Why Keeping a Trading Journal is Key to Success

Your dedication to your journal is the most important statistic.

trading journalPart of being a committed swing trader is keeping track of your progress and by far the best way to do this is keeping a journal entry of your trades.

Dedicating yourself to keep in a journal will give you important feedback on your performance and show you patterns unfolding that show you what is working and what you need to change.

A trading journal is as simple as a notebook were you write down your trades, the reason for the trade and the outcome. I say the outcome very specifically and intentionally.

The goal of your journal is not so much to celebrate winners and ignore the losers but a mechanism for valuable feedback into your process.

What most traders do incorrectly when keeping a journal

the most common error made by active traders is simply putting in the journal the stock they traded and whether or not they made money. The true goal of your journal is to document your progress.

  • The reason for the trade prior to entry.
  • Your planned stop-loss, your planned profit target
  • The dollar amount you plan to risk on the idea.

Once this is on paper, your next objective is to document how you actually manage the trade. In other words, whether you follow your rules. This is of course assuming you have rules in the first place.

An area infrequently discussed on this topic, is keeping track of your discipline when scanning for new ideas. It is very important to assess market conditions so that your trading ideas have context. Simply put, some market environments have higher probabilities and should be traded more aggressively. At the same time, keeping a journal of when not to be in the market is just as important.

Additional trading journal benefits

Professional traders have a manager or program that monitors activity and risk. The average swing trader doesn’t have this luxury so a journal is the best way to go. One of the keys you want to identify is recognizing your strengths and weaknesses. Patterns will emerge clearly showing you which stocks, ETF’s or industries you trade well and which ones you simply can’t get a handle on.

This is vital information that cannot be ignored. A mistake many traders make is they continue to trade stocks they consistently do not earn money in. A trader committed to his or her success will pay attention and set aside their ego. Resist the urge to believe if you lost money in a particular stock, that it’s your duty to get that money back.

To succeed in the long-term, you must learn to recognize the difference between a trade that simply didn’t earn money and a stock you simply don’t trade well.

There are two ways to handle this from your journal reports. To put this idea in context you must understand that stocks have personalities, different liquidity, and different volatility. It is also a common mistake for a swing trader to gravitate to stocks in the news. Your journal will tell you which stocks you should focus on.

When should you write your journal?

It is very important each trade is documented when the ideas are fresh. You will not remember the details one week later. Write out your thoughts and reasons for the trade just prior to initiating the trade. If you make any trade adjustments document them immediately. When the trade is over, this journal entry is the most important.

Gathering your thoughts on your trade management and the resulting outcome is the feedback over time you are looking for. As each month passes you will get a clear picture of the validity of your strategy and your ability to follow it.

This is the key to long-term swing trading success

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