How To Keep An Effective Trading Journal For Binary Trades

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What to Include in Your Journal Trading Spreadsheet

Did you know that there is a simple and effective method that can help you spot any weaknesses of your trading strategy, fine-tune your entry and exit points and improve your trading performance?

Yes, we’re talking about keeping a trading journal.

Almost all successful traders have one and make regular retrospectives of their journal entries to spot and eliminate any recurring patterns that lead to losing trades.

In the following lines, we’ll cover what trading journals are, why you should keep one and what fields you need to include.

We’ve also prepared a trading journal spreadsheet for you to download, for free!

What is a Trading Journal?

A trading journal is a record arranged by date that includes all trades that you take in the market. Trading journals consist of journal entries, each of which represents a separate trade taken by a trader.

It provides an overview of all your trades and the markets that you’re trading, including their entry and exit prices, trade direction, position sizes, trade results, as well as any other information that a trader may find useful to include.

Besides your trading strategy and risk and trade management, a trading journal should also be a part of a well-designed trading plan.

Why Should You Keep a Trading Journal?

Trading journals provide valuable insight into a trader’s trading performance. By keeping a detailed journal, traders are able analyse their trade results and identify reasons why certain trades worked well, while others didn’t.

Is there a specific chart pattern that has an unusually high losing rate?

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Or is there a currency pair that hits your stop-loss levels only to reverse shortly after?

Trading journals can help you spot those trading mistakes and support you in fine-tuning your trading strategy. In addition, by making regular journal retrospectives, you’ll be able to identify any behavioural patterns in your trading that led to a losing trade.

Most successful traders regularly keep a trading journal, and many of them will tell that their trading journal has been an important tool in improving their trading performance.

Read:

What to Include in a Trading Journal?

Trading journals should include all necessary elements that describe a trade, such as the date and time of the trade, the traded instrument, the direction of the trade, entry and exit prices, position sizes and the result of the trade once it’s closed.

Besides these main elements, a well-designed trading journal should include additional information as well.

Those additional entries will help you keep track of your trading improvements and make it easier to analyse your performance.

We’ve listed the main and additional elements below.

The Main Elements of Trading Journals

  1. Date and Time – Each journal entry should include the date and time when a trade has been taken. If you’re using a trading journal spreadsheet made in Excel (you can download our free trading journal template spreadsheet here), you can use the date and time column to filter and arrange your entries and find the one you need
  2. Traded instrument – This element describes the financial instrument that has been traded. Besides the traded instrument, you can also include the market (e.g. Forex – EUR/USD, Commodities – Gold, Stock Indices – S&P 500…) to make it easier to filter the market you need
  3. Trade direction – The trade direction entry can be either buy (long) or sell (short). Our trading journal template will add this field automatically after you enter your entry and exit prices
  4. Entry and exit prices – These are three separate fields, reserved for the entry price, stop-loss level and take-profit level
  5. Position size – In order to determine whether your position sizes meet the requirements of your risk management rules, you need to enter the position size for each trade you take. This field will help you later during journal retrospectives to analyse whether you take too much risk on your losing trades
  6. The result of the trade – The final mandatory field of a trading journal is the result of the trade. Simply add the profit or loss in USD terms (or another currency in which your trading account is denominated)

Additional Elements of Trading Journals

Besides the major fields described above, a well-designed trading journal should include additional elements as well. We’ve listed some additional elements below, but you can add any other field that you consider important in evaluating your trading performance.

  1. Market commentary – You can dedicate a separate column to market commentaries. Here you can provide some fundamental background of the traded instrument. For example, is a central bank expected to hike rates at the following meeting, or did inflation rates and economic growth disappoint?
  2. Reasons for taking a trade – In this field, you can describe the reasons why you’ve taken a trade, including fundamentals and technicals. For instance, if you’ve taken a trade because it reached a confluence support of a channel and trendline, and candlestick patterns show that the technical level holds, you can write this information in a bullet-point format into the field.
  3. Charts – Pictures tell a thousand words. Adding a price-chart to your trading journal for each trade will make your life easier once you start to analyse your journal entries in order to improve your trading strategy.

Read:

How to Make a Trading Journal in Excel?

Making a trading journal in Excel is quite simple. All you have to do is to include all the fields mentioned above as well as any other fields that you may find useful in your journal. For example, you can create a sheet with the following columns:

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Wednesday, May 16, 2007

How to Keep a Trading Journal: Trader Perspectives

When it comes to climbing the learning curve of trading, few tools have proven as helpful to traders as journals. Properly constructed, a journal can be a device for goal setting and identifying strengths and weaknesses. Here are some worthwhile perspectives on keeping journals from trader/bloggers:

