Trading journals are a great way to analyze and measure your trading performance. They allow you to spot any mistakes you might make and track your progress on improving your trade executions, discipline, and controlling your emotions. That’s why sooner or later most traders start a trading journal. So no matter if you are using a price action based strategy, or fully rely on indicators, you should create and maintain a trading journal. But what should be included in a trading journal? In this article, we will look at the 14 most important things and explain why you should include each of them in your trading journal.
What should be included in a trading journal?
A trading journal should contain all the following details about each trade:
In the next paragraphs, we’ll look deeper in why you would want to record all these details in your trading journal.
Each trading journal should contain the entry and exit prices for each trade. The entry price is simply the price where the users enters the market or opens his position. The exit price is the price where the user exits the market or closes his position.
Note that if you scale in/out during a trade that you will need to record these prices for each of the positions. By recording the entry & exit prices we can review our trades later to analyze how well we performed on our entries & exits. For example, we use the MFA en MFE metrics to get a clear indication of how good our entries and exits are.
Also, by comparing our entries & exits with the lowest/highest prices made during our trade we can analyze our performance and see how much money we’re leaving on the table. See for example the following chart. It shows the actual performance of the trader with the blue line vs the optimal performance the trader could have made if he had perfect entries & exits with the green line. Clearly the trader is doing very well overall but could perhaps improve his entries & exits a little bit so the 2 lines become closer together.
The entry date/time is the date & times are another essential piece of information each trading journal should contain. The entry date/time is the date & time when the user enters the market or opens a new position and the exit date/time is the date & time the user exits the market or closes his positions. Again, you will need to record these dates & times for every position if you decide to scale in/out of your trades.
By recording the date & time for each trade we are able to analyze what our performance is during specific hours of the day, days of the week, or months of the year and/or compare them with previous days/weeks/months.
Day traders, for example, might be interested to find out if which hours of the day provide the best trading opportunities. Perhaps they are making the most money during the open of the session or losing the most trades during the lunchtime.
For example, if we look at the following chart, we can see that this trader is making most of his money during the open and the close of the session while losing the most during lunchtime. Once the trader knows this, he might look into this to find out why this happens and perhaps stop trading during those times, or trade with lower position sizes during these times.
Swing traders, on the other hand, might be more interested in longer periods. An example which months or days of the week they are making the most money. Another thing we can look at is how long our trades take on average and if there is a correlation between the holding time of our trade and the profit we make.
For example, the next chart shows the holding time for all our trades and the amount of profit we made. We can clearly see that this trader makes the most profit for trades lasting 15-30min and looses the most for trades which last less than 5minutes.
When creating a trading journal, it’s a good idea to write down your initial stop loss and planned take profit target(s) for your trade. That way we can later analyze and determine how often you reach your planned take profit or stoploss. For example, its one thing to always target a risk-reward ratio of 3:1, but what if you only manage to get an average of 2:1 on your winners?
For example, the next chart shows the average R distributions for all trades of a trader. Note that the trader manages to cut his losers short to around -1.5R while letting his winners run from 2R up to 8R
Again, always make sure to record your stop loss & take profit for all the positions you take when scaling in/out of trades.
Recording position sizing in our journal can give us good information about our risk profile. Are we taking on too much risk or maybe not enough? By recording the position size, we can, for example, see if our biggest winners or biggest losers are perhaps caused by taking on too big of positions.
When scaling in/out of a trade be sure to record the position size for all positions
Our trading journal should also note the direction of each trade. Did the trader go short or long? By recording the direction for each trade, we can, later on, compare how are long trades are doing in comparison to our short trades. For example, we might have better luck with long trades considering the bull market of the last decade than with our short trades. By recording the direction of our trade we can later use if to filter our trades by different criteria and see if the direction of our trade makes any difference or not. Also, we might notice that some strategies perform better with long trades than with short trades.
It speaks for itself we want to record the profit or loss we made on each trade. But we want to record it in 2 parts. The first one is the gross profit or loss. That is the profit/loss we made without any commissions and fees. Again, if you are scaling in/out of trades be sure to record the profit/loss of each position individually. We use the gross profit/loss to calculate metrics like our profit factor
The second part we want to record is the commissions and fees we paid for the trade. Together with the profit/loss this will give us our net profit/loss which is used to calculate the metrics like expectancy / expected value and our max drawdown as shown in the following graph
We also would like to know which asset, stock or instrument was traded. Stock Most traders trade multiple assets no matter if they trade stock, futures, crypto, or forex. In the end, we want to see if our strategy gives us equal results across the different assets we trade. And if not then it might be better to look into this. For example, in the graph below we clearly see the user has a nice performance on the E-Mini futures (ES) but his strategy fails miserably on all other future assets.
One of the biggest issues most traders face is discipline. They either FOMO into trades, move their stops, or get out too early, or do other stupid things. By recording metric on how well you managed your trade execution, we can gather statistics on how your behavior is influencing your trade performance. As an example, look at the results below. We can clearly see that the trader is losing money whenever he enters/exits too early or too late. These are just a few of the metrics you could record along with your trades. Think about the mistakes you make and be honest about them. Next, include them in your trading journal so you can analyze how they influence your trading
Besides recording hard trade metrics also think about how your emotions were during the trade. Many traders struggle controlling their emotions during trading which surely affects their results. Think about your own emotions and if you think they might influence your trading then perhaps it’s a good an idea to start recording them. For example. Did you get angry after a couple of losing trades causing you to revenge trade to ‘win it all back’. Or perhaps you were afraid to open a new trade? Or you got overconfident after a few winning trades. By recording emotions like this for each trade, you will get a good overview of how they influence your trading.
Also, make sure you include a place to write down your notes during a trade. Maybe you were distracted by the doorbell during the trade, or your wife called? Maybe you noticed a pattern you want to pay attention to the next time. Perhaps you learned something and want to write that down. Having notes with your trades will for sure help you. Make it a habit to go through all of your trades at the end of the day and see how well you did. Write down notes for the next day perhaps on things to watch out for.
Who doesn’t like charts? Most traders love them and can look at them for hours. However, only a few traders take the time and effort to include them in their trading journal.
Making screenshots of how your charts looked like when you opened & closed your trade will help you later on. You can go through all of your trades analyzing your charts. For example, you might want to go back and look for specific patterns.
By recording the highest and lowest points price made during a trade we can determine how good your entries and exits where. For example, let's say that during the trade the price made a high which resulted in a profit of $500. But you waited hoping for more profit. However, let's assume price then reversed and in the end, you closed the trade for a profit of $400. While a profit of $400 is very nice it does not tell you how much you gave back. But if we record the highest & lowest price then, later on, we can see that you gave back $-100 which is 20% of the potential profit. This will allow you to look at your exits and entries more in detail and look at how you can make them better.
Besides the exits, you can also use the highest/lowest prices to analyze and improve your entries/stop loss. Let’s assume you use a $100 stop loss and that on average we can see from the lowest price that price in general never goes more than $50 against you. That would mean that you can tighten your stop loss some more.
Most traders have multiple setups. They might have a trend following strategy for when the market is trending and a range trading strategy for when the market is range-bound. By including the name of the setup or strategy in your trading journal we can, later on, see how well each strategy performs and how many trades you get from it. For example, look at the following screenshot where we can see a trader that has 3 strategies. The HWB & Breakout strategies seem to perform well, but the trader is losing with his reversal strategy. Next, we see that the trader gets the most trades from the HWB strategy and only a couple from the other strategies. By looking at these results it might be a wise idea to stop trading the reversal strategy since its not profitable and returns just a few trades. Sometimes the answer to winning more money is just eliminating some of the losers.
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