How to build your trading journal

by Aug 30, 2019General, Stocks/ETFs0 comments

losing money

If having a trading plan is important to know what to do, a trading journal is crucial to know what you have done. In fact, only when you have a trading journal can you review your past decisions, identify what worked and what didn’t, and therefore improve.

What are the elements that you should include in your trading journal? Of course, this is somehow subjective, it depends how detailed you want to be. At the same time, ideally, your trading journal should include two sections. Let’s review them below more in detail.

 

Open Positions

In this section, you should record the positions that are currently open in your portfolio. This, of course, assumes that you have a portfolio: if you are doing scalping or very short-term trading, you may not need this section. The elements to include are the following.

  1. Enter date: the day the transaction was executed.
  2. Stock ticker: what is the symbol of the asset you bought? For example, if it is Amazon it would be AMZN. For the S&P500 ETF, it could be the SPY.
  3. Amount: how many shares (or contracts, or lots if you are not trading stocks/ETFs) is your position? For short selling, you may use a negative number.
  4. Entry price: the execution price of your order.
  5. Stop-loss: the stop-loss price (it may not apply to long-term investing).
  6. Target-price: the price at which you want to close your position for taking profit (it may not apply to all strategies).
  7. Commissions: how much did you pay to execute the order?
  8. Current price: the last price.

From these elements, you can derive a lot of statistics like the current profit/loss of your position and for the whole portfolio. This can be done automatically with software like Excel.

 

Closed Positions

Here, you can record the closed transactions. When a position is closed, you will erase it from the Open Positions section and add it here. The main elements to include are the same as the Open Positions with some modifications:

  1. Current price becomes closing price.
  2. Commissions should now represent the total commissions you paid to open and close your position.
  3. Exit date should be added.

By reviewing the Closed Positions section, you can identify potential mistakes/errors, and insights to improve your performance. Hence, a periodic review is important.

Let me know with a comment below if you use different information in your trading plan!