Trading journal vs. trading spreadsheet, which one is better for you? Here’s my take right off the bat: good traders use trading spreadsheets, but great traders use trading journals for the following reasons
So why use a trading journal instead of a spreadsheet journal?
In the following paragraphs, I will dive deeper in each of these topics. But for now, you’re probably wondering, why use a trading journal when Excel, Google Sheets, and a ton of other applications offer spreadsheets for free? Why not use them to track current holding, PnL, account balance, and whatnot?
Well, that’s the thing. Spreadsheets are designed to record and track values. Apart from a load of numbers and formulae, there isn’t much else that you’ll get from a spreadsheet as a trader.
Sure, a trading journal lets you record numbers too. But it offers significantly more than simply “monitoring raw trading data”. You can note down analyses, market conditions, trading sessions, strategies, and even your emotions at the time of making and exiting each trade. It allows you to look at your trades from all kinds of different perspectives. Filter them in all possible ways and generate all kinds of reports. These are things you will need when you start to analyze and improve your trading performance. But most spreadsheets don’t offer or fall short of these features.
Those are bits of information – alongside numerical data – that great traders heavily rely on. Unfortunately, spreadsheets are just not designed for that kind of info. Here’s a lowdown of why trading journals blow spreadsheets out of the water:
Trading journals bring lots of handy features to the table. One of them is the ability to monitor your trading psychology. Or, to put it in other words, tracking the emotions that influenced you to trigger a trade.
Why is that important? Because you can find patterns in your trading. For example, a trading journal can tell you how long you held a winning trade, the most profitable time frames for each day of the week, the number of longs that were profitable on AAPL and so much more.
When you note such patterns, you learn how to optimize and thus improve your performance by tweaking your strategies. It’s something that spreadsheets don’t offer. While they are excellent at crunching numbers, they can’t really report non-numerical information like emotions and patterns.
Both Microsoft Excel and Google Sheets offer templates with a “comment” section for recording a few lines regarding a trade. But that’s hardly a good way to capture your emotions and strategies during trading. Some spreadsheet templates, like the one below, blandly ignore the fact that trades are made by humans who are emotive in nature.
What you would like to know is answers to questions like ‘How much did I win or lose’ when I was stressed during a trade compared to trades where I was feeling relaxed. Or... did the emotions which come with a losing trade influence the way I took my next trades. Or maybe. Do I perhaps lose more at the end of the day when I‘m getting tired and less focused?
These are all questions a trading journal can answer and even more, you can track the results over time as well! So let's say you find out that a losing trade is impacting your trading behavior for the next trades. Once you noticed this you start paying attention to it and try to avoid it. Would it not be nice to see this back in some kind of graph or report? That’s where a trading journal excels and where (most) spreadsheets fell short
Apart from cells where you can enter numbers, it doesn’t offer much else. And while I like the fact that it’s simple to enter your trades, I can’t use it because there’s no way of tracking my patterns and provides very little reports. I can’t know how to improve my strategies and make more money.
So, the first point above emphasizes how spreadsheets are mostly inadequate. Nonetheless, depending on the template you’re using, a spreadsheet can be too complex for trading. Take a look at this example:
The clutter of numbers is overwhelming, to say the least. And it’s a thing we see with most spreadsheets. The author tries to place all the data and reports he/she wants into 1 big spreadsheet. But that makes it overly complex, not very user friendly, and hard to understand. Also, keep in mind that you’ll have to fill every single column for each trade. That’s not only a waste of your time but also error-prone. and (AGAIN) it won’t capture or report your trading psychology.
According to experts, oftentimes your trading psychology is more influential than logic. For example, after a loss, you might feel angry and jump into a bad trade in a bid to “revenge”. Greed, on the other hand, can push you to hold a trade longer than you should, which ultimately can turn a winning position into a losing one.
Unfortunately, spreadsheets ignore such important trackers. Instead, most of them focus on cluttering a sheet with numbers (like in the above example). Granted, you can choose the information that you want in a spreadsheet by creating your own set of columns and rows, but that comes with disadvantages as well.
For one, your trading spreadsheet will likely suffer from bias. That’s because you’ll be the one to choose the information to include. That is a very subjective process and you’ll almost certainly leave out pertinent information that can influence your decision making.
Trading journals, on the contrary, take your emotions into consideration. If you generate a report using a trading journal you’ll clearly see where you made decisions based on anger, greed, fear, or any other emotion.
Also, trading journals are apps or websites, and that allows them to be very user friendly and easy to understand. They don’t need to try to fit all data and reports into 1 big spreadsheet. Instead, they use different screens for things like the trading journal, the trading sessions, the different reports, etc. This makes them much easier to use, learn, and more fun to work with.
First of all, you have to add all your trades manually when you’re using spreadsheets. To make matters worse, it will get slower as you add more trades, and the more trades you add, the bigger and more complex that spreadsheet is going to look. That’s a nightmare that you don’t want to inflict on yourself, especially if you are a day trader taking 4-30 trades a day. Think about how your spreadsheet will look like after using it 1 year with 4-30 trades a day? Do you still think it will be very user friendly?
