Chapter 19: Keeping a Trading Journal
Trading Journal Spreadsheet
Keeping a Trading Journal is Crucial!
Although a tedious task, keeping a trading journal is crucial if you are aiming to be an effective trader. You need to be able to measure and keep track of your performance before you are able to improve and correct past mistakes. This is why having a proper journal is important.
Unless you have a photographic memory, it is impossible to remember all your trading details like reasons why you made a particular trade, why you selected a certain entry point or why you exited the market at a certain point. Even though you can refer to your trading or transaction logs provided by your broker, those data does not tell you the “reasons” for the trade. In other words, you cannot reflect back on your trading psychology .
Your trading plan calls for you to purchase the USD/JPY call options. However, your gut feeling tells you that this trade will not work and you are taking the trade because you are just sticking to your trading plan.
Later, halfway through the trade, you find that the market is starting to move against you and this sets you off thinking that why didn’t you listen to your gut instinct in the first place. Prompted by the “demons” in your mind, you decided to close the trade early to minimize your losses.
Shortly after closing your trade, you find that the market has turned and is moving as expected according to your trading plan. The end result is that you could have turned a profit instead of suffering a loss. Without recording down the reason for the unplanned exit, you will never know that your emotion got the better of you here. With a written record in your trading journal, you will always be reminded that you must not let your emotion rule your trade.