“By compiling detailed daily diaries of his market observations for over a decade, Cook was able to develop a slew of original, high-reliability trading strategies” – Jack Schwager, discussing insights from Mark Cook
I often ask traders looking for an answer to their poor performance what percentage of professional traders record the results of their trades.
The answer is of course invariably “100%”.
I then ask the traders if they record their own trades, and get a “no” followed by an “aha” moment.
It’s often the unexciting hard work that generates the best improvements in results. Things like writing a trading manifesto, setting goals, or in this case keeping a journal of your trades, provide you with a foundation from which you can grow as a trader.
Stop doing what is not working and do more of what is
One of the simplest and best ways to become successful at trading is to focus more on what works, and less on what doesn’t. Without a Forex trading journal, it’s incredibly difficult to do this.
The human mind and memory are imperfect, so if you fail to capture data on the trade you just placed, then you may to struggle to remember what you did well, or to spot trends in your performance that you can exploit.
Maybe you trade poorly on Fridays because you’re tired at the end of the week, or perhaps some of your setups and patterns work much better than others. Maybe your strategy works extra well in volatile market types. By recording your trades, you have a window into this information that would otherwise be closed.
How to start a trading journal
You could go old school and start a trading journal by hand, or you could use a spreadsheet.
But in this day and age, there are some very good journal solutions designed for traders that allow for detailed reporting and can save much of the hassle.
My favourite of these is Tradervue as it automatically imports trades from a number of platforms including MT4. It allows you to input R-multiples and, for those of you that follow Van Tharp, it will calculate the System Quality Number (SQN) of your strategy. It also comes with full journal functions for recording your insights about the trade, as well as charts.
What to record
When I record my trades I like to input the following data:
- Strategy Name:
- Trade:
- Market Type:
- Market Type 1 timeframe higher:
- Set-ups in play:
- Entry Type:
- Stop-loss Type:
- Dollar Risk (R Multiple):
- Target:
- Fundamental or technical Catalyst:
- Link to trading view chart:
- Reason for the trade:
- Trade management plan:
You can write this information down in your journal, or if you are using Tradervue then you can make judicious use of “tags”. Using tags allows you to then sort and report on a subset of your data. For example, you might want to see your performance across all trades in a bull normal market type.
Time to be disciplined
Keeping a trading journal requires discipline and hard work.
Make a commitment to yourself that you will no longer trade without recording your results. This will allow you to build a store of knowledge about what works for you and what doesn’t, and it will provide you with the stepping-stones to trading success.
This is the third article in our “significant importance” series about quadrant 2 activities to conduct for your trading. You may also like to review the first two in the series if you have not done so already:
The Significant Importance of Having a Trading Manifesto
The Significant Importance of Setting Goals for Your Trading
Cheers,
Sam
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders. He is a part owner of Forex Signal Provider fxrenew.com (You can get a free trial). If you like Sam’s writing you can subscribe to his newsletter for free.
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