What data to record in a trading journal?

Collecting and analysing trading data

Before trading a strategy on a live account, experienced traders will thoroughly test a strategy on a demo account and determine whether it is profitable over a sustained period. When they start trading that strategy with real money, they will continue to record their results and constantly monitor them.

This collection of data is a trading journal.

The easiest way to record the data of your trading activity is using a spreadsheet. This allows you to very quickly analysis a lot of data to get useful information.

The image below demonstrates what such a spreadsheet may look like:

What trading data should you record?

You are essentially looking to record as much information as possible for every trade that you take. The data you are looking for is everything that will help the performance of the strategy and more importantly, the kind of performance that can be expected in the future.

Time and date of each trade

This is especially helpful information to find entry points when looking back over your charts. You can find the exact market conditions at the time when you entered your trades. There may also be certain times when the strategy either works well or breaks down completely – recording the time and date will highlight these periods.

The financial instruments being traded

Keeping track of the financial instruments you choose to trade with will help you determine profitability for each instrument over a sustained period of trading. Not all financial instruments behave in exactly the same way, some assets have different spreads or costs of trading and so not every asset will work under your strategy. It is essential to record what you are trading in order to cut the unprofitable asset classes from your trading strategy.

Entry, stop loss and exit prices

Recording these makes it much easier for you to check and verify each trade when looking back over your trading results and your charts. It will allow you to determine information such as risk to reward ratios and the initial risk that can safely be traded with the strategy, as well as analyse individual entries.

The results in pips, percentage gained and cash values

Recording your profit and loss will allow you to get a more accurate picture of whether the strategy is worth pursuing. As well as monitoring the profitability of the strategy, you will also be able to assess the strategy’s risk to reward results and whether trading the strategy, in reality, produces the same risk to reward as expected.

Turning the data into useful information

Once you have collected this data, the next step is using it to provide meaningful information. The amount of trades taken is a huge factor. For example, results based on 10 trades are nowhere near as valid as results based on 100 trades. The image to the right shows how this may look like in a spreadsheet. The following is the information that you are attempting to attain:

Overall profit or loss

This should be shown as cash value and ideally pip value as well.

Distribution of wins, losses and breakeven trades

This helps to determine the ratio of winning versus losing trades. It also helps traders decide exactly how much of the account can be risked on each trade and determining the overall risk to reward that can be taken using the strategy.

Average risk and average reward

The average risk to reward is vital so that expectations can be more aligned with the reality of the performance. This can have a positive impact on your psychology when trying to follow the strategy closely.