If you interview a lot of successful traders, the only thing they have in common is discipline. When motivation runs out, discipline takes its place. When emotions overflow - discipline brings you back to your place. Discipline helps you stay on track with your strategy. But discipline doesn't come out of nowhere. Discipline has to be cultivated. And you can do it with the help of a trader's diary, which traders, especially beginners, very often underestimate.
Here are some reasons why maintaining a trading diary can be advantageous:
- Record-Keeping: A trading diary allows you to keep a detailed record of your trading activities, including the rationale behind each trade, entry and exit points, position size, and the outcome of the trade. This record can provide valuable insights into your trading behavior and performance over time.
- Performance Analysis: By regularly reviewing your trading diary, you can analyze your past trades to identify patterns, strengths, and weaknesses in your trading strategy. This analysis can help you make informed decisions about refining your approach and improving your trading performance.
- Learning and Improvement: A trading diary serves as a learning tool, enabling you to reflect on your trading decisions and outcomes. It allows you to learn from successful and unsuccessful trades, helping you make adjustments and enhancements to your trading strategy.
- Emotional Regulation: Keeping a trading diary can help you manage your emotions by providing a structured outlet for reflecting on your trading experiences. It lets you objectively assess your decision-making process and emotional responses, leading to greater self-awareness and emotional regulation.
- Accountability: A trading diary holds you accountable for trading decisions and actions. It encourages discipline and consistency in your approach to trading, as you have a documented record of your performance that you can refer back to.
- Goal Setting: You can track your trades and their outcomes in a diary to measure your progress toward your trading goals. This can help you stay focused and motivated to achieve your objectives.
What are the disadvantages of a trading diary?
Keeping a diary from day to day can be boring. Also, keeping a diary manually increases the risk of human error. Time-consuming. You will be tempted to stop keeping a diary when you miss an excellent entry point to a position while you are writing down the result of a previous trade.
That's why the most challenging part about keeping a journal is not abandoning it after you've already started it. You have to cross that line to get one step above the rest. You must force yourself, cultivate it, and make it a habit, like brushing your teeth before bed.
Types of a trader's diary:
- on paper – kept by hand;
- audio – traders record their thoughts and decisions on a dictaphone;
- video – traders organize video recordings of their actions during the day. A famous market psychologist, Brett Steenbarger, described one case in his publications of one loss-making trader who made a positive breakthrough in his results when he started video recording his actions, which he analyzed afterward;
- excel tables of a free format;
- specialized software and online services. For example, tradersync, tradingdiarypro, myfxbook, and others. Google will serve you;
- built-in statistics in trading terminals;
- keeping diaries directly in charts;
- hiring an assistant to keep your diary.
In summary, maintaining a trading diary can be valuable for self-improvement and enhancing your trading skills. It provides a structured way to review and analyze your trading activities, leading to greater self-awareness, improved decision-making, and a more disciplined approach to trading.