Every trader wants to know the secret to success. And every successful trader knows there is no secret: trading is about having a plan and knowing what tools you need to execute it. Today we will look at one method that might be helpful to any trader and offer 3 reasons why you may want to keep a trading journal.
What is a Trading Journal?
A trading journal is a powerful tool that may help strengthen your skills and achieve positive results. Essentially, it is a detailed record of what happened during every trade.
So, what should a trading journal include? It may contain the following important information:
- Date and time of the trade;
- Position size;
- Investment amount;
- Duration of the trade;
- Trade result;
- Additional notes (could include the technical analysis tool you applied or some comments on the trend strength, market sentiment, etc.).
What’s important is customizing your journal entries to fit your personal trading style.
Why Keep a Trading Journal?
At first glance, keeping a trading journal may seem tedious and time-consuming. Nonetheless, recording your trades teaches consistency and discipline, both of which can pay off in the long run. Let’s dive deeper to find the answer to the common question: “Why is a trading journal important?”
A trading journal may help you achieve the following goals.
Identify trends and patterns
Notes are useful in analyzing which trading approaches work, and which should be adjusted. You can write down the types of charts you’re using, the patterns you’re observing, and how certain events impact your trades. Over time, you may be able to realize which approaches bring better results. And even identify common mistakes you may be making that can negatively impact your trading experience.
For example, you may notice that you tend to exit trades too early. Or maybe you sometimes forget to set Stop-Loss and Take-Profit features, missing the opportunity to maximize profits and manage losses more effectively. Keeping a trading journal may help you realize these common errors and find ways to fix them.