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What is trading journal?
Source: | Author:finance-102 | Date2023-01-17 | 232 Views | Share:
A trading journal is a document where you record details of your trades. It can be in soft-copy format and includes several sections such as the asset being traded, the time of execution, reason for execution, time of closure and profit/loss, and reason for closure. Having a trading journal can help enforce your trading approach and strategy by helping you keep track of your trades, improve your trading discipline and avoid making decisions in haste.

A trading journal is a document where you record details of your trades. It can be in soft-copy format and includes several sections such as the asset being traded, the time of execution, reason for execution, time of closure and profit/loss, and reason for closure. Having a trading journal can help enforce your trading approach and strategy by helping you keep track of your trades, improve your trading discipline and avoid making decisions in haste.

 

A popular layout for a trading journal among traders typically includes the following sections:

 

The asset being traded: The section of the trading journal that pertains to the asset being traded can be used to record the specific currency pair, stock, or ETF that the trader is trading. This information can be useful in tracking one's performance in specific markets or instruments. Additionally, it can be used to identify patterns or areas where the trader may have more experience or success.

 

Time of execution: The time of execution is a section of the trading journal where the trader records the exact time at which the trade was executed. This information can be useful in identifying patterns in one's trading behavior. For example, if a trader consistently executes trades at a certain time of day or in response to certain market conditions, this information can be used to make more informed decisions in the future. Additionally, it can also help in determining the impact of the market volatility on the trade.

 

Reason for execution: The reason for execution is a section of the trading journal where the trader records the underlying reason for why the trade was executed. This could include factors such as new data releases, political events, or technical indicators. Recording this information can help the trader understand the thought process behind each trade and identify patterns in their decision-making. For example, if a trader consistently executes trades based on new data releases, they can use this information to adjust their strategy and focus on obtaining timely information in the future. Additionally, it can also help in understanding whether the trade was based on fundamentals or technical analysis, which can be helpful in building a robust trading strategy.

 

Time of closure and profit/loss: The time of closure and profit/loss section of the trading journal is used to record the exact time at which the trade was closed, as well as the profit or loss that was generated from the trade. This information can be used to track the performance of the trader's trades over time and identify patterns in their trading behavior. For example, if a trader consistently closes trades at a certain time of day or in response to certain market conditions, this information can be used to make more informed decisions in the future. Additionally, it can also help in determining the impact of the market volatility on the trade and strategy. It is also important to note that, in this section, it is recommended to record not only the profit or loss in currency but also in percentage, this will help to compare different trades and understand the performance of the trading strategy over time.


Reason for closure: The reason for closure is a section of the trading journal where the trader records the underlying reason for why the trade was closed. This could include factors such as reaching a certain profit or loss target, breaking through a key technical level, or because of changes in market conditions. Recording this information can help the trader understand the thought process behind each trade and identify patterns in their decision-making. For example, if a trader consistently closes trades because of reaching a certain profit target, they can use this information to adjust their strategy and focus on setting more ambitious profit targets in the future. Additionally, it can also help in understanding whether the trade was closed based on predetermined rules or on market conditions which can be helpful in building a robust trading strategy. It is also important to note that this section can be beneficial in identifying mistakes or errors in the trade and learn from them, thus, improving the trader's skills over time.


These sections help to capture important information about each trade and can be useful in improving your trading approach and strategy.


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