“Successful traders know that a consistent and systematic review of their daily trading activities is the direct path to growing and improving”
– Van K. Tharp
While looking at the movements of your charts, play the Reflection song by Lea Salonga and sing along with these lines: What is that trade I see? Staring straight, back at me. Why is the reflection something I don’t want?
Reflecting is not only done for the state of your mental health, to have a clear mind, or even to create better decisions. Reflecting must also be done when investing and trading to create sound and correct decisions. In order to do this, you must have a good, healthy, and peaceful environment. At the same time. It is very essential to have your thoughts and actions documents. Just like how you journalize the things you do every day; you must also journalize your investments and trades!
For investors and traders, journalizing helps develop a more efficient and effective strategy in dealing with the market. With journalizing, you can see your mistakes clearly and what were the principles and rules that you have went against. At the same time, you can look at where you have excelled in! That’s the great thing about journalizing, it gives a peace of mind and determines the areas where you need to improve on. It instills the value of sticking with the rules and principles in beating the market.
One thing to know about journalizing your trades and investments is that it develops the discipline and habit of documenting every transaction that you have made — from buying to selling, and even checking the chart movements.
Here are the things you should know when creating a journal for your trades.
Step 1: Determine what stock to purchase and what type of stock
It’s a must to know the stock you will be purchasing. But not only that, you must know what stock you will be purchasing. Is it a speculative stock? Defensive? Cyclical, blue chips, or tech stocks? This initial step already determines if you are a good trader. A good trader knows where he or she invests in. You can use either technical or fundamental analysis, or combination of the two. Remember, the organization of your trades starts on your discipline in analysis.
Step 2: Listing the quantity of shares bought
Do not rely on the information and journal given by your stock brokers. Record and list down the quantity of shares bought so you can be fully informed about your total investment. This will help you note if have already gained or made losses in your portfolio.
Step 3: The buy and sell point
This refers to the entry/exit point at which you decide on the price you would buy or sell your stock. To limit losses, you must note your target profit and stop loss. The benefit and essence of this step is to know the progress or status of your holdings.
Step 4: Type of time holding period
Determine on how long would you be holding the stock. Would it be for 3 weeks? For 2 months or 3 years? Decide whether you would be holding it on a short, medium, or for long term.
Step 5: Trading Strategy
Trading strategies and holding period goes hand on hand. Journal whether you will be strategizing it with position trading, swing trading, day trading or scalping. Being informed with your strategies will help you on your decision making
Step 6: The buy signal and the reason
Journal the signals and indicators at which made you buy a stock. Were you just hyped with the news or alongside with the comments of traders? Always make a logical and clear decision with a good foundation of analysis, not with feelings. This will also help you understand more the importance of understanding the market structure and indicators. Was there a breakout? A hammer candle stick? A double bottom or an ascending triangle?
Step 7: Date when sold
Consider all dates important, as if they were your anniversary or even your birthday! Treat this as an important component of your trade for it will determine if you broke your rules and time frame.
Step 8: The sell signal and the reason
Selling your stock also goes hand on hand with your time frame. Determine what was the reason for selling. Have you reached your stop loss or target profit? Was there a market breakdown or have you foreseen that the market is on downtrend?
Step 9: Principles and Results
As much as every step is important, you would and must also see the results of your trades! Have your stocks been performing well? Have YOU been performing well? Were your imposed rules and principles followed? If not, what were the results of your non-compliance with your principles?
Consider every step important. With the discipline of journaling, you will always continue to grow and develop the areas you need to improve more!
Take note: You do not just record your success but failures as well! TAYOR!
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