In becoming a profitable trader, people must act like one. Many trading desks globally demand their traders to have some type of journal or notes on every trade. The notes will include an explanation of what they are doing, the setup, and the outcome of every trade.
Keeping a journal might be one of the main things separating amateurs from professional traders. Though the journal doesn’t contribute to the profit and loss statement directly, it does make a difference over the long term. And this enables traders to see their thought process and check if they could pick up a pattern. This is also important if they start to see a pattern with trades that finished profitably, showing where traders must focus their attention and types of trades to look for to boost the value of the account.
Know What to Focus On
There’s a list of things traders must write down in their journal, including the basics like the time of the day, entry price, exit price, and the financial instrument they are trading. If possible, they should pay attention to the size of the position too. But traders need to record some less obvious things as well.
One pointer to keep in the trade journal is the reason why ta traders entered, not from a technical perspective, but on the overall attitude of the markets.
One more thing is to jot down how trades feel psychologically during the trade. Once traders think that many of the trades are uncomfortable, it must be clear that it’s either it didn’t take a right set up, don’t trust the system, or have too much leverage. The position size may be too large, and by writing it down, they begin to feel what position size is perfect. With that knowledge, people can plan trades better and continue to stick to the plan.
Writing is Better than Typing
According to studies, writing down makes it more likely for people to remember it than typing. In this generation, writing things by hand might seem outdated or irrelevant, but it makes people remember better.
Aside from that, writing down trades and all the factors involves slow traders down, something unexpectedly positive to the trading results so far. It does not only make people think about the reasons to take the trade, but it also slows down the trades. As a result, it can bring a more positive outcome.
Everyone is Different
Traders’ journals are all different. Eventually, they’ll know what details are important for them. Then, if they are trading someone else’s money, they might need to record less important information – it’s better to have a lot of details than less as no one knows when it will come in handy.
Also, journals will look different due to the differing psychology in every person. Know that it’s okay to be upset about an outcome or a life event. Still, people should write them all down and be completely honest to eventually address deficiencies, whether psychologically or technically. This market is very challenging to get through with positive expectations. With that, every little insight can become extremely valuable.