Many day traders keep a trading log detailing all of the trades that they have taken. While this is not a requirement of being a successful day trader, it is a good idea for beginning day traders, and for experienced day traders when they are trading a new trading system. As a trading log is a detailed record of each trade, it can be used to review individual trades, and also analyze the trading system's performance over time.
A good trading log should include all of the following information :
- Trading system
- Market (such as the NQ futures market)
- Date and time of the entry
- Entry price
- Stop loss
- Exit price (the actual exit price)
- Maximum excursion (the potential profit)
- Maximum adverse excursion (the heat that had to be endured)
A very good trading log should also include any additional information that might be relevant to the trading system. For example, a trading system that was based upon a stochastic crossover might include the following additional information :
- Where the crossover occurred (above 80, above 90, etc.)
- Difference between the stochastics after the crossover (a difference of 1 might be a weaker crossover than a difference of 5)
- Time since the last crossover (a shorter time might indicate a choppy market)
Trading logs can be stored in many different formats, each with their own advantages and disadvantages. A trading log that is as simple as a paper notebook would be easy to use, but could only be analyzed manually, which could be very time consuming for large numbers of trades. A trading log that was stored in a SQL database, would be more complicated to setup and use, but could be analyzed many different ways, and very quickly, regardless of the number of trades. Most day traders will store their trading logs somewhere in the middle, such as in a spreadsheet, which would offer some analyzing flexibility, while still being relatively easy to use.