10 Benefits of Using a Trading Journal

You may use a trading notebook as a tool to keep a record of every deal you make. It may be kept online or in a physical diary and can be as thorough as you choose. Surprisingly, a lot of individuals disregard the advantages that could be theirs if they kept trading notebooks because they believe that they are a gimmick.

The opportunity to track and analyze your progress, identify which of your tactics and systems have the greatest success, and identify areas that need work are just a few of the many advantages of keeping a trading diary. Even before you jump in, Trading Journals may be used to test the waters.

Before you start trading and write in your trading journal. You should first find a forex broker. Be careful, there are many broker scams out there. WikiFX allows you to research and verify your broker in one convenient place. Brokers are ranked based on their regulations and services. The WikiFX app is download-able in the appstore and playstore.

Let's look at how to maintain a decent trading diary that will be helpful to you in the long run before we look at 10 advantages of utilizing a trading notebook.

Keep a Trading Journal: How to Do It

trading diary

trading diary

A solid trading journal should include details on each and every single deal you make. Since the trading notebook is not something you preserve as a source of pride or as evidence of your accomplishments, you must not exclude a deal for any reason. Your trading notebook will assist you in identifying and addressing any shortcomings in your trading process.

Remember to include as much pertinent information about each deal as you can while composing your trading notebook. Along with mentioning the gain or loss, you should also explain why you went long or short and why you were right or wrong. When you go down to evaluate your trading notebook, you will have a ton of information if you do it this way.

However, it's crucial to avoid being too specific because doing so could make it more difficult to adhere to in the long term.

The following details for each trade are something you may write in your trading journal:

Date

Name of security

Number of shares/Total investment

Description of trading signals

Description of the entry and exit signals

Stops used and reasoning behind them

Total gain/loss from the trade

Writing down your feelings when maintaining a trade notebook is one more thing you should strive to accomplish. It is helpful to record your feelings about the transaction before, during, and after you placed it, both generally and explicitly.

The review phase will benefit greatly from keeping track of your emotions since, once you become aware of them, you may learn to regulate them. Once you've managed your feelings, you'll be less prone to make snap judgments that will only hurt your trading.

How Can Trading Journals Help You？

Keep in mind that consistency is necessary if you want to fully profit from a trading notebook.

You won't be able to fully use it throughout the review phase unless you keep a totally objective and thorough notebook!

The following are a few of a trading journal's major advantages:

1. A Trading Journal Aids in Determining the Viability of Each Setup

Every trader has a variety of setups that they may use, depending on the circumstance. Many traders, however, are unaware that they can be more adept at employing some setups than others.

For instance, certain traders would undoubtedly do better in trending markets than in mean reverting ones, while others may possess talents better suited for range-bound markets.

When you have a few months' worth of data (preferably at least three months' worth), you can open your trading notebook and examine each individual system to see whether or not it has been profitable for you. 3 months is a considerable amount of time to evaluate a system's viability, particularly if you are a day trader.

It is important to use such strategies more frequently when you see that they are more advantageous for you in order to increase your profits.

2. Using a trading diary can help you improve your weak points

Simply because a given system works for you does not mean you should abandon all other systems and utilize only that one. Trading systems do, in reality, take a long time to create and do serve some use. Every trading strategy ultimately fails and must be updated. Keeping this in mind, it's crucial that you always look for fresh approaches to replace the old ones.

Trading systems, even for simple techniques, may occasionally be rather difficult to understand when seeking for fresh approaches. As a result, it's possible that you misunderstood the system or are failing to apply it appropriately.

Fortunately, you have the trade journal available to you. Review each deal in detail to see where you made mistakes and how you may avoid them in the future.

You may compare the results of the two periods when it's time to check your trading notebook again to determine if you made any progress.

3. You Compile Sector-Specific Information

You could discover that you have a natural talent for predicting oil prices. Another possibility is that you are far more adept at trading airline stocks than IT companies due to your background in the aviation sector.

A trading log helps ensure that you are aware of your areas of strength even though many traders are able to recognize markets in which they have an innate edge.

You may evaluate the transactions you made in each particular sector or category of securities when you reach the review stage of your trading diary. You will be able to choose which industry you can be the most successful in in this method.

Keep in mind that you have further options for dividing up your trading of assets. For instance, you could be very educated about computers and adept at trading stocks of computer manufacturers, but you might be less experienced with cloud-based businesses. Although cloud computing firms like Dropbox and companies that manufacture computers like Dell are both classified as tech stocks, they are extremely different from one another.

