A trading journal is a great tool for the traders looking enhance their performance. It helps an individual in making sharp strategies, keeping in check the emotions, and keeping a record of trades. As a trader, one should keep a journal for the below mentioned reasons:
1. Fosters discipline and responsibility
Writing a journal helps in devising routines which aids in ensuring that the trader does not get irrational and stick to the trading plan as the journal serves as the reminder.
2. Uncovers strengths and weaknesses
Going back and reviewing past trades help an individual to recognize the profit making habits and the tasks that require improvement.
3. Enhances Risk Management
The analysis of trade information helps to fine tune position sizing, placements of stop-loss, and risk: reward ratios.
4. Better control over emotions
Writing down emotions before, during, and after trades helps put a spotlight on psychological triggers impacting decisions and decision making.
5. Growth and strategy improvement
Capture changing trends in trading data leads to better trading performance over time.
How to keep an effective trading journal
Details to be recorded:
- Asset and trade date
- Points of exit and entry
- Risk reward ratio and position size.
- Strategy and market condition applied
- Emotional state and critical insights.
Conclusion
Documenting these processes legally leads to self-improvement and excessive discipline thus creating success out of trading.
