Using a Trading Journal is one of the keys to be successful as a day trader, even the most experienced traders have a Trading Journal and they track every single trade they take. It does not matter whether you are profitable or not, having a Trading Journal will help you to recognize patterns that repeat in your winner trades, patterns that repeat in your loser trades, your weakness, your strengths and it will help you to improve your strategy. What you can't track, you can't improve.
A Trading Journal must include:
1- Time and Date: It will help you to track what time of the day and what day of the week your performance is better or worse. Also, it will help you to go back to the chart at the exact date and time when you take each trade and allow you to reevaluate your entry and realize what you could improve.
2- Screenshot of Setup: are you actually trading a good setup? Are this pattern and trading zone previously established in your trading plan? Answering these questions will help you to focus on the best setups and to only trade in those areas you are interested in.
3- Risk % and Risk $ amount: In your trading plan you must establish exactly the % of your total investment capital you will risk per trade (max. 2% per trade is recommended) and the dollar amount you will risk per trade (it will also depend on your total investment capital and what you feel comfortable losing if things go wrong). For example, if a trader has a $10,000 account and decides to set his maximum account risk at 2%, he cannot risk more than $200 per trade (2% x $10,000). Even if the trader loses 5 consecutive trades in a row, the trader has only lost 10% of his investment capital.
4- Position Size: Using the previous example, if the same trader wants to buy Facebook at $200 per share and places a stop-loss order at $180, the trader is risking $20 per share. So, if the max loss per trade is $200 (2% of his total investment capital), that means that 10 shares can be bought ( 200/20=10).
5- Setup name / Reason for entry: What setup are you trading? Is there any particular reason why you are trading? write down this will help you to reconsider whether you are trading according to your strategy or if you are just gambling.
6- Entry Price / Stop loss price: Entry price will depend on the pattern you are trading or a specific support/resistance zone. There are plenty of theories on stop loss placement. Stop orders or limit orders have different uses depending on the type of trading strategy being implemented.
7- Take profits Price(s): Take profit orders are often placed at levels that are defined by the chart pattern and support/resistance levels in play.
8- Risk/Reward ratio: I will always recommend a risk/reward of a minimum 1:2. In my personal opinion, the ideal risk/reward ratio is approximately 1:3, it gives you a breakeven win rate of 25%. For more info about risk/reward ratio, I recommend you to read "Importance of knowing your profit/loss ratio"
9- Emotions when taking the trade: Anything that causes you to overreact or underreact can control you, and often does. When trading you must have your mind like water, emotions like greed or fear will make you make mistakes and take the wrong decision. Write down how you feel when taking a trade and how you feel after a lose/win trade is closed. You need to recognize the reason for those emotions and avoid them to affect your trading plan. I would recommend 10 minutes of meditation before trading sessions.
10- Trade Management Notes: Did you take profits too soon? Did you move your stop loss? Did you add to a loser trade? Should you add to your winner trade (if a new setup was formed) or let your winner run even more?
11- Results (equity % & $): This will help you to calculate your profit/loss ratio and to measure how your strategy/ system is performing.
12- Feedback / Notes to self: This is a personal review of how the trade work out, things you have done right, things you could improve, and things you need to avoid/change in your next trades.
If we look at any other highly competitive field apart from trading, it is very clear that keeping a track record of important performance data is the number one tool on the road to success. Athletes improve by obsessively watching recordings of their past performance and analyzing their flaws together with their trainers. Race drivers know exactly how fast they can drive on a track in a certain car under certain circumstances because there is a whole team of engineers analyzing a ton of data from previous races. Conclusion: a trading journal will separate you from the amateurs. If you are interested in get the Google Spreadsheet I use as my Trading Journal you can find it in the FREE RESOURCES section.
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