Perhaps the most important activity a trader can perform; Journaling.
But, what is it?
The act of a trader collecting detailed data on all positions. Something that if not done routinely, can mean the difference between a 2-year journey to consistency, and a 10-year journey (as a mere example).
Why is journaling so important?
2 reasons; (a) performance improvement, (b) backtesting purposes.
Let’s break it down…
First of all, the simple routine of recording data on all of your positions will create a disciplined work ethic… without which, you won’t go far.
By journaling your trades, you’re easily able to find areas of improvement in your day to day trading performance (i.e. overall analysis, entry/stop placement, targets, management, emotional state etc). Without having that current data feed, it’s impossible to do proper and continual self-review… This is a concept my MasterClass students take very seriously.
Now, when it comes to journaling for the purposes of backtesting, this involves data collection on a larger scale. This way, a trader can attain a more complete perspective, with a bigger pool of information (vs. daily or weekly journaling based on individual positions only). If you’re struggling with a specific strategy, this is when you would use journaling for the sole purpose of backtesting that strategy. In this case, you’re analyzing more than just your own trades and therefore able to apply strategy refinement and fine-tuning afterward.
2-step journaling process:
- Collect detailed data in a spreadsheet.Keep it simple with basic info such as: symbol, long/short, strategy, open/close date, open/close price, stop, limit, P/L (PIP), P/L ($), P/L (%), account value, notes. Or make it even more complex with additional data and charts if desired (check out- MyFXBook, Fund Seeder, Edge Wonk).
- Take screenshots.Collect screenshots of each position, lower & higher timeframe(s). Use a program such as Bear or Evernote and break it down by date (for ease of reference later).
Remember, to be successful in trading, it comes down to discipline and dedication. A trader who journals every day/week, but also puts in the time to backtest, will have a much stronger edge in the market over the long-term.