When I started trading stocks, I did not have a trading journal. I bought stocks without
knowing my take profit and cut loss points, my reason for buying, and even when I would have to sell my stocks.
Every new trade was just as confusing as the last, and I would wonder what went wrong with my trade each time.
Eventually, I came across the concept of a trading journal, and I realized that keeping track of my trades helped me become a better trader. Here are some reasons why you should consider starting your own trading journal as well:
1. You learn from your mistakes
Having a record of all your trades gives you the opportunity to go back and analyze what went wrong. Did you put too much capital on a speculative trade? Were you not disciplined in your cut loss? Maybe there was an indicator you overlooked?
Whatever the error or success might have been, keeping a record of your trades helps you fine tune your trading system and ultimately makes you more aware of your tendencies as a trader.
a Screenshot of a Part of my Trading Journal when I First Started
Most online brokers have a transaction history, and you can use that to review your trades. But if you are like me, I prefer keeping an excel sheet as a trading journal that helps me quickly see my past trades all in one page.
2. You can keep track of your progress
Everyone in the stock market is in it to make money. Not everyone does, though. As you keep track of your trades, you are able to see whether you are making progress or not. Keeping track of your trading gains and losses would help you stay focused on your actual earnings performance. This helps you to stay disciplined and be more responsible with your money when you realize how much you are actually putting at risk.
Small and steady winning trades build up earnings over time, but one big mistake could wipe them out all at once. In the same way, fewer trades but with bigger capital can allow you to earn faster, but also exposes you to larger losses.
Tracking progress keeps us level headed and prevents us from becoming mere gamblers in the stock market. It helps us see clearly whether or not our efforts are worth the trouble or the risk. Trading is not for everyone; only the disciplined and responsible survive.
3. Comparing different trade plays and setups
Another advantage of keeping a trading journal is that you get to see which trade setups you excel at. Certain chart and candlestick patterns could be more familiar to you, thus providing you better opportunities and probability for success.
It differs from one trader to another, but you have to find the patterns and plays that you are more comfortable trading with. Others prefer support bounces while others prefer breakout plays. Some trade patterns like ascending triangles or symmetric triangles.
Refer to your trading journal and see what kind of trading setups you are more successful with in the past. This gives you more confidence to trade the patterns and setups you are familiar with, once you recognize them in the charts.
Keeping a Trading Journal is one of the best tools you can equip yourself with when trading the markets. It keeps you on course and helps you constantly refine your trading strategies and financial goals.
Start journaling your stock trades, and see how much you've improved over time!