How to start a trade journal and analyze your trading performance

Most traders will either already use a trading journal or are thinking about starting one. In this post, we look at what trading journals there are and how you can start your own journal.

So how to start a trade journal and analyze your trading performance?

  • Choose a trading journal
  • Record the basic trade details
  • Additional trade metrics to record
  • Analyze the equity/drawdown performance
  • Analyze the R-multiple distribution of your trades
  • Analyze your trade setups
  • Analyze your trade hold times

 

Choose a trading journal.

There are many trading journals available to choose from, but all of them fall into one of the following categories

  • online or offline trade journal
  • excel sheet or application
  • manual or automated trade journal

The choice you make will greatly influence how future proof your journal is, how user friendly it is, and how deep you dig into your trading performance. We will look at the differences in the following paragraphs.

 

When to choose an online or offline trade journal?

Both manual and automated trading journals are available as online or offline version. The biggest advantage of an online journal is that it lives in the cloud and thus you can access it anywhere and from any device at any time. You don't need to download and install updates since that's all done for you and your data is safely stored in the cloud so need to worry about losing your trading journal when you pc crashes.

Offline trade journals, on the other hand, come in the form of excel sheets or desktop applications. A disadvantage of both is that of course, you can only access them from the computer they are installed on. This becomes very cumbersome if you are trading from multiple devices (phone/tablet) since you always need to enter your trades on that one pc which has your trading journal installed.

Besides this, it also means you are responsible yourself for making backups to prevent losing your journal in case of a hard disk crash for example. But there are also benefits. Most offline journals are licensed as a single payment and thus cheaper when comparing them with online journals which are subscription-based most of the time. Also when your trading data gets stored on your desktop you could debate if that's safer from a security point of view then when your data is stored in the cloud.

In the end, we think it comes down to how user-friendly your trading journal is and if it offers all the functionality you need. When choosing a journal think of the future. An excel sheet might seem like a good idea, but will it still suffice after it contains a few hundred/thousand trades?  Also, note that in general online and offline desktop applications will have way more functionality to filter and analyze your trading results than an excel based trading journal.

What's the difference between an automated trading journal and a manual one?

Both types of trading journals will essentially provide you with the same basic functionality to log trades and analyze your trading performance. However, a manual trading journal means you will need to enter all the data yourself for every trade you make. This can become very time-consuming, boring, and error-prone. An automated traded journal, on the other hand, takes away this extra work by recording your trades for you fully automatically. No data entry is needed. What's more, it's all done in real-time so you are constantly up to date and they can record other details for you like taking screenshots of how your chart looked like when you opened/closed the trade.

Besides data entry, we see that an automated trading journal, in general, will give you more options to analyze and filter your trades and trading performance than a manual trading journal. Especially when comparing them with the manual trading journals done in Excel. These will only supply basic filtering and analyze functionality.

Why would I need an automated trading journal?

For some traders, a manual trading journal might suffice, especially when they are just starting, or if they are only taking a couple of trades per week/month. But most traders would surely benefit from an automated trading journal. Consider the following:

For traders who are trading at high volumes, it can be easy to forget to input data and keep track of all your trades but this problem is easily solved when using an automated trading journal since all the hard work is taken care of for you. In turn, this means that your time will be better managed. An automated trading journal will likely be extremely useful to those who make multiple trades every day. That being said, there is no reason that an automated journal wouldn't be of just as much benefit to someone making fewer trades in any 24 hour period.

. In this digital era, it isn't only trading itself that is done online, your automated trading journal will live in the cloud. This means you can access it at any time, from everywhere, with any device. Another big benefit is it will be backed-up online in a safe place so you don't need to worry about losing your journal anymore.

. One of the best ways to ensure ongoing success in the world of trading is to keep on top of your trading data and continually analyze it, with the capacity to adjust your trading strategy whenever it is necessary. One of the major ways that this type of trading journal can benefit you is through the ability to clearly and quickly analyze your trading performance from different viewpoints. A good journal will show you if you need to work on your discipline, emotions or psychology. If you have a tendency to cut runners short and let losers run. If your strategy is profitable in the long run. And how small changes in the market could affect your trading performance.  

