It never fails.
Every so many months, a new trading journal website pops up.
…and every so many months, another trading journal website closes shop. If a trading journal is so vital to successful trading, then why aren't these websites homerun successes?!
In this post, I will show you exactly why I think most trading journals fail and what I think the ultimate Forex trading should look like. Obviously, I have very selfish motivations behind writing this post…this is something that I want to use.
Just like any other idea, I can't guarantee that this idea would be successful. There would have to be some beta testing and pivoting.
Let's face it, trading journals aren't sexy. This is why I don't create this myself, I already have my hands full.
But if you agree with me, then this post could be a new business idea for you or help you improve your existing idea.
…and if there is something like this out there already and I missed it, I would love to hear about it. I still use Evernote because I haven't found anything yet.
Before I start, let's get something clear…any journal is better than no journal. So, I'm totally for using anything, no matter what it is.
But if we were going to create something that is the best of the best, here is what I think it would look like…
Where Current Trading Journals Fail
In general, I think that people who create trading journals are awesome and have their heart (and mind) in the right place, but approach the solution from the wrong angle. I'll get to what I think the right angle is, but here is a short list of what I think most journals do wrong.
Manual Trade Data Entry
Seriously?! Is this 1995?
Things like entry/exit price, stop loss, etc. should NOT have to be entered manually. The details of the trade should be retrieved live (like MyFxBook) or uploaded from a CSV file.
Complicated Data Entry
Next, a lot of trading journals make you fill out so much information when you enter a trade entry. Some things I have seen are:
- Did you read your trading rules for this method?
- Method traded
- Current mood
- Your assessment of probability of success
- Trade data (mentioned above)
- Current moon phase
- Did you have a BM today?
OK, obviously I'm just joking on the last two. But you might as well throw that in, if you are doing to be filling out all that stuff anyway. Some of those metrics are useful, I don't deny that. But when you take a trade, do you really have time to enter those details?
A lot of these things are good in theory, but not practical in real trading.
Traders who take a couple of trades a week might be OK. But if you take several trades a day, who has time to fill that all in?
My point is that some traders will find some of these metrics useful, but that vary from trader to trader. So why clutter the screen with all these options?
Not Charging for the Service
I WANT TO PAY FOR A SERVICE THAT WORKS.
It's great that people provide services for free.
But let's get real…
If you have a fluffy business model, then chances are good that you will be closing shop sometime in the near future. I pay for Evernote because I know that they will probably be around for awhile.
How do I know this? Because they have a real business model.
It's the same reason that trading blogs fail. I don't want to lose my entire trading journal because a service went down.
At the same time, I don't really see the benefit of paying $100 a month. If Dropbox can charge $9.99 a month, I don't see how a basic Forex journal service can charge a lot more than that.
Lack of Content
Many trading journals don't have a blog that shows the benefits of a trading journal. Things like case studies and practical examples.
Yes, it takes a lot of time to do this, but it is necessary.
Geeking Out on Metrics That Don't Matter
Akin to too many entry parameters is providing too many metrics. The one in particular that I don't find useful is how much profit you missed out on.
If you have exit rules, then that shouldn't matter.
Am I wrong?
There are some metrics that can certainly help you improve your trading. But again, they will vary by trader.
Alright enough complaining…
The Trading Workflow
Before I get into solutions, it's important to take a look how I see most traders trade. Obviously, different traders have different routines, but I think most traders will agree that this is their basic process.
Step 1 – Scan Charts / News
You will look for opportunities, either technical or fundamental. You will be looking for a chart pattern or some sort of news.
At this point, you wouldn't need to enter anything in your journal. Maybe just some paper/whiteboard notes on which pairs to potentially trade.
Step 2 – Identify Opportunity
Once you see the entry, you will mark up your chart, or make a note of the potential entry reason.
You should be totally focused on entering the trade parameters correctly and double checking your analysis. Entering anything in your trading journal at this point would probably be distracting.
It is for me.
Step 3 – Enter Trade
Then you will place the trade and add your profit targets and take profits. If you are a technical trader, then you will probably take a screenshot, but that is really all you have time for.
If there are multiple trading opportunities, you probably don't have time to enter a million things in your journal about a trade. Realistically, you would only enter information AFTER all the trades for the day are executed.
Step 4 – Manage Trade
If there is any trade management, then you will have to do that. Things like pyramiding, or multiple profit targets are the common ones.
Again, you probably don't want to enter any details about the trades at this point. You need to focus on managing the trade. Maybe a take screenshot, at most.
Step 5 – Review Trade
After the trade has closed, then you will journal the trade and see where you can possibly improve. This is were you can now go back to your screenshots and trades to analyze each trade.
You would probably do this on a weekend or a non-trading weekday.
OK, you are probably thinking: “No shit Sherlock.”
Yeah, this is all pretty obvious, but I don't think that software developers really think about trading from a workflow perspective.
