic chart representation of your trades and market statics at the time of entry. EDGEWONK is much cheaper with fewer features with a free but lacks some future platform integration like TT and CQG. I have also used Journalytix and found it to be very good with seamless platform integration but it’s incredibly expensive and lacks some of Tradervue’s features.  CT has an excellent integrated tool that combines basic trading metrics and written note taking space, they also thrown in edge watch for stats for free if you are a Rithmic trader.   These are all excellent tools  now its down to you.  

Are trade journals effective?

Yes. Trade journals are effective and are as good as the trading data imported. The more trades you import for analysis, the better the result. More importantly you need to take the time to tag and actually journal your trades and then review to improve.

What do you write in a trading journal?

A trading journal includes the classification the day type, news and other market moving events, importing and analysis of a buy or sell order, trade size, executed price, trading strategies, commissions, and notes. Auto-generated trading metrics included in the trading journal software help you to find your trading edge by analysing the trading performance.  Other things to include are tacking your sleep and mindset/feelings during the time of the day. If you would like to look at an example of my journals, please click on the link provided.

How will you review your trading journal?

The trading journal software will calculate helpful metrics to help you analyse your trades. The intention is to find the most profitable strategies and separate them from the others. For example, you may identify trading strategies where you feel that they are profitable but where the imported trade history tells another story. The trading journal is free of emotions and helps you to analyse your trading activities. Keep written notes close by in the same package or keep a paper journal it doesn’t matter how as long as you do it.

Trade well 

BT

My written trade journal link from 20th May 2022