Just as bad is the fact that spreadsheets are susceptible to human error. Study's show (link to pdf) that on average, a spreadsheet has one error for every twenty cells that have data. And since you’re adding trades manually, it will be practically impossible to avoid errors. Just one misaligned row, misplaced number, or missed negative can damage the integrity of the entire document.
Now I agree, most trading journals allow you to enter your trades manually as well. And when you do that there are susceptible to human error too. But nobody is doing that. All trading journals at least allow you to import your trades from an export you created with your trading platform. That is already way better than entering all the information manually. But some trading journals, like improve your trade , take this even a step further. They allow you to record your trades in real-time and even add screenshots of how your chart looked like when you entered or exited a trade. This means you don’t need to manually enter all your data anymore or export and import broker statements.
But while manual entering data is boring and error-prone, surprisingly, that’s not even the worst thing that can happen. Unless you know a good place where you can download a custom-made spreadsheet which exactly fills your needs, chances are you’ll have to create your own or extend/modify an existing one. If you get the formulae wrong, it means that all the calculations will be wrong. Heck, the spreadsheet can tell you that you’re making a profit when you’re making massive losses.
That’s one area where a trading journal wins hands down. All the good journals, including the improve your trade, are already programmed for trading stock, equity, forex, futures, etc. They are comparable to a buy-and-drive-car; get the journal and start trading with little to no hassle.
Additionally, trading journals are often designed based on relational database principles. For that reason, they process data and produce reports very quickly regardless of the number of trades you do.
Trying to do collaborative work? Forget it if you’re using a spreadsheet. The thing with spreadsheets is that they can be highly personalized by the user. That’s a good thing in other fields like accounting where data entry is the most important thing.
However, it’s not so good at trading, especially if you want to share and compare trades with other people. The fact that it’s not a standardized interface means that you’ll be sending and receiving spreadsheets that are organized in all kinds of ways. You’ll probably take more time trying to understand the data than preying on potential trades, taking positions, or closing positions.
Trading journals are pretty much standardized. You can glance at the next person’s journal and understand their strategy provided you know your way around that particular journal. For example, everyone who uses the Improve your trade journal gets the same dashboard and the same entries for trading.
When using a trading journal, your data will typically be stored in the cloud. In addition to adding an extra layer of security, cloud storage ensures that you can access the data anytime, anywhere. Another benefit is that it will be backed up and that you cannot lose your data when your computer crashes
Credit where it’s due: Google Sheets is cloud-based. You can also save Excel files to iCloud, OneDrive, or Google Drive – depending on your preference. The downside is that you’ll have to save the files manually. The auto-save feature is only available on Google Sheets, not Excel or other offline spreadsheets. And that means you can lose your files if something happens to your computer or hard drive.
To make matters worse, some spreadsheets (particularly Excel) are prone to viruses. Some unscrupulous folks out there usually hide viruses in Excel’s macros. So, if you download that setup, you essentially transfer the viruses to your spreadsheet and computer.
You’ll never hear about such issues when using a trading journal. That’s because of the good people who create them understand that we use them for sensitive activities. They, therefore, ensure that they safe from security vulnerabilities.
6. Its hard to create or modify spreadsheets
Did you know that almost all existing trading spreadsheets are, in fact, not designed to work with multiple positions for scaling in & out? You’ll need to program the spreadsheet. That involves using complex formulae and syntaxes.
That’s another big problem with spreadsheets – you are pretty much limited to your knowledge of spreadsheets. On the contrary, trading journals do not require any technical knowledge of the software or platform. Most of them just require you to enter your values and they’ll generate reports for you.
Finally, spreadsheets often require you to download an installer, install it on your computer, and keep downloading updates to maintain it. Needless to say, the most popular spreadsheet apps like Microsoft Office require a subscription.
Conversely, trading journals don’t require you to download, install, or maintain anything. However, one thing to keep in mind is that most of the good trading journals are paid solutions.
In Conclusion…
Spreadsheets are mostly a clutter of numbers with little to no aesthetic appeal. It would’ve been nice if they offered some value in terms of the kind of information that traders actually need. Say the psychology of trade, for example.
Unfortunately, most don’t or only rudimentary which makes it hard to make a case for them. Don’t get it wrong. I’m not bashing spreadsheets or anything. They might be the perfect choice for some people and that’s fine. But when you need more complex filtering, reporting and are looking for a nice user experience that you can access from anywhere on any device then a trading journal would be the better choice.
Do you want to know what a trading journal is, and why you should use one ? If you are serious about your trading, then you should treat it as a real business. This means you should track all your dat...
Read MoreAs a trader, you probably noticed understand that markets change from time to time. For example, during the summer we often see that the markets are quieter and during the fall we usually get some mor...
Read More