08: How to Journal your trades like a Pro!
Have you ever wondered how some of the top traders in the world get their trading systems so fantastic, so precise? They do it by spending a considerable amount of time on journaling their trades. You need to record your trades in a spreadsheet or journal in order to be able to conduct an effect review. It is essential, and I don't know of a single successful trader that doesn't do it. It allows you the ability to identify the strengths and weaknesses of your trading strategy and plan. And allows you to identify the areas that need further improvements in your trading. You will not make it in this business if you do not record your trades, review them, analyze the data, to make improvements.
If you don't have a trading spreadsheet/journal, you either need to make one or get one from someone else. There are some links at the bottom to two really good ones. With Tradervue being my preferred choice of the two.
Highlights & Takeaways:
- Why Journalling your trades is the #1 best thing you can do for your trading business
- What are the key essential elements you must have in your trade journal
- Keeping a journal is not just about statistics and analysis, it is also about psychology.
- Looking for patterns and habits in your trading. Once you find them, Then what?
- How much work is journalling all of your trades? Is it worth it?
How Our Week Went:
Well we have had such an amazing week over in the Thinktank Community.
“WEEK OF GARTLEYS”
- Missed a Gartley on the NZDJPY by ¼ of a pip entry missing 30 pips (Missed a lot this week actually)
- Win on GBPNZD for 150 pips, Gartley Pattern
- Win on USDCAD for 35 pips, Gartley Pattern
- Loss on GBPNZD for 28.7 pips, Bat Pattern
- Win on NZDUSD for 12.1 pips, Gartley Pattern
- Loss on GBPJPY for 27 pips, Gartley Pattern (One of those that just hit stop and reversed)
- Win on EURAUD for 38.5 pips, Bull Bat Pattern
- Loss on the USDJPY for 14.2 pips, Bear Bat Pattern
- Win on the AUDJPY for 31.9 pips, Bear Bat Pattern
- Win on AUDNZD for 33.5 pips, Bear Gartley pattern
- Small Win on NZDUSD for 16.8 pips, Gartley Pattern
- Small win on NZDUSD for 12.4 pips, Bat Pattern
- Win on NZDUSD for 19.5 pips, Karma Pattern
- Win on EURNZD for 30.5 pips, Gartley Pattern
Total Pips: 13 trades = 339
Why Journal Your Trades?
Now there are a lot of people out there that do not keep a trading journal. And of course most of them I believe are unsuccessful or at least not as successful as they could be. I do believe there is a direct correlation to the two. They argue that they don't keep a journal because if they need to review anything, their broker provides them records of their trades. In fact, the broker's records also keeps track of available buying power, margin usage and profit and losses for each trade made.
But no matter how much data your broker keeps for you, there are benefits to keeping your own trading log. Journalling kind of gives you what I call “reps”. So essentially, by recording your trades and reviewing them you can learn more about your trading in a single trade than in 5-10 trades without journalling them. And the more reps you have the better. So the idea is to learn more from your trading no matter if you win or loose on the trade.
What are the details that you need to record?
The most important thing in keeping a trade journal is recording the right information. Not everything you think of to record, should be recorded. I should know. At one point I was recording whether or not the moon was full or not. And if I had a good sleep that night and ate breakfast in the morning and what I ate. These are things that to be honest just don't need to be in there. But if you want them there, that is fine. Just make sure you have all the other information that we will talk about.
The only “wrong” way to keep a journal, is to not keep a journal.
- Instrument Traded (EURUSD, GBPJPY, etc)
- Direction of trade (Long/Short)
- Set up / Strategy (for me this is which pattern I took, like a Gartley pattern or a Bat pattern)
- Timeframe (Was this off an hourly chart, or a Daily chart)
- Trend / Countertrend
- Date (That you entered the trade)
- Size of the trade (How many shares or contracts)
- Entry Price
- Stop Loss
- Risk / Reward
- Date (That you exited the trade)
- Exit Price
- Total pips
- Win/Loss/ or Breakeven
- Gross P&L
- Net P&L
Notes (most important)
- Psychological & Emotional State (where you frustrated, were you about to walk out the door, but you wanted to squeeze this one trade in, etc)
- Ability to follow your plan
- Trade Entry, management or exit, in particular error and/or successes
- Ideas you had about the trade.