Trading is, without a doubt a field that requires a lot of learning and it's no secret that to be successful, one should have a good plan in place that covers every eventuality. When you first enter into trading, it can be easy to become overwhelmed and a good way to get started on the right foot is to make use of an automated trading journal. It forces you to be disciplined and hold yourself accountable for your trades, which is one of the biggest problems most traders face. Quite simply, this is one less stress that you will need to worry about as you begin your journey into the trading world and can make the transition from novice to pro much smoother.

Essentially, an automated version of the trading journal is the best option for those who are serious about analyzing trading performance, improving their discipline, and analyzing their performance from multiple perspectives. Traders who are making only a few trades a week or month or only need a few reports may find a manual journal to be enough. 

For those who are just starting in the trading market, there may be a lot to take in but through the use of an automated journal, things suddenly become a lot clearer.

 

6 Benefits of an automated trading journal

Many advantages can be gained through the use of an automated trading journal. Now that we clearly understand why you might require this type of journal, let's explore the benefits you can expect once you get started.

1. Automated trade recording

We can't emphasize enough that your automated journal will be much more efficient than manually entering every piece of data. There are other, perhaps more important responsibilities you will need to tend to as a trader and with the stress and monotony of data entry removed from your day, you will be able to better manage your time and dedicate it to other areas of your trading career.

What's more, an automated journal will record your trades in real-time, this will give you the advantage of always having the most up-to-date information on hand whenever you need it. 

2. 100% correct data

At the end of the day, we are all only human and, whether we like to admit it or not, humans are prone to making mistakes. This can be especially true if you are working long hours or have a lot of trades to enter into the system.

No matter how careful you try to be, mistakes may be made when manually entering your trading data but an automated system takes away this worry. Not only is this important for accuracy when looking back over your previous trades but if you are looking to track your performance over time, it is essential that you have data that is precise and correct - even the smallest error can alter the entire look of your performance, giving you a false view.

3. Hold yourself accountable

After spending time analyzing your trading data through your automated journal, you will be able to determine your strengths and weaknesses in what you do. In turn, this will allow you to further implement effective strategies but will also force you to hold yourself accountable for your successes and failures.

4. Allow yourself to focus on what's important

Being a trader, you will know that the market can shift quickly, and without a moment's notice, for this reason, and many others, it is vital that you are able to act fast and change your strategy in the blink of an eye. This is something that cannot be as easily done if you are spending hours every day manually entering the data from each of your trades into your journal. Again, if you are working at a lower level and completing a small number of trades each day, this may not apply but for those with many trades, you will appreciate how this might impact you.

By creating an automated trading journal, you take away the task of entering the data and are then free to focus on analyzing your performance and increasing your overall trade performance.

5. Manage your emotions and increasing your discipline

For a lot of traders, there is a degree of emotion behind each trade and in some cases, this can prove detrimental to success and performance.  Most automated trading journals allow you to measure how well you execute your trades and some even allow you to define your own criteria and metrics you would like t monitor. they will make very clear which mistakes you are making and how improving specific metrics will be financially beneficial to you. In turn, this will prevent you from making an unplanned move or entering into a trade that may be anything but ideal.

6. Advanced filtering and analysis

if you want to dive deep in your trading results and filter and analyze them from various views then an automated trading journal is ideal.

Record the basic trade details.

Once you decided what type of journal is suited for you it's time to start recording your trades. For each trade, you should at least record the following details since these ones are needed for all the basic analysis reports.

  • open / close price
  • open / close time
  • position size
  • Initial stop loss(es)
  • Initial target(s)
  • scaling in/out details
  • profit/loss
  • commissions / fees

Additional trade metrics to record.

Besides recording the basic details about each trade also think about other things you would like to record. Remember.. the more information you record about each trade.. the more options you have later on to filter and analyze them. Don't just think about the raw price details, but also consider things like emotions, discipline, trade execution. A sample list could be:

  • screenshots of how the chart looked like when you entered and exited the trade.
  • the lowest price reached during the trade. This can be used to analyze how good your entry/exit / take profit and stop loss placement is
  • the highest price reached during the trade. This can be used to analyze how good your entry/exit / take profit and stop loss placement is
  • entry (e.g. good, chased, too late, FOMO)
  • exit (e.g. good, too early, too late)
  • emotion (e.g. hopeful, scared, angry, stressed, relaxed)
  • trade setup (e.g. breakout, scalp, reversal or any other strategy)

 

