The world of trading and investing is complex and diverse. The number of stocks listed on U.S. stock exchanges alone exceeds 8,000 listed companies, plus tens of thousands of other stocks, forex pairs, options contracts, futures contracts and other assets globally. Millions of buy and sell transactions are executed daily.
One of the most underrated tools in the trading world are trading journals, where traders can upload their trading activity to automatically analyze the trades and identify a trader's strengths and weaknesses categorized by trading strategy, time, type of trade, asset and more.
What Is a Trading Journal?
A trading journal is a powerful tool, mainly used by active traders to track their trading activity and performance over time. The best trading journals help analyze what strategies and trades are working the best in current market environments. They also identify weaknesses and trading strategy parameters with improvement potential.
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Maintaining a trading journal, especially over many months or years, can provide valuable insights into a trader's strengths and areas where the trader could do better. The analysis enables them to find their most profitable edge and refine their strategy if appropriate.
Main Benefits of Trading Journals
- The trading journal helps traders identify what strategies are most profitable. By tracking performance over numerous trades, traders see what entry and exit methods work best.
- A journal allows traders to recognize weaknesses in their trading. Analyzing past trades reveals if a trader repetitively makes the same mistakes over and over again so that they can work on getting better.
- Maintaining a journal provides an objective record of what influenced past trades for better reflection. It creates a "rearview mirror" to assess factors like one's mindset at the time of trading or market conditions.
- Tracking performance metrics over time through a journal keeps traders accountable and motivated. It shows progress achieved or remaining weaknesses to address, keeping traders focused on improving.
- Analyzing a journal's records of trades and factors can also provide data to analyze more deeply by using backtesting software to see if a bulk of trades would have worked better by using specific filters and trading strategy adjustments.
Things to Include in a Trading Journal
A trading journal is only as good as its data. The more data is recorded, the more beneficial for detailed analysis, the higher the improvement potential.
- Date of the trade - Having the exact date allows an easy chronological review of trades and factors over time.
- Name of the stock/asset traded - Tracking trade results by symbols (stock symbols, options contracts, etc.) shows the profitability of specific investments but also asset classes.
- Long or Short - Some traders are better at taking long positions only, while others are better at short selling. Keeping things separated helps to identify if a trader is better at going long or going short with the opening transaction.
- Entry price - Recording the price where the trade was opened is crucial for calculating profits/losses.
- Exit price - Similarly to the entry price, the exit/close price is needed to determine financial outcomes.
- Stop loss price - If an initial stop loss or trailing stop loss was used, then it should be documented.
- Profit/loss amount - The ultimate metric of a trade's success or lesson to learn.
- Factors influencing entry/exit - What triggered the exit? Did the trail stop loss get hit? Was the profit target reached? Where is there news, or what else caused the trade exit?
- Analysis/reflection - The key to improvement is reviewing what went well and areas to address and writing findings down in the journal.
Regularly logging these details in a journal supports consistent learning and evolution of a trader's skills and knowledge.
What to Do With the Data
After tracking trading activity with a meaningful sample of data, it's time to analyze it. Here are some ideas on what to track:
- Compare the overall profit of long trades vs. short trades.
- Analyze the average winning and average losing trade.
- Compare the assets traded regarding their profitability.
- Analyze what market hours are the most profitable ones.
The findings can be used to optimize the trading strategy or to use the new awareness to improve trading profitability. For example, it's not seldom that a trader is profitable during the first 30 minutes of trading or only during pre-market hours but then least effective later on. It's the trader's responsibility to use the data to their advantage.
Top Choices of Trading Journals
TraderSync: The trading journal impresses with 50+ supported online brokers and apps for importing and journaling trades. The supported assets include stocks, options, forex, futures, CFDs and crypto. Autosync is available for the leading U.S. brokerages Interactive Brokers, Robinhood, TD Ameritrade, and TastyWorks, but also for various crypto exchanges like Binance, multiple day trading brokers like CenterPoint Securities, and 30+ forex brokers. TraderSync offers three pricing plans: Pro for $29.95, Premium for $49.95 and Elite for $79.95 per month.
TradesViz: TradesViz is compatible with 50+ brokers, including leading U.S. brokers like Interactive Brokers, Robinhood, TastyWorks, TD Ameritrade and TradeStation. TradesViz supports stocks, futures, options, forex, CFDs and cryptocurrencies, with market data from Australia, USA and India. In addition, it's possible to sync with multiple global brokers. TradesViz costs $19.99 in the Pro and $29.99 per month in the Platinum Plan.
TradeZella: TradeZella currently integrates with 25+ brokers and supports stocks, options, forex, futures, CFDs and crypto. Automatic synchronization is limited to MetaTrader, Interactive Brokers, Robinhood, Thinkorswim, and TradeStation. The cost for a subscription is $49 per month.
Wrap Up
Trading journals deserve more attention from traders because the tracked data is a good guide and mentor in the process of becoming more profitable. Trading journals take out the guesswork and clearly identify what works and what does not. It is of low importance whether to use a free or paid tool. It's more important to start using the often underrated tool since it is worth it to invest the time needed.
This content is for informational purposes only and should not be construed as financial advice. The views, thoughts and opinions expressed in this contributor content belong solely to the writer.
Lee Enterprises newsroom and editorial were not involved in the creation of this content.
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