- Source of the trade idea (chat room, twitter stream, research you did, alert system, your own idea, etc)
- Confidence Level (How confident you are in the trade)
- Trade Expectations
- Market Conditions / Outside Factors (eg, news)
- Day of the week
- Pre-day notes (what was going on that morning prior to entering any trades)
Now once you have all this data, you need to make effective use of it by analyzing the data which is provided. In essence you are re-experiencing your trades. You can do this on a daily basis, weekly or monthly basis. I actually do all three. At the beginning of the day I review what trades I had on the day before if there was something that was sticking in my mind or bothering me and review them. Then at the end of the day, I review the ones that I did that day. And then at the end of the week I review the week to try and spot any problems that I had during the week. And once in a while, not every month, but maybe every few months I review the previous month and maybe the ones before that that I had not reviewed yet. But each time I review, it is like another repetition. It is as if you made another trade.
So I am looking at my trades not just once, but multiple times. On average I review the same trade 4-5 times. This is great to help me become familiar with my trading and helps me analyze my trading habits better. Am I a physiological wreck every Monday? Am I placing or exiting trades improperly? And If I am, what are the causes?
Now when people journal their trades, the only thing most people care about is knowing the profit and loss figure and seeing it charted as an equity curve. Journalling is far more than just keeping a profit and loss account. And while it is fine and dandy to track and look at, I think there are more important things to track. One is you Winning percentage.
Winning percentage is the number of wins decided by the number of trades times 100. So:
- number of wins / number of trades x 100
And another is your Win Loss Size Ratio which is
- Average win / average loss
Now don't just stop there and make the mistake of making the calculations for the two. Calculate these values for other things like:
- Long trades vs Short Trades
- Trend vs Countertrend
- Each trade setup
- Each timeframes
Journalling is also fantastic for journalling your reflections of each trade. So things like:
- Was your plan followed or not.
- Did you deviate from your plan and if you did, why do you think you did?
- What could you have done better, and what you did wrong.
- And there are a whole host of other questions that you could ask.
You could also take screen shots of the trades that you took. Screens shots of your entries, any time you manage your position, and when you exit your trades. It can include the reasons WHY you took the trades that you did and why they were managed in the way that they were.
Keeping a journal is not just about statistics and analysis, it is also about psychology.
Journalling is not just about the data and analysis, it is about why did you get into that trade in the first place. How did you feel when you were in it, your emotional state? We have all had trades where we exited trades too early due to fear, just to see that trade make it all the way to our targets. And one way to learn from trades like that is to document your thoughts and actions on why you exited that trade the way that you did and when you did.
Patterns Patterns Everywhere
Look for patterns and habits in your trading. Then, when you find a pattern that could be relevant, you have to dive deeper into it. Things to look for:
- Time of the day (Performance by time of day) Better in the morning / evening?
- Day of the week
- Instruments (Which ones work and which ones do not)
- Winning days vs loosing days (I find, for me, Tuesdays, Wednesdays, and Thursdays to be the most profitable days)
- Winning trades vs loosing trades
- Long vs Short
- Overtrading (lots of traders have this problem)
- Duration in the market / Time in Trades (are your longer trades working better than your shorter trades, etc)
- Your trades vs market behavior (do you do better when the market is trending or when it is a range day)
But it seems like so much work.
Well sweet cheeks, it is. However, the best of the best traders take journaling very seriously. As do I. In fact, I spend on average around an hour or two journalling because I trade full time. If you only trade for an hour or so a day, you might only spend 15 minutes journalling. This is a business. And you have to treat it like a business. And in business we have to do certain things to make sure we stay in business. And journalling is one of them. It is amazing that when you record your trades and all the information I have outlined, in detail, how much better your business becomes. I would never have thought that my business would be so profitable. And I say the number one reason it is, is journalling. Make your journal work for you!
Also think about recording video of your trading throughout the day. This can be really handy. I did this for a while but it did not suit me very well. But for some of you, it might be a perfect addition to your journal.
LINKS AND RESOURCES MENTIONED IN THIS EPISODE:
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Good Luck & Happy Trading!