A day trading journal is the only part of your trading arsenal required to succeed at active trading. Your journal contains each trading transaction and a brief summary of the trade. Much like a traditional journal, a day trading journal takes you into a deep intrapersonal conversation that leads to the road of consistent profits.
How to Create a Day Trading Journal
The simplest method for creating a day trading journal is to setup an Microsoft Excel spreadsheet. Within the spreadsheet should be the following columns:
Type of Trade: Long or Short
# of Shares
Net Profit: Profit - Commissions
Run-up/Drawdown: Displays max paper gain/loss
Did I follow all my rules?
What was done right in the trade?
What was done wrong in the trade?
What to Learn from the Day Trading Journal
When looking at your trading journal you can approach it from two angles. The first angle being the monetary side and the second day trading methodology.
The numerical breakdown of your trading activities is more than just numbers. You will be able to quickly see if your trades are profitable, whether you make more money shorting or going long, and if using more money affects the way you trade. One of the columns of most use is the run-up/drawdown as it shows you if you are giving back gains or are taking to large of a drawdown in anyone trade.
Day Trading Methodology
More importantly than the numbers, how well did you measure up to your trading methodology? Did you follow all of your rules that give you your edge? This is the real meat behind the day trading journal. The trading journal is only as good as its input. So, if you lie to yourself in your journal, your trades will not improve. However, if you are truly honest about your shortcomings, you will begin to see a pattern in your trading. Your flaws will be exposed and you will be able to consistently tame the beast of fear and greed which we all face on a daily basis.