If they did, then there would be more user-friendly trading journals available. Even traders might take the process for granted.
Before writing this, I know I did. It's not an easy process to create an elegant solution, I totally realize this and I'm not talking shit. Just trying to propose a better solution.
So let's start here…
A Different Approach
Why do we keep a trading journal?
I think this is the best place to start.
Most traders basically want to know the following:
- What issues can they correct to trade more profitably?
- What are common characteristics of winning trades?
- What are my running metrics for each individual method I trade (for multiple rule based systems)?
- Maybe: How do my backtesting results compare to my live trading (for technical systems)?
That's pretty much it. Can you think of anything else?
Everything else is mental masturbation. Let's look at this one by one…
Basic Characteristics of Winning/Losing Trades
I would like to see all of my past trades and filter by winning trades and losing trades. Then I would like to see a table of the entry chart and the exit chart, with the before/after charts side-by-side.
MyFxBook comes pretty close. They allow you to filter by winning and losing trades and tags. But it kills me that you cannot see your before/after charts at the same time.
You have to put your mouse over every single trade to see the charts. Even then, it is not so easy to see the charts.
A lot of services have this already, but some don't. It is really useful to be able to create your own tags and filter and create reports by one or multiple tags.
Then you can add things like moon phase into your filtering criteria and nobody has to know that you are a weirdo.
That might be a legit characteristic for you (seriously, I keep an open mind). But the point is that you can determine what works for you, not what the developer thinks was a good characteristic to filter by.
Tags also make it easy to track different trading methods and give you the performance for each method, even in the same account. MyFxBook does this well, check out what they do.
This could be available at a higher cost and could be optional. I wouldn't have a problem paying a little more for something like this.
What do my winning and losing trades have in common? Is it the day of the week? Is it the time of day? Trade duration?
This is stuff that I might not think of myself, but could be low hanging fruit. Ideally, there would also be a statistical confidence level built in.
I don't want to hunt through a million esoteric metrics to find something useful.
Tell me, dammit!
Compare to Backtesting
It would also be great if the trading journal could upload backtesing results from Forex Tester 2 or Metatrader. This would make it easier to see why your live trading is so different from your backtesting.
Tradingrex comes close, but it could be taken a step further. A real-time alert, if you have exceeded your backtesting parameters, would be perfect.
Follow Up Reminders
One more thing…
Journaling your trades is great, but you might not be in objective state of mind when you reviewed your trade. I think that the ideal trading journal will ping you some time after you closed your trade.
Have a reminder email, maybe a week or two weeks later. You will be surprised how differently a trade can look, when you are looking at it more objectively.
How many times have you done that after step 4 above? Probably not as much as you should…I know that is the case for me.
Of course, if you haven't journaled a trade in the first place, then the journal will remind you of that too.
An Upgraded Forex Trading Journal Workflow
That being said, let's revisit the four steps that I mentioned in the beginning. But now let's add in what I think would be the ideal journaling process.
Step 1 – Scan Charts / News
No change here. The journal wouldn't come into play yet.
Step 2 – Identify Opportunity
Same thing here. Nothing doing, journal wise.
Step 3 – Enter Trade
Nope, no journal entries yet. Just take a screenshot and store it somewhere safe. Mql5.com makes it easy to take a snapshot in Metatrader and store it online for easy access later.
When you enter the trade in Metatrader, you could fill out the comment field to remind yourself why you entered.
Ideally, the trading journal would be able to detect the comment and create a tag when it automatically uploads the trade.
After you enter all of your trades, then this would be the ideal time for the journal to automatically update your journal or for you to upload your CSV file. At this point, you could enter some entry notes and tags, while it is fresh in your mind.
Step 4 – Manage Trade
If the trade needs management, then you would do so. Just like in step 3, after you are done, you could update your notes at the end of the trading day.
Step 5 – Review Trade
When the trades are closed out, then it is time to upload your final screenshots and notes.
At this point, you can upload your screenshots and get some final reports. Some useful ones would be:
- Tag performance reports
- Trade analysis:
- Screenshots, risk, pips, clearly laid out on one page, for every winning/losing trade. Filter by winning/losing trade.
- Advanced analytics – results compared to backtesting
- Advanced analytics – suggested improvements
If you haven't updated your closed trades in 10 days (or whatever), you would get a email reminder to update. Then in two weeks, you would get a reminder to review your trades again. You could then add additional notes and screenshots.
The most basic trade analysis report would look like:
That is a really rough sketch, but you get the idea. If all of your winning trades (or any tag for that matter) are in a list, it makes it much easier see common themes.
Final Thoughts on the Ultimate Forex Trading Journal
The reality is that many trading journals are really close to creating what I would consider as the ideal trading journal. But I still use MyFxBook + Evernote because they provide the ideal combination of features that I'm looking for.
Somebody will figure it out. It's just a matter of time!
Will it be you?
If you have something like this already, contact me! I would love to feature you and use your product.