  • Joey Fundora, from the Downtown Trader site, offers an excellent account of how journals can aid in the cultivation of a trading edge. He explains how he utilizes the journal feature within the StockTickr program to create a forward evaluation of his trading. He makes effective use of tags to categorize his trades, enabling him to quickly identify the types of trades and markets that are working best for him. Great article.
  • Trader Mike tracks his trades with a spreadsheet and offers the spreadsheet as a free download. He follows his P/L as a function of dollars risked and leaves a column for comments about each trade. This enables him to identify specific circumstances–in the market and in his trading–that were operative in the trade. Helpful tool.
  • Here’s a post from Charles Kirk, summarizing Doug Hirschhorn’s trading journal checklist. He includes 15 items, such as news and economic events for the day, the trader’s game plans, and self-evaluation. This is useful as an integration of trading and trading psychology.
  • In this article from my personal site, I provide a summary of trading journal features that have worked best for the traders I’ve known. I stress the use of the journal to learn from good trades as well as bad ones, and the role of the journal in preparing for the upcoming trading day. I also identify specific metrics worth tracking to improve your trading.
  • Here’s another take on journals from Downtown Trader. He makes effective use of the “R” statistic in his journal and outlines several ways of improving the bottom line.

In the end, trading journals are like exercise equipment: they only produce results if you work them regularly. The best journals, I find, don’t make the collection of information burdensome and focus on concrete goals for improvement. All of us are most likely to keep learning if we keep the learning fun.

How to keep a trading journal

Modern trading platforms allow a trader to generate a report for open and closed positions and canceled pending orders, calculate a statement, and draw a profit and loss curve in a couple of clicks. Such information is available for download in various formats so that the trader can present it in a convenient form for future reference. Why do you need to keep trading records?

Attention test – table of questions for positions

If a trader keeps a trading journal in the form of a flowchart or tests with questions, they get rid of one of the main problems – entry errors due to inattention.

A trading algorithm can not always be translated into a programming language, but the rules for entering a trade, exiting a trading position, setting orders to limit losses and take profit can always be described on paper.

When writing a report by hand or entering information in a spreadsheet, the person uses five types of memory.

Regularly filling in the columns of the journal and checking the presence of all the conditions for opening a position, even a beginner will soon learn to make trades completely on autopilot.

A simple example of filling in a table with trading system rules based on the intersection of two moving averages, with a confirmation filter in the form of the RSI oscillator:

The system configured to enter during a rollback, checks the position of the RSI after the moving averages intersect and waits for the moment to complete the trade when the indicator curve moves to the overbought zone. At point 1, the conditions are not met, thus in the last column the trade is canceled:

The trader keeps track of the situation to point 2, the previous completed columns remain unchanged (the moving averages intersect), the RSI enters the overbought zone – the last column changes, and the sell trade is completed.

As practice shows, just opening the chart of quotations increases the pulse and raises pressure, especially for beginners. In a situation where you want to take a weighted decision and correctly place an order, figuratively speaking, the cardiogram of your heart looks like the movement of quotes after the publication of news about the Fed meeting on rate hike. In such moments, you need to be distracted from the market. Journal pages and columns with verification of trade conditions will become a reliable assistant to a trader embraced by emotions.

Usually the trading system signal is predicted in one candlestick of the working timeframe, and if the trader does not work on minutes, there should be enough time for filling the journal.

Comments column – why is it important

The trading science advises not to make amendments to the strategy on the run. The trading algorithm must be observed clearly, until a predetermined loss level is reached, at which point it must be stopped and optimized. Any change in the strategy before it is put on the market should be tested, and the results subjected to careful analysis – and only after this you can make a decision about implementing the optimized parameters and settings in real trading.

However, this rule is constantly broken by experienced traders and beginners – the annoyance of the lost profit, regret about the stop signals that triggere when the price turned in the direction of the position forces traders to change something daily and hourly.

It it ain’t broke, don’t fix it. When you constant changes to your trading strategy leads to losses, return to the zero point. Your journal’s Comments colums will help in this. In it, the trader should note all deviations from the rules and describe in detail the reasons motivating them to change the trading system.

Filling out an additional column does not take much time, it’s better to start describing the changes right after the trade is completed, hot on the heels of the changes.

The trade result column with comments will impartially use the language of figures to justify or show the harm of your innovations.

How to sum up a trade

The trading strategy must be tested before being used on a real account. If a trader uses a set of indicators, then the test process is automated in a special application to the terminal. Testing of systems with complex rules that can not be described by Boolean logic has to be done manually.

Testing is carried out not only to determine the profitability of the strategy, although this is a priority task, but also to determine the benchmark parameters for the subsequent real trade:

  • percentage of profitable and unprofitable deals in a row, period of maximum drawdown and profit factor

Each trade, from the moment of its opening, participates in the calculation of the above parameters, which are constantly compared with the test ones for discrepancies for the worse. This is the reason to pause trading and optimize the parameters of your trading strategy.

Trading is a creative process of finding new ideas. In parallel to the trading process, traders study books, get acquainted with analytical materials, often get new ideas, but have no time for their realization. The journal can become a repository of trading ideas and interesting thoughts, which later, when summing up, can illuminate the trader to create new strategies.

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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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