What Is a Trading Journal and Why Do You Need One?
For a successful goal-oriented trader a journal is a must. In order to improve your trading skills, you will have to measure your performance, analyze trading strategies and adjust your behavior accordingly . And this is where the trading journal shines. It can even work as your personal coach and a mentor. By occasionally looking at all the mistakes you’ve made in the past, you will find it helpful in order to avoid repeating them in the future. This simple yet effective tool can also boost your discipline and consistency. The journal can help you get rid of unproductive habits, elevating your trading results.
What is a trading journal?
Put simply, a trading journal is a collection of all your trades and information related to them . What kind of information should it be? Everything you find relevant, from your emotional state to market observations. Still, there are several points that have to be present. Absolute must-haves, therefore, include:
Market conditions before, during and after the trade. This information will let you evaluate the reasoning behind each deal and tell good traders from the bad ones. What went well . Even the most devastating deals can be to your advantage if you know how to learn from them. Is there anything that, despite the incurred losses, was done well? For example, your ability to determine the trend direction and its strength, proper risk management etc. Don’t be afraid to praise yourself for things you are good at. New ideas . Trading is not only about perfecting the things you already know, it is also about learning new things. By committing to a trading journal, you will get an opportunity to better test new approaches and ideas. Mistakes made . Arguably the most important point on this list. After all, the purpose of the trading journal is to make you a better trader. Only by learning from mistakes would you be able to improve.
Why is it important?
In order to improve your trading performance, you will certainly need to get rid of your emotions. One of the easiest ways to do so is by keeping a journal and improving your discipline . With the help of this simple tool, you will greatly decrease the number of random trades and will, therefore, be in a position to better manage your losses.
Already setting up a journal? Easier said than done. The trading journal will require significant effort, especially in the very beginning, when still getting used to it. But don’t let the challenge of sticking to a necessary routine frighten you. In the end it will be worth it.
Setting up a journal.
The ‘trading history’ panel (upper left corner in the trade room) is a useful tool, yet it cannot be used as a trading diary on its own. As you already know, it is not enough to observe the opening and the closing price of the asset, as you should also be conscious of prevailing market conditions before and after the trade. You can keep a trading journal as an Excel spreadsheet or use a standalone application.
Whatever you choose, don’t forget to review your journal once in a while . A trading journal that is not being thoroughly reviewed is worthless. Go through the trading history once in a while (one to four times per month). Notice the mistakes you’ve made, analyze the most successful deals and try to learn something new every time you open a trading journal.
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