Even though a trading journal is vital to success in trading, it can be really hard to maintain. Most traders find it boring.
It is a lot more fun to take trades and make money, right?
Or at least that is what I think…
Believe me, I know.
I fought a trading journal for years.
But you cannot make money consistently, if you do not know what you are doing well and what you need to improve on.
Therefore, trading won't be much fun without a journal.
So in this post, I want to help you create a journaling process that you will actually stick to and use for the rest of your trading career. As with many things in life, a minimalist approach often works best.
You can always add things later.
Step 1: Ruthlessly Simplify Every Single Step in the Process
The first key to successful journaling is to identify every step in the journaling process and simplify it to the bone.
Chop everything you possibly can.
…and yes, a can of PBR can help with this.
So before we get into actually how to create a journal entry, let's take a look at each component and what you need to do to almost guarantee that the process is as painless as possible.
Recording Trade Details
This is where most trading journals fail miserably, as I talk about here. They expect you fill in every detail of the trade manually.
On top of that…they ask you to fill in some other stuff that you may or may not need. Do you really need your MFE and MAE? Probably not.
But here's the kicker…
As traders, we also think that we need all this information.
That this was the case for me. But every time I had to fill out my trading journal, it caused me so much stress because I had to fill out 50 different things for every trade.
There is a better way.
I'll show you what to do in Step 3.
Trade Less Until Your Journaling Capacity Can Catch Up
If you have 100 trades a week and zero trading journal entries, then it is time to stop for a minute and balance that out.
If you want to improve your trading, you need to review your trades. Trading alone will not help you progress.
So take fewer trades and make sure that you can easily journal them all.
Don't worry, the journaling process will get easier. Then gradually increase your trades until they match your journaling capacity.
Don't Overthink It
The goal is to have the least amount of information in your trading journal, for it to be effective. So don't start with a “what if I need this” attitude.
Start with a “what is the minimum I need” mentality.
I think most of us naturally geek out on anything trading related, only to realize later that it was mostly mental masturbation.
Keep it simple and move forward quickly.
On that note…
Use the Right Medium
So…everyone (including me) is telling you to use an Evernote trading journal. But what if that doesn't work for you?
Then don't frickin' do it.
I've seen hedge fund managers print out their trades on paper, write a few notes on them and put them in a box, so they can review them later.
…and it works for them. They are managing millions of dollars successfully.
So do what works for you. Find something that is simple, effective and is relatively painless.
2. See the End Goal Clearly
I think many traders overlook this point. Ask yourself why you are journaling.
Your only answer should be:
To see when I am trading well and how I can improve.
In order to reach that goal, you need to figure out what kind of information you need to review, for your trading style. This is going to be very different between individual traders.
I'll show you an example in the next step, but think about what you need to see. Then only record that stuff.
The rest is fluff.
3. Systematize Your Journal Entries
To make things easier, every journal entry should have the same format. Here are some ideas on how to make an effective journal entry template.
Have a Timeline and a Forex Journal Template
I would suggest starting from the time you enter a trade and journal every step long the way. Even if you just write one sentence about what you did.
So this is what your journal template might look like…
- Reasons for entry
- Chart with stop, entry and take profit marked
- Additional entries for this trade idea
- Partial closes of position (if applicable)
- Notes on partial close
- Chart at time of partial
- Observations about trade progress
- Result in pips, $, %…or all of the above
- Closing charts
- Secondary review (two days to two weeks later)
- Thoughts about the trade
I have this template created in Evernote and I just duplicate the template, every time I need to journal a new trade. Here is what my template looks like:
Notes:% Risk:Pips Risk:Open Chart:Notes:Result:Close Chart:Secondary Review:
This part can be a pain in the ass.
I've got a better way.
Instead of manually entering all the trade information when I open the trade, I just do a screenshot of my MyFxBook account after I close the trade.
Here's an example:
This makes it really easy to insert into Evernote. MyFxBook allows you to choose the information you want to display so you only see what you need.
If you don't use MyFxBook, you can just screenshot your brokerage statement.
On a Mac, you can hit [Command + Shift + 4] on your keyboard to get the screenshot crosshair. Then just highlight the part of the screen you want to take a picture of, and it will appear on your desktop.
…and you just saved yourself about 5 minutes of data entry.
If you are on a Windows computer, then you can do this.
Easy to Read Screenshots
I have a system for showing trade information on a chart, that you might find helpful.
When I enter a trade, I mark off my entry, stop and take profit in Metatrader 4.
This makes it really easy to analyze a trade later.
I just use the horizontal line tool and change the color of the line. To change the settings, double click on the line and you will see two squares appear on each end. That means the line is selected.
Then right-click on the line and select Horizontal Line properties…
The next window will allow you to set the line color and the exact price that the line is at.
I use the following color coding:
- Red: Stop loss
- Blue: Entry price
- Green: Take profit
- Orange: Level I'm watching
Then I use the MT4 save function to save my chart to their server. This way, I can log into my account and get it later, especially during a busy trading day.
Not much to this part. Why did you get in?
For me, I only use a few entry strategies, so it is pretty straightforward. If there were any unusual circumstances, I note that too.
Again, add whatever details you think are necessary for future analysis.
Same thing here, not much going on. You were either stopped out, hit the profit target, or you closed out manually.
Give a reason for the exit and your feelings about how the trade turned out.
Provide suggestions for possible improvement (if there are any) and also pat yourself on the back for things you did well.
Then provide another chart screenshot at the time of exit.
This is something that a lot of traders miss…
I firmly believe in doing a secondary review of your trades. This means waiting anywhere from a couple of days to a couple of weeks, depending on your trading timeframe.
When you review your trade later like this, the emotional energy from the trade has usually dissipated and you can see the trade from a more objective standpoint.
Take another screenshot of the chart and review your trade again. Note both the good and bad.
You might be surprised how differently you feel about the trade later.
Find a Way to Make it Fun
Finally, it can be easy to fall behind in your trading journal because it seems boring.
So figure out how to make it fun.
Yes, it is possible. You can make anything fun or boring, just by how you choose to perceive it.
The first thing you can do is not stress out about doing your trading journal. If you commit to doing your trading journal every Friday, but you miss one Friday because you were hanging out with friends, don't beat yourself up about it.
Just do it on the next Friday. Stressing out about sticking to a rigid schedule will only make the process more unpleasant.
Do setup a schedule, but don't be too hard on yourself when you miss one day.
Next, find a way to make the process fun. Maybe you can imagine that it is a treasure hunt…
You are looking for the hidden secrets in your trades that will help you make more money.
Another thing you could do is to keep your trading goals in mind. Imagine the lifestyle or freedom you will have and realize that filling out your trading journal is the only way to get there.
Or you could fill out your trading journal while hanging out at a cool bar. Turn it into a fun field trip!
Find whatever makes it fun for you and do that!
Final Thoughts on a Trading Journal You Will Actually Use
Before I end this post, there is one more huge point that I want to add.
A losing trade is not necessarily a bad trade.
I see this in trading journals all the time and I used to do this too. But it is counterproductive to your progress.
When you have a losing trade, the natural human tendency seems to be to try to figure out all the things that they could have done differently to make it a winning trade.
Trading is about winning and losing. A losing trade can be a good trade.
If you back and forward test your trading method, you will understand how often you are likely to win and lose. So judge the quality of your trade on how well you followed the system, not the results on your P/L statement.
Now go work on your journal!
What works best for you in your trading journal? We would love to hear about it in the comments below…