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Trading Journal: A Wise Direction Behind your Trades

A trading journal is a must-have tool for every trader who wishes to survive and thrive in global markets. Read on for what it is and why it is important.

SageFX - Nov, 12, 20

*Sage FX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

Trading Journal

The term trading journal may not be familiar to some. However, many-a-trader use this method to enhance their trading performance and boost their confidence in executions. While the motto anyone can trade is true, successful forex trading does require some practice. And just as there is little else than getting in the water to learn how to swim, there is nothing better than to trade to learn how to do it. In order to reach a level of consistent efficiency in trade, forex traders go through a learning process. And, a tried and proven method is the use of a trading journal.

What Exactly is a Trading Journal?

So, a trading journal, or diary, is a log, and one of the most effective tools for managing and assessing performance. It is the act of recording and reviewing your daily trades. By doing so meticulously, you can learn from your own strategies and use the knowledge to improve future trades. A journal helps you track progress, examine mistakes, and be better prepared. Think of it as a dynamic record-keeping for trading.

Benefits of Logging your Trading Performance

Why should you keep a log of your trades, you ask. There are several reasons that make the case to keep a trading journal. Overall, following this learning process is an effective way to improve your tactics, risk assessment, and emotions management. The main positives are:

  • Figuring out what works and what doesn’t
  • Developing discipline to face facts and emotions
  • Improving your risk assessment and management

So here’s a detailed list of benefits to start your trading diary today:

Optimizing Strategies

Being a successful trader relies mainly on setting up effective strategies. And reaching the level of know-how to do so requires practice and a diligent review of your records. Study every move’s outcome as well as the market at the time of your trades. This will give you insight into the mishaps to avoid and the right moves to stick with.

Managing Emotions

Whether it is ego, anxiety, or indecisiveness, your mental state plays a huge role in trading. Most traders are not very good at controlling their emotions and this sometimes leads them to make rushed decisions that affect performance. Impulsive trades are a big factor in unsuccessful trading. Being serious and honest in your journal allows you to note your feelings – and externalize them – and learn about your emotional triggers. This practice will give you discipline and help you steer your emotions in the right direction. Making you a wiser trader.

Adjusting Performance

Analyzing your entries in the trading journal on a regular basis gives you the knowledge you need to avoid repeating the same errors. But also, incorporating more of the tactics that did work into your new plans. From the start of your trade to the exit, examine the session and all the surrounding data to assess your performance. This will bolster your confidence as a trader and set the stage for growth goals.

How to Maintain Your Journal Efficiently

A trading journal is a tool to use to your advantage. It is meant to be personal and often includes more than just technical data on trades, but subjective details and emotions pertinent to the trader’s style. We can, however, share with you the framework and basic points to include in your logs so you can maintain an efficient journal.

  1. First, choose the platform for your trading journal. The most commonly used is an Excel spreadsheet, for the flexibility it offers. But some prefer the good old black on white paper notebooks, and many are opting for more digital solutions such as apps.
  2. Select the format you prefer, and focus on the content. We identified two main categories:
  • Entry and exit date
  • Trade execution: order type, length, size, capital
  • Results of the trade: profits or losses
  • Market conditions
  • Long term market analysis
  • Reason for trade entry and exit
  • Trade goals and conviction towards the trade
  • Strength and weakness of the trade
  • Thoughts, emotional triggers, state of mind
  • Trading errors and proposed fixes
  • Notes for future improvement
  • Skills: acquired or missing
  • Performance level
  1. Read your trading journal and review your trade notes. A successful trader examines each execution, but also tries to identifies potential patterns and the progression of their performance. It is not effective to just write and maintain a trading diary, the wisdom is impaired only after studying your own logged experiences. Only then, can you identify aspects of your trading style to optimize, track your emotional triggers, and set goals to reach.

Wise Words To Remember:

  1. Always begin the journal before trading, and end it when it is done.
  2. Record everything honestly. Including observations on your emotional triggers, and distractions that led to bad trades.
  3. Observe and take notes of events and changes in the markets. Comment on what you see, even if you are unsure.
  4. When you review your journal, find the patterns. The financial ones, the personal ones, and those related to your strategies. Learn from those setups.