Have you ever noticed on car races the people staring at monitors that keep track of all kinds of pilot and car metrics? These are the guys that watch everything that matters to win a race. Trading should be treated the same way. If you just race a car without monitoring your performance, you won’t know what you need to do in order to improve. Now, you might say pnl is the only number that matters for a trader, but what if you could drastically improve it by understanding how your money is being made or lost. That’s why a trading journal is so important. It is a great way to track your ideas, your metrics and to discover areas that need improvement. It is not about writing how your day went. Below, you will find some of the reasons traders like trading journals.
1. To track the most profitable securities
Without knowing what securities are most profitable, you end up trading things that you are not good at, losing money and impacting negatively your pnl.
2. To track the most profitable strategies
Do you know what strategy works best for your trading style? Is it resistance breakouts, scalping, tape reading, technical analysis, ma crossover? As you know, markets change and so do your strategies. What works today, might not work tomorrow and you must be able to know when your strategies go sour. By tagging your trades by strategies, you can find out what strategies to focus in order to improve your pnl.
3. To discover your most profitable trading times
There are traders who make money in the mornings and give it all away in the afternoon. Without a journal, it might take a long time to recognize your most profitable periods affecting negatively your pnl.
4. To find out your winning rate and risk reward
Knowing your win rate is important because it will help you detect winning/losing streaks. There are people that have a win rate of 20% and make money because they have good risk reward. Others average 60% but lose money due to poor risk reward. A journal will calculate these rates and help you improve them when trading.
5. To track commission and fees
For scalpers, commission and fees make a big difference at the end of the day. Monitoring your costs is an essential part of any business.
6. To keep a trading diary of daily events
Writing is a great way to stick to a plan and to collect your trading thoughts. A great trading diary contains notes about your trades, learnings, emotions, goals for the day, week or month and overall trading strategy.
7. To track your trading history
A great way to improve is to set performance benchmarks that can be derived from previous trading history. A trading journal should be able to give your pnl by day, month and year that you can use to set goals for future trading sessions.
8. To track your risk and reward
It is tough to pull the trigger on a trade if you don’t know how much you are willing to risk and what your profit goals are. A great trading journal will tell what your ratio is, so you can trade knowing beforehand your entry/exit points.
Accounting is an essential element of any company and your trading journal should be treated as such, if you take your trading profession seriously. Don’t settle for an excel trading journal spreadsheet that limits your potential and it is hard to maintain. Use a trading journal software like Trademetria that will give you an edge and all the information mentioned in this post.
Open a Trademetria account today and discover how you can improve your trading performance today.