Every individual trader who has started trading has the desire to learn the success mantra of trade. However, the pro trader knows that there is no fixed mantra for success in trading. It is a known fact that the most successful traders are the ones who have initially lost the most. But the difference between the pro trader and the others lie in the fact that the pro traders identify their mistakes and try to reduce it.
Thus, successful trading is about having a detailed plan in advance regarding how to trade and then when to exactly execute the trade. While trading, considering the time factor is highly crucial as trade positions taken untimely is fruitless.
For this, the trader has to consider preparing the trading journal. A trading journal is basically a written record of what happened during a trade. The trader has to include the market condition, the trade time, the trading size, success or failure in the trade, traders’ emotions, prices at which the position was taken and closed. Dotting down these important contents, may look tedious initially but recording the trades will pay off in the long run as it teaches traders the discipline and consistency.
The trading journal helps the trader in analyzing the past strategies taken that were actually useful. The trader should also focus on marking certain events that impacted the trade. Over a long period of time, the trader will recognize the mistakes that cost them money. With the trading journal, the trader will realize that he/she traded on a false signal and became its victim, or exited the trade too late or too early, or put stops and limits at wrong price levels. Once the trader develops the habit of journaling, he/she would be saved from repeating the same mistakes again.
In the trading journal, a trader elucidates his/her feelings which helps to check whether the decision taken was emotionally driven or he/she followed the fundamental and technical analysis. This helps to understand their control of emotions while trading. Moreover, that will help the trader to know his/her strengths and weaknesses. Over a period of time, the trading journal provides the trader with a list of his trading emotions which he/she has to polish on.
Thus, the trading journal becomes an invaluable tool for the new investors as these records highlight traders’ weaknesses and also their strengths. In the long run, this will help the traders to re-establish their self-awareness and then utilize their strength, while attempting to reduce their weaknesses.