In today’s world of computers, the internet and fast machines, it can look outdated to keep an old-fashioned trading journal.
Naturally, while the image to your left does show a notebook and a pen, you can use a program like Excel to keep your trading journal. Just as long as you keep one, I don’t really care how you do it.
Most traders don’t keep trading journals. I base this fact on no research or polling, just my own obeservation and acquaintance with traders in a variety of investment fields. Those that do are the more serious, careful, cautious traders and those which I respect the most. You simply have to respect someone who is that disciplined to write down every single detail about their trades.
In addition, I respect people who have a respect for their own money. And yes, keeping a trading journal is showing how much you respect your hard earned money.
Why should you keep a trading journal?
The main reason is to simply know what you’re doing. It’s so easy to blow your money away on trading that getting control over your actions is paramount.
The simple action of writing things down or typing them into an Excel sheet is enough to stop most reckless trades or, if you do get reckless, give you the ability to learn from your mistakes later on.
The second thing a trading journal allows you to do is to analyze your actions. In your journal, I want you to write down the most details you can about every trade you take. The entry price, the stop loss, the take profit prices, how the trade ended, profit/loss, time of entry and time of exit (and another detail I’ll go over below).
I want you to know everything there is to know about your trades. I want you to have an intimate knowledge of why you placed each and everyone of them. This way you will learn what works, when, and get a “feel” for the patterns in the market.
The third thing a trade journal does is help you with your money and risk management. Placing trades isn’t enough. You need to allocate your funds correctly so you’re never over exposed on any single trade (or small group of them).
The fourth reason has to do with emotional control and discipline. There’s no doubt that trading is one of the most stressful actions a person can take. This is one of the reasons losing money is so easy: thinking clearly is a challenge.
You want to be in total control over your actions so you need to also note the way you feel when you place a trade. This will slowly train you to recognize the toxic emotions which drive you to make the wrong trading decisions and lose money. In my Forex Mental Fitness course, having a trading journal is a key step on the way to a powerful trading psychology.
So, either grab a pen and writing pad or open an Excel sheet write now and start recording your trades. You’ll thank me for this.
Do you already run a trading journal? If so, share some tips in the comment section below. If not… what’s stopping you?
