Summary

Trading journals are so useful that they play a central role in the trading plan of most professional traders. Things like planning futures trades, recording existing positions, and recording any emotions that may arise are all important factors to pay attention to when building a profitable trading strategy.

Therefore, knowing how to create and use a trading journal is crucial to the success of any trader. Without it, traders may not be able to track their profit and loss positions. Or worse, their account could be ruined.

What is a transaction journal?

The content of a trading journal consists of a document that records everything you perform as a trader, including strategy development, risk management, psychology, and more. Keeping a transaction journal is very simple, but if created and used correctly it can come in handy. It can lead to valuable insights, prevent your account from getting bloodbathed, and it can also be the reason your account skyrockets.

Keeping a trading journal is important for several reasons, including:

• It holds you accountable for your trading.
• It makes you more disciplined and persistent.
• It helps you discover profitable trading strategies.
• It records your strengths and weaknesses.
• It allows you to be more cautious when analyzing potential transactions.

Successful traders carefully plan all of their trades and record successes and failures in their trading performance. By creating a trading journal and utilizing it correctly, you can become a successful trader no matter how the market moves.

How to create a trading journal

You can find a free trading journal template in the next section, but learn How you create the template is also important. You can customize your trading journal in a variety of formats to suit your trading style and needs. As long as you have a place to plan and record your trading activity, you're all set.

First, you need to create a transaction journal spreadsheet (e.g. Google Spreadsheet, Microsoft Excel) and a written document (e.g. Google Docs, Microsoft Word). You'll use them to record your exact transactions and your thoughts respectively. If you prefer, you can also include the written document as a second tab in the spreadsheet (see template below).

Next, you need to know what to record every day so that your trading journal can have a significant impact on your success. You can find some examples of trading journals online. But no matter which template you use, your spreadsheet should contain columns relevant to each transaction. These columns may include:

• Entry date
• Exit date
• Contract code
• Direction (long/short)
• Entry price
• Position size
• Notional value
• Stop loss
• Take profit
• Exit price
• Transaction fee
• Profit and loss (P&L)
• Profit and loss percentage (P&L %)
• Remarks

Some traders may also add time frames, screenshots of settings, and other things they deem important. The most basic requirement is that the information be useful to traders.

In your written document (or another tab), you should set aside a section for each day to write down all your feelings and thoughts so you can organize them easily.

Written documents allow traders to express their creativity, while spreadsheets allow them to measure the profitability of their creativity. Both are very useful when creating and using a trading journal.

It’s that simple! Learning how to create a trading journal is only the easy part, though. It will also take a while before you understand how to use a trading journal. However, as long as you have a solid understanding of the basics, you'll be using your trading journal like a pro in no time.

Transaction Diary Template

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Note that in this example we have added a second tab that acts similarly to the written document mentioned above. You can add a variety of thoughts and comments here to track your decision-making process and the results of previous trades.

How to use a trading journal

Creating a trading journal is one thing, but understanding how to learn from it Applying the acquired knowledge to a trading system is another matter entirely. Effective use of a trading journal can turn an unprofitable trader into a highly profitable trader.

Before entering any trade, you need to have a good reason for making the trade. This is where written documentation comes in handy.

When you pay attention to the market every day, many thoughts will pop into your mind, and feelings will continue to flow through your body. You need to record these thoughts and feelings so that you can detect anything that may be helping or hindering your trading performance. This may include general market behavior, past transactions, current transactions, and potential transactions.

Your written documentation can also help you clarify the merits of a particular trade idea. You should look at all aspects of your trading ideas so you can discover the strengths and weaknesses of each idea.

Once you've written down your thoughts and emotions, it's time to use a spreadsheet.

Your spreadsheets are not for creative expression but for more logical recording than written documents. This is where you will record all of your transactions, so it's important to keep it organized and updated.

An important factor in keeping a successful trading journal is accurately measuring your successes and failures. You should make sure to keep accurate records in your spreadsheet so you can measure whether the ideas you present in the written document are profitable.

A good practice is to record your trades immediately after you execute them. At this point you will have a clear impression of the transaction, which will save you time spent on this aspect in the future.

Another good habit to develop is to review your trading journal spreadsheet every day. This way, you can take a comprehensive look at your trading portfolio, giving you insights into your level of risk exposure and whether you might be able to make more trades.

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Summary

It doesn’t matter if you are a swing trader or a day trader. Becoming a successful trader is very challenging. If you don't plan and record your trading performance carefully, you'll be flying around the market like a headless fly. This situation rarely ends well.

By learning how to create and use a trading journal, you will be able to identify patterns and market trends more effectively. Writing detailed notes to capture your thoughts, emotions, and transactions is a simple investment that can pay huge dividends.