4. Using a trading journal to create incremental goals

Benefit: Benefit of Goal Setting: Setting Goals

To avoid putting too much pressure on yourself while you are still learning, you might establish objectives that are just a little bit better than your prior ones.

You may make fantastic decisions about your goals, how you will track your progress (such as the timeline), and what you will do to reach your objectives by keeping a diary.

A trade notebook might be useful in this situation since it can highlight the areas that require improvement if you want to achieve your next objective. For instance, it can turn out that external reasons are to blame for your poor performance in the stock market, in which case it might be time for you to take a break from stocks and concentrate on other investments for a while.

5. A Virtual Portfolio Can Be Maintained in a Trading Journal

Although there are many online tools that may assist you in creating a virtual portfolio, a trading journal can also be quite helpful in this respect. Beginners can start a trading diary with a fictitious sum of money ($100,000 is an excellent place to start) to see if they can outperform the market or not. It could be the right moment to start employing real money if you are successful in the market. Just be aware that trading a virtual portfolio does not subject you to the same psychological strain as actual trading.

Even seasoned traders might benefit from using a virtual trading notebook. A trading notebook, for instance, may be a useful practice tool while you learn the ins and outs of the futures market if you are an experienced stock market trader who wants to diversify into the futures market. You can eventually start trading with real money after you are consistently able to turn a profit in your trading diary.

Keep in mind that brokerage costs must be taken into account if you are managing a virtual portfolio in your trading journal in order to have proper results.

6. Using a Trading Journal to Track Potential Growth Stocks

A trading log could be helpful if you're someone who wants to make long-term investments in growth companies. Instead of buying the stock, you may start recording all the information you can about it in your trading diary, including the patterns and the dangers related to buying the aforementioned stock.

You need to have access to enough information after a few weeks or months to make a credible attempt at forecasting the stock price. You can invest using this knowledge as your basis. But keep in mind that investing in growth firms typically necessitates a fundamental rather than a technical approach to the stock market.

7. Keeping a trading journal makes you responsible

You are less likely to make deals that are not in line with your trading strategy if you keep a trading log. The impulsive trade is often what leads most traders to lose money.

As a result, being able to reflect on instances in the past where you deviated from your trading strategy and suffered losses may be beneficial to you the next time you are prepared to do the same.

8. A Trading Journal Aids in More Effective Risk Management

Risk Associated With Trading Journals

Many individuals are unaware of how much money their risk management strategy is costing them. You may, for instance, use the same risk management approach for both small and large deals. This might not be a good idea because bigger deals require more caution and could wind up costing you a lot more money.

A trade log enables you to identify any potential areas for risk management errors. Setting the stop loss too close to the present price may indicate that you are not taking a significant enough risk to provide a significant return or that your position is too tiny to produce any type of meaningful gain.

The contrary can also be true, and you might opt to reduce the size of your position after some time of writing if you discover that you cannot handle the violent swings!

9. A Trading Journal Aids in Understanding Trading Psychology

Many people have mental barriers that prevent them from taking chances. Keep in mind that you must take enough risk in order to get substantial profits.

Emotions in general greatly influence your trading (especially if you are a day trader). Keeping a trading notebook will help you identify any instances in which your emotions are getting the better of you.

A trading log, for instance, can show you whether you ever lose your temper and start making foolish deals to make up for your losses. If you keep a trading log, you may also notice if you tend to make hasty judgments following a string of profitable deals (and vice versa).

10. Maintain Consistency with a Trading Journal

Your bad habits will eventually start to fade as you continue to use your trading journal, and you won't make foolish financial decisions as frequently. This is due to the fact that you will be able to identify the errors you are making and will be more careful to try to avoid them in subsequent trading sessions.

Only after utilizing a trading notebook for a while will some errors become apparent. In order to fully profit from it, it is crucial that you maintain an accurate trading log in which all of your trades are recorded.

To sum up

It is obvious that keeping a trading notebook provides a wide range of advantages. Both novice and experienced traders are advised to keep a log of their trading. The wonderful thing about trading is that you can never be perfect, no matter how talented you are. As a result, there is always room for improvement.

No matter how good your trading journal is, it wont matter if your broker is camming you. Dont forget to download the WikiFX app before you start trading.

Remember that maintaining a trading log needs some discipline, and discipline can only make you a better trader in the long run. It may be challenging at first to keep track of every single trade you make (particularly if you are a day trader).