What Is a Trading Journal and Why Do You Need One?
Every successful and ambitious trader must have a journal. For the purpose of getting better in general and improving your trading skills, you will need to evaluate trading strategies and control your behaviour respectively. A trading journal is needed specifically for this. A trading journal may even be a mentor or a personal trainer to you. Sometimes you can look at your previous mistakes and this may be really useful for you, so that you don’t make them in the future.
A trading journal is not a complicated but a really valuable instrument which can improve your consistency and behaviour in general as well as it helps to forget about your bad habits and it can increase your chances of success.
What is a trading journal?
Generally speaking, a trading journal is a collection of all your deals and information that has to do with them. So what do you have to include in your trading journal? The answer is simple, everything you you think is important and has to do with your trading and this can be your market observations or your emotional state. But there are some points that have to be included in a trading journal. and this are:
- Market conditions before, during and after the trade. This information will allow you estimate the reasons of all trades and distinguish between good traders and bad traders.
- What went well. Even the worst trades may give a benefit if you know how to learn from them. Even if the trade was bad, you can still mark what went well. For example, the fact that can identify the trend direction and its strength, good risk management etc. There is nothing bad in saying to yourself that you are good in something.
- New ideas.In trading, not only you have to master what you already know also learning something new. Due to the trading journal you have a chance to better understand and try new methods and ideas.
- Mistakes made. Most likely, this is the most essential point. The main purpose of a trading journal is to make your trading performance much better and in order to do that you have to learn from your mistakes, because this is the best way you can improve.
Why is it important?
It goes without saying that if you want to improve your trading performance, you will have to stop being emotional. The best way how to do that is to keep a trading journal and work on yourself. Due to the trading journal you will lower the amount of random trades. Consequently, you will be able to control your losses better.
However, it may take some effort to adjust a trading journal, significantly at the start, when you are still getting familiar with it. Although, it may take certain effort, you won’t regret doing that.
Setting up a journal
The ‘trading history’ panel, which is at the left top corner of the screen, is a helpful tool, however, it can’t be used as a trading diary. You may already know that it is not enough to follow the opening and the closing price of the asset, because you as well have to take into account the current market conditions before and after the deal. You may have your trading journal in Excel or use any other program.
It doesn’t matter what you will choose, but keep in mind that you need to review your journal from time to time. If you don’t regularly review your journal, than there is no point in it. Therefore, it is better to review your journal 1 to 4 times every month. Pay attention to your mistakes, and analyze your goog trades and try to learn something new each time you review your trading journal.