Trading Journal - Why Keeping Trading Journal Is Important
The trading industry is a kind of battlefield for the traders. Only enhancing experience & skills can make a trader win the battle. Success in trading requires planning and practice of a high level. So traders need to go through a comprehensive learning process to grow their profit rate consistently in trading.
Furthermore, a trading journal is one of the best tools to guide and optimize the trader’s trading system. It can steer you faster towards a profitable trading career if you plan on becoming so.
Let’s clarify what a trading journal is first.
What Is A Trading Journal
A trading journal is a log that helps to keep detailed information about one’s daily trading history. Usually, traders tend to jot down all information about a particular trade after performing it. So, it helps him re-evaluate his performance and other reports that can act as the foundation for better trade execution in future.
The main objective of a well-maintained journal is to empower his trading skills to a higher extent. Traders can gather knowledge and learn the mistakes that they made while trading as well. Then, they will try to act more carefully on their future trades.
You may use a handwritten journal or a computerized one. But a combination of both is ideal. A notebook for thoughts, ideas, and reflections while a spreadsheet for permanent trade idea record.
It sounds better, right?
Benefits Of Having A Trading Journal
Now let’s see how a trading journal can help a trader in various ways.
- It helps to build a framework for strategies. On the other hand, traders can learn about risk intelligence that is for analyzing risk and uncertainty. Besides, it helps identify challenges, set goals, and track progress.
- To manage emotional triggers through the development of enhanced ’emotional’ regulation and management. Also, a journal helps to develop greater resilience, the capacity to recover quickly from difficulties.
- A trading journal defines your strengths and weaknesses at the same time. To establishes and cultivates improved trading practices, a tool like a journal is a must.
- One of the important points that every trader must consider is keeping himself out of questionable trades. Maintaining trading history is a good choice in this case as well.
- It fosters improved ‘Critical Thinking’ and reflection on one’s practices. We can rename it as a personal development tool that increases self-awareness.
5 Things That Must Have In Your Trading Journal
It’s not like that everyone must have to have the same types of trading journals. Creating a journal depends on many factors as every trader does not follow the same trading plan and strategies.
However, there are some prescribed basic options that everyone should have in it.
Here are the 5 things that one should include:
- Introduction of your trading life
- Market views and Philosophy
- Observations of the market
- Previous trading mistakes & missed opportunities
- Your performance statistics
We will conclude with an interesting and realistic quote by Ray Dalio, founder of Bridgewater Associates, rated by the FT as the world’s most successful hedge fund manager:
While most others seem to believe that mistakes are bad things, I believe mistakes are good things because I believe that most learning comes via making mistakes and reflecting on them.
Try to keep all your trading experiences in a trading journal. Analyze the log and find out the mistakes and the progress as well. And then proceed again.
Be brave and trade safe!