First things first, how do stock traders journal their trades? A good trading journal has information about every single one of your trades. Journaling is something that needs to be done religiously whether it’s a profit or a loss since a trading journal is not something that you keep as a source of pride or proof of just your successes.
With that out of the way, here are some reasons to consider starting or continuing your stock trading journey.
Help Set Up Gradual Goals
A trading journal can help you set step-by-step goals to not put unnecessary pressure on yourself while you’re still in the learning process. It’s a great way for you to filter the goals you would like to pursue, how you will measure your progress, and what you can do in order to achieve those goals. With a journal, there is a visual understanding of what you need to work on if you want to hit your next goal and the goal after that.
Manage Risk More Efficiently
A lot of stock trading beginners don’t realize that their initial risk management technique costs them a lot of money. A trading journal can help you see where you might be making mistakes with the handling of risk. An example would be that you’re not taking a big enough risk to generate your target profit because you set the stop loss too close to the current price.
Assist in Working on Your Mistakes
“Failure is a great teacher and if you’re open to it, every lesson has a lesson to offer” – Oprah.
Keep in mind that all trading strategies will fail eventually so you must always strive in finding new ones to replace the failing strategies. A trading journal gives you documentation to help you review all of your trades to see where you went wrong and compare the performance of any two periods to see if you have experienced any improvement from assessing your mistakes.
Holds Accountability and Brings Consistency
For most traders, impulsive trades are usually the root of their losses. Having a trading journal means that you’re less likely to make trades that aren’t part of your trading plan because you review those impulse trades to help you be ready if the same scenario arises again.
Eventually, as you continue to use your trading journal, your bad habits will start to diminish and you’ll stop losing money because you’ll be able to see the mistakes that you’re making and make sure to try to avoid them in future trading sessions.
These are just some of the reasons why traders keep a trading journal and it could be beneficial for you too. Remember that to avail of the full benefits of a trading journal, you need to remain consistent in keeping a completely unbiased and comprehensive journal. The purpose of the trading journal is to help you review your weaknesses in your trading strategy and help you right those wrongs for future success.