Keeping a Trading Journal is Crucial For Every Single Trader:
It may seem lame or unnecessary, but maintaining a Trading Journal is a critical component for every individual who wants to achieve sustained success in the markets. The transaction history that your broker provides simply isn’t enough. All that usually contains is data such as time of entry & exit, number of shares traded, and ticker symbol. This information is certainly important, but the real substance is in your own thoughts. Why did you enter/exit the trade? What was your thought process? Did you have a plan? Did you follow that plan? What were the overall market conditions prior to entry? All of this information needs to be inputted manually. The importance of documenting your own emotional psychology and any other relevant information that provides context for each trade you make should not be underestimated. Failing to document each trade properly provides zero help when it comes to improving the execution of future trades and overall results. And this isn’t a one-time exercise meant for beginners, it’s ongoing for traders of all experience levels.
The task of keeping a journal with all of this information may seem daunting, but the long-term payoff can be extraordinary. A great deal of useful information can be obtained from your recording efforts. When you reflect back on a week, month, quarter, or even a year of trading (with detailed notes on technical, fundamental, and emotional observations), there’s no doubt that you’ll learn a lot about your own psychology and overall approach. Instead of being oblivious as to why you’re experiencing the results you’re experiencing, you’ll be able to pinpoint tendencies, behaviors, and patterns (both in yourself and the markets) that you can utilize to refine your mindset and system. With the data you’ve gathered, becoming a highly profitable and consistent trader could boil down to simply doing more of what works and less of what doesn’t. But without that data, no such improvements can be made. Journals are only as good as what is written in them. Overall, a trading journal helps develop discipline, build confidence, and provide the valuable feedback required to continuously improve performance. No book, webinar, or mentor can do it for you – it has to be done on your own.