Whether you’re planning to set up an investment portfolio, company or even a trading portfolio in 2024, it’s always crucial to keep your financial records in order to monitor your results. That’s why you need a trading journal!
With these results you’ll be able to track to see if the business is generating a decent income, growing at a sustainable rate or if it’s on its way out.
In this article, I’ll highlight the important items you’ll need to have in your trading journal into the new year.
Let’s start with…
What a trading journal is…
This is a log book either written in a book or plotted on a spreadsheet, which details: every trade you make, the metrics to show how your portfolio is doing and your trading levels with reasons why you entered and exited a trade.
You’ll need to know what to have in your journal, whether you create it on excel or in another sheet format.
With every trading journal you’ll need to record the following items…
1. The date you entered your trade.
2. The market you traded (Currency, stock or index).
3. The type of trade (Buy (long) or Short (sell).
4. The reason why you entered your trade.
5. The gearing level of each market you trade.
6. Your margin per spread trade.
7. Your entry level.
8. Your stop loss level.
9. Your take profit level.
10. The amount of money you deposited in your trade.
11. The gain potential if your trade hit your take profit.
12. The loss potential if your trade hit your stop loss.
13. The risk to reward for each trade.
14. The current portfolio value.
15. The date you exited the trade.
16. The reason why you exited your trade.
17. The amount of money you would have made or lost in the trade.
When you record these details, you’ll be able to identify whether the system you have is a profitable and a sustainable one.
The question you need to ask is…
How much data is enough?
The market moves in different environments. Sometimes you’ll see different markets moving through strong up or down trends and other months you’ll see markets moving in consolidated sideways trends.
In 2024, the JSE has started off on a negative note at -5.25%. But if you zoom out, you’ll see it’s been in a sideways range since 2022. So, it’s important to understand it’s probably best to risk less than what you normally would. This is why you’ll need to have jotted down as many trades as you can to see if you have a profitable system or not.
My general rule when it comes to testing the markets involves three sets of 20 trades.
Set #1: Make sure you back test 20 trades you would have taken in the past.
Set #2: Make sure you forward test 20 trades which would test in the future.
Set #3: Make sure you real-test 20 trades to see how your portfolio would have performed with trading using actual funds.
This is a good start to track your trading performance.
However, there is one more important set of results you’ll need when you set up your trading journal.
Consistency and persistence
You will need to plot every trade you take. Build it and slowly your portfolio will build with it.
PS: Build your trading portfolio for FREE for the next 90 days with me
If you want to test it out, make sure you sign up to Red Hot Storm Trader. This is the go to trader service where I send out trades each week. Plot the trades in your journal and watch how your money would have grown into a sizeable portfolio. Do this for 90 days. It’s risk-free to join for 90 days and you can see for yourself the power of trading.