Trading Journals to Bring Your Trading Skills to the Next Level

2023년 1월 14일

Hello, traders.

In this post, I am sharing tips for trading journals to bring your trading skills to the next level.

This post would help you if;

✅You are not sure what to write in a trading journal
✅You are not motivated to create your trading journal
✅You do not last in recording your trades



■Importance of trading journals
Trading journal is important in order to;

1. Analyze your trades
Trading journals help traders identify problems and points to improve in your trades, by reviewing how you analyze the market and make decisions before taking positions.

Have you ever asked yourself after trades?

”Why did I take this trade??”

Even if you think you were calm and analyzed the market very carefully but you acted differently. This really happens.
With trading journals, you can review if your trades are rule-based, you have made wrong decisions and/or made any mistakes during trades.


2. Evaluate your strategies
Especially when traders are in the process of developing their own strategies, this evaluation is vital to make decisions on whether you need to improve something in your strategies or it is even worth using the strategies.


■3 Things to Remember When Creating a Trading Journal
1.PDCA Cycle
2.Design what kind of data you want to collect from your trading
3.Screenshots are musts




1.PDCA cycle is a well-known improvement method so I do not need to detail here, however, we, traders should always keep in mind that we have to keep improving ourselves and/or our strategies by conducting PDCA cycles for a single trade and for a group of trades during a certain period of time.

2.Another purpose of recording your trades is to collect data. Trading is a statistic business where data is very important for you to make decisions as there is no 100% in financial markets.

3.Humans’ memory is much weaker than we think. No matter how strongly we try to memorize what the markets look like, we forget. Because our memory is vulnerable.
This is why taking screenshots is important so that you can analyze your trades with the same conditions as when you took positions.



■Sample criteria for creating a trading journal

Here’s is sample criteria(questions to yourself) when you make a journal.


✅Why did you take this trade?
Is this trade as per your strategy or just one of FOMO entries?
Clarifying the reason to take this trade gives you a chance to review your thought process before the trading.


✅What is your plan in this trade?
In my opinion, traders always should have what they aim in a trade that they are about to take.
Without this, traders are easily affected by emotions which ends up with cutting profit too early or even leads to out-of-rule trading.


✅Result
Win/Lost/Even


✅Plan TP/SL
Record planned TP/SL before you take trades in pips or currency(USD etc.) depending on the instruments you trade.


✅Actual TP/SL
Record actual TP/SL in pips or currency(USD etc.) depending on the instruments you trade.
You can perform variance analysis comparing between plan and actual.


✅Risk & Reward(RR)
RR is the breakeven point in trading business.
Whether your strategy can be profitable or not is all about balance between win rate and RR. It is vital to track and monitor RR.


✅What is good about this trade?
Here is what I recommend to implement in your trading journals.

Trading including learning process is a completely solitary process.
When you are at school or at work, teachers and supervisors guide you in the right direction and praise us for good grades and good jobs. This experience of being praised will give you confidence in your studies and/or work, but this process normally does not happen in trading.
Therefore, when you are just starting out trading or when things do not go well, some traders might get lost asking themselves what they are doing is right or wrong.
That is why it is important to pat yourself on the back when you behave correctly in trading.

It is said that when people are praised, Dopamine is released in our brains which bring us to the feeling of well-being. Dopamine is also called “Happy hormone”, so the brain tries to work harder to reproduce that feeling of pleasure. In other words, you feel more positive and motivated, which leads to confidence along with the small successes of behaving correctly in trading.

This can only be a good thing, as it gives you confidence in your trading strategies.

Why don’t you give you a clap when you have done correctly?


✅What improvement do you need from this trade?(Action for next trades)
To complete the last step of your trading PDCA cycle, consider what improvement/measures you have to implement against your mistakes and/or problems.
These action items will help you avoid making same mistakes in the future.


✅Emotion
It is often said that recording your emotion during a trade is effective because emotion makes us make wrong decisions, break rules and chase the market like a horse chasing a carrot.
Did I get scared when executing trade? Why? Was I afraid all the time? Why? Reviewing your emotion would give you a hint on why you felt like that.


✅Conviction
Conviction is how confident you are in a trade you took.(High/medium/low)
This is one of the ways to measure whether your confidence is statistically linked to your performance or just your imagination.
For example, you took 10 consecutive trades with high conviction rate and 7 out of 10 was successful trades. In this case, your view/analysis on the market is quite accurate and this makes you convinced that you should take a trade only when you feel highly convinced.



■Trading Journal Tools
What tools do you use to record your trades?
Excel? Apps? Or even by hand writing? Let me know in the comment section below.

I am using a web service.(not sure if I can name the service here due to the house rules...)
It allows me to record all necessary info along with screenshots as well as creating monthly reports which definitely increase productivity and efficiency of trading journal.