Welcome back, Traders!
As we are approaching the end of 2021, we thought it might be a good time to talk about the Trading Journal’s importance and the benefits of keeping track of your performance!
What is a Trading Journal?
A Trading Journal is a document (either paperback or digital spreadsheet) where you record all your trading activity over a specific period. It is a detailed summary of all your trades. It should include
● assets traded
● trade execution and order type
● entry and exit levels (both Take Profit and Stop Loss)
● length of the trade
● risk management
● the outcome of your trades
● strategies used
● analysis and brief reasoning for the entry
● risk to reward ratio
● sessions traded
● details of any economic news that may have impacted the result of the trade
Some traders may even go a step further and include a detailed explanation of the logic applied to the trade and a screenshot of the chart at the time of analysis and order executions.
Why use a Trading Journal?
Trading Journal enables you to analyse your past trades and confirm whether you have been following your strategy and trading plan or if you’re still letting your emotions take over and execute trades more impulsively.
Moreover, having a record of your thought process behind each trade allows you to understand better how well you execute your trading strategy when you are under pressure trading with your capital in a live environment. Trading Journal enables you to paint a clear picture of your performance, consistency and habits that, once analysed, should help you gain confidence in your strategy and executions or enable you to improve on the areas of your trading that need more work!
Remember, becoming a successful and profitable trader requires a lot of planning, analysing and practice - you have to ‘own’ your strategy, learn it inside out, so when there is a valid entry or exit signal, you can execute it confidently without hesitation. As such, a trading journal will enable you better to understand your strengths and weaknesses as a Trader.
It not only keeps you accountable for any errors or rushed decisions but also gives you insights into what you do best and where you should improve to become the best trader you can be.
Trading Journal also provides a clear picture of all impulsive trades you have entered, so it is much easier to see when you’re letting your emotions dictate your trades. Yes, it is possible to win a trade based on your ‘gut feeling’, but it will never make you a consistent and profitable trader in the long term! Trading Journal should help you minimise these kinds of trades once you realise how much a bad impulsive trade can cost you!
Last but not least, Trading Journal will help you manage your emotions! As we’ve already discussed, psychology and your mental state are crucial elements of your trading career! Trading with emotions can lead to significant losses - whether because of bad trades you’ve taken up or due to all the missed opportunities you were scared to enter! Writing down how you felt about a trade when you executed it will help you better understand your personality and psyche. While writing down what you’ve learned from each trade will enable you to be more comfortable with your emotional triggers the next time you execute your trade!
If you don’t use a Trading Journal yet, make sure to put it down as one of your New Year Resolutions and see how much you can improve in 2022! It will enable you to track your progress better as a Trader, become more disciplined and consistent, and provide an insightful journal of how much you have improved over the years!
If you’re not too sure how to create your Trading Journal, there are many free & paid platforms that you can find online that will help you get started!
Join us next week as we continue our Trading Top Ten Education!