Trading Journal
As part of your trading system, it’s important to keep a check on your open positions and your overall performance. There are losses in trading and in the business of trading there are also expenses to consider. These need to be managed, and you can do this by keeping them small. Many traders tend to prefer to forget about their losing trades but it is a mistake not to look at your past trades as you can often learn a lot by looking back at what went right and what went wrong.
So once you have established your risk management plan make sure to record your results, starting with your initial trade. The way to do this is to keep a trading diary (book or spreadsheet) in which you make notes about all your thoughts on each trade, your emotions, your reasons for and against, and any exit adjustments you make during the trade. It allows you to concentrate on your active trades, and gives you a good basis to review later whether you could have done anything better.
You will find things that you could have done better, and maybe places where you tried to second-guess your trading system. For instance, was your stop loss level placed too close to the market, or was the timing wrong? Your journal should be absolutely honest, and can be kept secret from anybody else if you wish — it’s for you to continually improve, and not for recriminations.
I don’t recommend reviewing your trades in the same day you took them, as emotions will still be fresh in your mind and you may find it hard to be objective. However, you should make a practice of reviewing both losing and winning trades, perhaps every week when the markets are closed. Remember that you will lose trades even if you act perfectly, it’s just the nature of the markets, so don’t think that your journal will always be able to tell you what you did wrong. In fact, you may find you did something wrong with a winning trade, but the market was kind and you got away with it.
It’s useful to print out a copy of the chart when you made your decision to take the trade, and to have the chart where you decided to exit. With a trailing stop exit strategy, you can look at a later chart to see whether the trend continued and you would have gained more with a looser stop which did not take you out of your position so quickly. Remember that each trade is individual, so one case of the trailing stop acting too quickly does not mean you should necessarily adjust your plan. You need to get a consensus opinion from several trades.
I tend to stand with the crowd who promote doing one thing well… really well trying to be a master tradesman in whatever method best fits who you are! To do that, records are a must as is practical revision and assessment. You never stop learning that’s true but at the end of the day how long can you read books and attend courses focusing on for example supply / demand trading strategies? (it’s the same stuff but with a refit).
The answer to successful trading and a healthy mindset is not out there somewhere or with somebody else. The answers were to be found within me I just didn’t know how to look and where to look 😉 . (in the early times I used a trading friend to keep me honest and accountable to myself, often I wanted to try something new or attend yet another course and he would say “no you’re not, get real and work with what you got”. I would have to show him my weekly figures and trades… etc and explain myself if questioned ) Once I was able to sort my own self out, the trading confidence arrived on the scene.
An older guy who traded from his home professionally once told me very early in the piece to look “inside”… At the time I thought yeah right, whatever . Not anymore.
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