Hello again fellow traders and those aspiring to be! In this post we will touch on something near and dear to my trading heart. It’s a topic I’ve mentioned before and this surely won’t be the last time as it is the most vital thing to my improvement as a trader.
If you are not keeping a trading journal and need to know what a trading journal is (and should be) then please see the trading journal example post for an explanation. For this post though, we are going to discuss the WHY you (and every trader) needs to keep a trading journal. I’ll will use a personal experience to drive home this point!
To say I’m not the most organized person isn’t a stretch, so keeping track of market and trading information would get a little messy for me. I had random sheets of papers and notes everywhere. Finally I went old school and bought a marble notebook (because I apparently need to be treated like a grade schooler, ha!)
Each page of that notebook would represent a single trading day. During lunch and at the end of the trading day I would jot down notes on that day’s market action and how I handled it along with my results.
Now I’m admittedly a risk adverse person or a grinder if you will. I want to hit singles and doubles all day and have a high on base percentage when it comes to trading. A homerun or nothing, boom or bust style is not my personality and it is important to trade a style that suits your personality.
So with that said, a few months after I started keeping a trading journal I noticed a trend and it turned out to be a giant roadblock in my trading success!
Each month I would make money more days of the week than I would not. However, I was only break even to a small profit those months.
So what is it that I found?
Each of those months there was two or three “blowup” trades as I call them. It’s a trade where you end up breaking all the rules of your trading plan and take a loss that is three, four even five times what your initial risk is.
When I looked at my notes and my numbers it turned out these handful of trades were literally eating up my profits for the month. It hit me like a ton of bricks!
For step by step instructions on how to keep a trading journal and the exact information you should be tracking take part in the Active Trading Blueprint. It’s just one of the many topics covered as we build out a complete trading plan step by step.
Remember, “Victory Loves Preparation.”