What Is a Trading Journal: What Data Should You Analyze?
I find it important to break down your trading journal by picking apart this key data:
- Screenshot comparisons
- Your PnL and RR profitability
- Mistakes you are making
- Where you stray from your trading plan
- Your emotions throughout the trade process
- Post-trade information
- Missed trade opportunities and why
Let’s discuss each in greater detail and see what you can gain from each.
Screenshot Analysis
Incorrect analysis
You might see times when your first guess about a price range was wrong, which caused you to make bad trading decisions.
For example, you realize that a support or resistance level you identified was actually slightly lower or higher than you first thought…
Being aware of this could help improve your analytical skills and be more careful when looking for key trading zones.
Best Setups
Comparing winning and losing trades through screenshot analysis can reveal patterns or differences in your trade setups.
Carefully examine the formations of candles and price action leading up to your entry point for both winning and losing trades…
You should be looking for any similarities or distinct features in the setups of your winning trades that were absent in your losing trades.
This kind of analysis helps you learn how to successfully enter trades.
As always, it is important to make sure that this analysis has a large enough sample size to be reliable.
Avoid making hasty adjustments to your trading strategy based on single instances of success or failure!
Analyzing your PnL and Size of Losers vs. Winners
Analyzing your Profit and Loss (PnL) may seem simple, but there’s more to it than just calculating your win rate.
I need you to understand that Win Rate, in many cases, doesn’t mean all that much….
“Hang on Rayner… how can it not matter if you are not winning?!”
Well, win Rate by itself does not always mean Profitability.
You need to consider whether you make more on your winning trades than you lose on your losing trades.
Let me show you…
Trading Results Table:
OK, so here is a small sample size of 7 trades.
Even with a low win rate of 28%, a focus on risk management and maximizing profits on winning trades can still yield positive results…
In this example, with a $10,000 trading account and a 2% risk per trade, you would be up $560!
While this scenario may not be sustainable with such a small sample size, it highlights the importance of prioritizing the quality of trades over their quantity.
Analyzing your PnL data allows you to identify patterns, such as losing streaks or the need to minimize losses, which are key to refining and enhancing your trading system.
Identifying and Eliminating Trading Mistakes
Early in my trading journey, I realized the importance of reducing the number of mistakes I make.
Each mistake chips away at profitability, whether it’s a minor error or a major setback.
However, making mistakes is part of the learning process, and it’s okay to admit them.
What I learned from experience is the value of focusing on just one or two mistakes at a time…
Instead of trying to fix everything at once, I spend the next month fixing those one or two.
For example, if I see that I consistently trade too much or do not follow my risk management rules, that’s what I look at.
In this way, I can work on making the right trading habits a part of my daily life.
After that, I deal with the next set of problems.
This gradual approach allows me to make meaningful progress without feeling overwhelmed or spreading myself too thin.
Over time, this method has proven effective in helping me refine my trading process and become more consistently profitable!
Analyzing When You Didn’t Follow Your Trading Plan
Thinking about times when you did not stick to your trading plan can help you understand how you make decisions.
Attempt to figure out the real reasons for your actions…
Did your feelings get in the way of your rational thinking, causing you to stray from the plan?
Take a step back and honestly assess whether you are sabotaging your system!
By recognizing these moments and searching for the root cause, you can develop ways to prevent similar behavior in the future – becoming a better trader as a result.
Track Emotions throughout the Trade, not just Before and After
On longer timeframes, huge market movements can happen as trades play out – playing on your emotions as they do.
You may feel tempted to close trades early, either for a small profit or due to slight drawdowns.
These feelings can have a big effect on how you make decisions and lead to bad trading results.
That’s why it’s important to track your emotions not only before and after the trade but also during.
Consider making quick notes about your emotions and thoughts as the trade progresses, but don’t act on them straight away.
This approach allows you to see your feelings in the open, without letting them get in the way of your trading system.
It can help you stay disciplined and follow your trading plan, which will ultimately improve your trading overall.
Potentially Analyze what happened After you Exited
Analyzing your trades a few days after you’ve exited them is strongly recommended.
Why?
Firstly, once some time has passed, your emotions become detached from the trade.
It means you get a clear, realistic assessment of the trade’s actual performance.
Secondly, this analysis lets you see if any areas of your trading strategy could be better.
For instance, if you review ten trades and find that in eight of them, the price continued in the direction of your trade after you exited…
…it pretty strongly suggests that your exit strategy may have room for improvement!
Armed with this approach, you might adjust your profit-taking, perhaps even letting your winners run further before exiting.
Missed Trading Opportunities
Listing these opportunities in your trading journal is another valuable practice.
Once you identify a missed entry trigger, think about what was going on at the time.
Were you unavailable due to personal commitments?
Or did you simply miss the opportunity? (it happens)
Learning about the reasons you missed trades can help you improve your process and make better use of your time.
It can help you find out whether your strategy is true across different pairs and timeframes.
Thinking about why you missed these trades can also help you figure out deeper problems like fear, doubt, or laziness.
You can come up with ways to deal with these issues and be more disciplined in following your trading plan.
In the end, it’s the motivation that serves you, reminding you how important it is to stay alert and disciplined when trading.
