Well, after my first article Importance of Trading Journal I decided to write part 2 to say more about this theme. I will try to keep it clear and concise.

Basic parameters:
  • date, time and prices of entry and exit
  • predefined SL, PT and risk reward ratio
  • actual risk reward ratio
  • entry setup, timeframe, currency pair, position size, side
  • confluence factors, market condition - trending, range bound, choppy (sideways)
  • emotional state and mood before and after trading session (I recommend to distinguish these compliance as good - green and bad - red)
  • note before trade - description of trade, emotional state, compliance with trading plan
  • note during trade - moving with SL and PT, exiting trade, progress, emotional state
  • note after trade - summary, emotional state, compliance with TP (yes/no, if no - why)
  • trading goals (more about this later)
  • database of screenshots
  • equity curves
  • account statement

You may add:

  • daily viewpoint (I'd trade EUR/USD today only with trend, I wait for breaking S/R level etc.)
  • database of trades which you failed to take (e.g. because of fear even it suited trading plan)
  • statistics - W/L %, average losses and wins, drawdowns, average gains and losses etc.
  • whatever else you like to keep and want to know for long term period

Important:

When you take trade (if it will not last a few minutes) you should immediately fill these parameters (of course some of them will be filled after trade closing) and you should take also screenshot of current trading setup.

I do it like this: I create a new folder named as a current date (e.g. 24.8.12) and I add the entry screen into this folder (e.g. 24.8.12 IN S GBPUSD - just shorted GBPUSD on 24.8.12) the same it is with exit. If I exit a few days later the screen is also in the entry date folder (e.g. 28.8.12 OUT S GBP USD).

This makes you a database of your trades screenshots sorted by date exactly according to your trades log so when you will do your analysis it wil be easy to find requisite screenshots.

This will lead to:

If you will do it this way, it will lead to building a good trading habits, patience, discipline and passion. Simultaneously this will help you to reduce number of trades (especially bad trades) as you will record them and if you make a green series of "trades accoring to trading plan" you will try to keep it green and you will not want to mess it by some stupid emotional trade. It will also motivate you to keep going this way. Always remember that the more records you have the more important trading journal becomes but this does not mean that you go and make 50 trades right away to have a long track record.

I know that this could be hard to follow especially if you are a day trader who make several trades per day but it is very important to start build habit like this. There will be times when you will feel lazy and you just say "I'll record it tommorow" but this is wrong - your mind get used to make exceptions like this and you can't be able to build these good habits not to mention that your records will lose on value because you just will not remember how you were exactly feeling yesterday or what were your reasons to taking a trade.


Objectivity and discipline:

This is mainly goal of your trading plan and it can be achieved through fixed rules but there's also a huge amount of discretion and gut feel, especially when you trade a method instead some trading system. One way may be a checklist which decides about taking or not taking trade.

Another way how to stay objective about taking trade is summary before taking a trade. Try to say aloud why you are entering the trade and you also may imagine situation in which you are explaining to your friend trader why are you exactly entering at specific chart. You should say everything that supports or contradicts your trading decision (e.g. trade is in direction of recent uptrend, setup just rejected a key support combined with round number, there's fib. level etc.). If the trade still meets your trading plan you can enter, write it down into the trading journal and take a screen. If it does not meet your trading plan you may be tempted to take trade even you know that you should not.

In this may help a strong record of trades (especially the green ones - I don't mean green because of profits but green because of trades that meet your trading plan! Losses should not be treated as something bad or wrong they are PART of trading and you must accept and understand it.) which will motivate and encourage you to stay sideline and wait for better trade. I think this is one of the most difficult thing in trading but is necessary to learn it.

Your trading journal will show you your state and progress in this way - it will be simply depicted by green and red color and your commentaries and feelings.


GOALS:

This is another important thing that keeps you motivated and disciplined and should be led in your journal.


Long term and short term goals:

You should have set both of them. Long term goal should not be set like "I want to become a full time trader one day" this may be some kind of "super long term" goal, in short, this won't help you right now. The point of the short term goals is that they help you focus at a specific part of your long term goal - it's like a puzzle. You focus on every piece of your bigger picture (long term goal) and you put it together by time.

Long term goal can be e.g. double your account in a year (this is based on trader's experiences and preferences).

Short term goal may be set in terms of months (or even weeks and days) and they have to be achievable. If they will be unrealistic they will become source of frustration!

Lets say that our long term goal is double up our account, our monthly - short term goal is make +10% (if you make big amount of trades you can set weekly or daily goals). You should try to achieve this every month, there may be time when you make 8% in first week so then you should slow down a take only the best trades in next 3 weeks so you may manage to make even more than your monthly goal - good for you! This will reduce your level of stress and you start enjoy being disciplined and patient.

You also should give yourself much space for losses. In this case it's "only" two months but this is just example. If you don't manage to achieve your short term goals - don't despair and move onto next month (again it is very important that your goals are realistic!) and don't give it up - strong will is required in this business!

The important thing here is to lead this stats in your trading journal to know where are you in term of goals.


Analyzing:

If you keep so detailed trading journal, the other thing you can do for maximizing its efficiency on your trading is analyzing its data.

You may analyze it every day, week or month (depending on your trading style - if you have 5 trades per month, you won't analyze it every day or week).

You just analyze all your past trades and specific screens, emotions, mistakes, feelings, good and bad trades, your goals, just everything. You can also update your equity curves and what is important, try to solve problems which appeared by e.g. upgrading your trading system or finding out why you have broken your trading plan many times.

Because of this it is good to distinguish these parameters by different colors as I mentiod earlier to know which were right and which were not. Here are important questions which you may ask yourself to find out why you have such results you have (e.g. why have I broken my rules? if you have this column red, or what pair was the most profitable and losing, the same about timeframes, setups, if you differ even trading session etc.).

This is the part where awareness and upgrades comes out.


In conclusion:

It's all about building a good trading habits and in my opinion this is a great way how we can achieve them. You don't want be that messy trader who doesn't care about his past trades and actions and who doesn't have any idea where he is heading to, thus he can't know how to get there.

Last important thing: it isn't enough to have a journal, you have to use it and update it regularly.

I hope you enjoyed this exhausting article and feel free to leave a comment.

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