Analyze the equity/drawdown performance 

The first thing we are going to look at is the equity & drawdown graph. this graph will show in one glance if your trading performance is winning or losing. But note that you need sufficient data before you can do any analysis. We recommend having at least 100 trades and at least 6 months of trading data. Anything less will probably not be enough to get any reliable statistics from. That said you could & should monitor your trading performance right from the beginning. Just remember that

  1. things will be fluctuating a lot more in the beginning just because you don't have many trades recorded yet. This should flatten out and after 100 trades you should see reliable results
  2. don't make any adjustment to your trading strategy until you logged your 100 trades. 
  3. Even if you logged more then 100 trades, always be aware that when we dig deeper and filter on specific sections that you might not have enough data to base any real decisions on

Back to the equity graph. In the example here we clearly see the trades are on the right track. The blue filled area specifies the account balance and over the course of 65 trades, this user managed to make around 6000. We also see that lately though the user is in a losing streak. Losing streaks are part of trading, but always something to be aware of. The statistics show we can expect a max. losing streak of 7 trades. The dark blue line shows the drawdown. The drawdown is the amount of capital loss due to losing trades in the percentage of your account. Be can see a big spike between trade 4-6 where the trader lost 30% of his account. After that, the trader recovered and kept his drawdown around 10% which is good. Again.. looking at the losing streak he is now in, we see that the drawdown is almost reaching 15% now, and while each has his own personal limits that might be a good sign to start trade with a smaller position size until he gets out of his losing streak.

 

Analyze the R-multiple distribution of your trades

What does R mean? R is simply the ratio between your the number of dollars you win vs the number of dollars you can lose on a trade.  For example.. let's suppose you open a trade and your take profit is $200 and your stop-loss is  -$100. In this case your win twice as much as could loose so your R will be 2. Most traders are always aiming for an R of 2 or higher when they open a trade. If they get at least an R of 2 out of trade then this means that a loser won't have much impact and can easily be won back by a single winner.  But planning and reality are two different things. You can plan each trade to have an R of 2 or higher. But can you actually realize this also? The R-multiple distribution shows a graph that displays how many trades reached a specific R. In the graph above you can see that there where 15 losers of -1 to -1.5R and that all winners where 2R or higher. Does this mean this is a bad trading strategy? Not at all. We can see this trader clearly is cutting his losers early and is letting is winners run. There are even a few trades with an R of 5 or higher. These alone easily offset the 15 small losers. So, in fact, this trader is doing pretty well. What could the trader do to further improve his strategy? Besides the obvious one which is trying to prevent his number of losers, he could look at his stop loss. All his losers have an R of -1 to -1.5. There are no break-even trades and no losers between 0 / -1R/ This gives us a clue the trader is using a fixed stop loss and is not moving it at al. So his trades either hit its target or its stop loss. The trader could look at using at a trailing stop, taking partial profits or moving his stop to break even when the trade is in profit to get the R of his losers a bit higher

Analyze your trade setups

Most traders use multiple trade setups. For example.. you might have a breakout setup which you use to trade breakouts outside a trading range. Perhaps you also have a setup for trading reversals, and perhaps some kind of pullback entry which you use to get in the trend when the market is trending. The trade setup graph will show you how each setup is performing. In the example above you can see that the trader uses 3 trade setups. He took 38 trades with his HWB trade setup which resulted in a total profit of $9000. He also took 7 breakout trades which resulted in $2600 and he took 1 reversal trade which made $450 profit. This graph clearly shows that the HWB entry is the most used setup. In this case, all 3 setups are profitable, but you could also imagine the case where a trader has a couple of setups where one is losing money. In that case, it might be wise to stop trading that strategy or at least look at it closer and see what is causing the losers.

Analyze your trade hold times

The hold graph will show you what is your most profitable holding time for a trade. By looking at how long trades took you can probably get a feeling what is the best timeframe for your trading. For example, in the screenshot above you see the trader took 12 trades which lasted between 5-15m minutes and that this timeframe is his sweet spot. Next up are trades that last between 1-4 hrs. This may sound very strange and it would surely be wise to look at this closer if the user had logged more trades. In this case, here he clearly did not log his 100 trades, and that we cannot fully rely on the statistics yet. He only logged 4 trades in the 1-4 timeframe which is not enough to make any decisions on. 

 

Erwin Beckers

I am the owner of EB-Worx. Together with my wife and dog I live in the Netherlands where I love to day trade the ES-mini and develop software which helps me to become a better trader.

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