A trading journal is a record of all your trading activity. Many traders do not keep a trading journal and this may have some negative consequences.
Why Should You Keep a Trading Journal?
Here are a few reasons why you should keep a trading journal.
“Keeping journals for each trading account, strategy and financial goal provides a means of comparison at a glance.”
1) Measuring Your Trade Performance
A trading journal will show you at a glance if your trading is progressively getting better, worse or simply stagnant. The trading journal in such instances will be your performance database. You can tell which strategy is working for you, which currency pairs you have more proficiency in, what works for you and what doesn’t. You may also use it for your own historical studies of the market. Knowing why you lost at a trade is a new trade half won. This is what a trading journal can do for you.
2) Future Planning
Every trader enters the market to make money. But many do not have an idea as to how much money they want to make and how they intend to achieve their target. This is where the trading journal comes in. Your journal will tell you how to structure your trades using minimal risk so that you can achieve set profit targets. You will know those strategies which deliver good rewards per trade at minimal risk.
3) Psychological Reinforcement
The value of psychological reinforcement in any human venture cannot be ignored. When you decide to open a position you can look at your trading journal and this may help you stick to the plan. Your written visions keep you on track and reduce the possibility of mistakes.
How to Keep a Trading Journal
You may have several trading journals if:
a) You have several trading accounts.
b) You use several trading strategies.
c) You have different money goals (short term and long term income expectations).
Keeping journals for each trading account, strategy and financial goal provides a means of comparison at a glance. In addition to writing your vision, money goals, plans and strategies, you should also keep visual evidence of your trading activity so you avoid the kind unpleasant surprises.
