Why Keeping a Trading Journal is Essential for Growth

Inquires to professional traders about what event changed their trades will frequently return to one event: publishing your activity in a trading journal. Initially, this might sound unnecessary. You know which trades you have made, right? However, when you're excited about something you believe, or if you're still feeling the burn of a loss, your memory alone cannot be trusted. Your journal reveals the truth, that is, the numerical value of the trades you made, the rationale behind your trade, and some of the patterns you may not have observed while losing or winning. Eventually, your trading journal, above all, becomes one of the most important tools for your own growth as a professional trader. 

Of Course You're More Than Numbers! 

Your trading journal is not just a record of entry and exit prices. The journal should account for both your thought processes and your state of mind when you executed your strategy. For example, if you placed a limit buy on EUR/USD specifically because a breakout was forming, that should be documented, along with your rationale, the market conditions that influenced the trade, and even note the frame of mind in which you executed the trade.

Once you review those trades, you should be able to determine whether the breakout in the currency pair fit your plan or was simply an emotional decision in the moment. If you hadn't documented those thoughts, you'd be unable to reflect and learn from the outcome. 

Why Your Memory Fails You as a Trader

The brain has a funny way of rewriting your personal history. After a win, you might believe you were more cautious about entry than you truly were. After a loss, you may have trouble recalling most of the warning signs you neglected. Your journal helps with the memories, while still allowing you to visualize in an honest manner.

A journal is a fictitous mirror that tells you exactly what happened during a trade, versus what you think or wish had happened. This honesty is the biggest piece that separates traders who repeat mistakes and traders who learn from losses.Recognizing Patterns You Cannot See in Real Time

One of the great things about journaling is that it uncovers trends you would otherwise not take notice of trade by trade. For instance, you could find that you lose most of your trades on Fridays when you are tired. Or you could find that you have the greatest profitability on trades that follow a strict stop-loss policy. When you meticulously notice and track details, you end up with a compilation of data that indicates your strengths and weaknesses.

Here's a very basic example of what you would put in the journal:

Even this simple little table could suggest a workplace: Excitement could bring about better trades than nervousness, or perhaps, breakouts are more your style than counter-trend set-ups.

Journaling Helps You Control Emotion

Trading is equally psychological as it is technical. Often fear, greed, and impatience will ruin a meticulously planned strategy. However, in journaling your trades, as well as how you felt before, during, and after, gives you keen insight into your emotional triggers. One example could be that you panic when a trade goes a slight amount against you–so you exit the trade early. When you see that documented across month’s worth of trading, you will start to adjust your mental strategy and/or your actual strategy.

Making Mistakes Into Learning Opportunities

Your losing trades become learning opportunities instead of failures when they are a part of the journal. The pain of a lost trade is often buried deep without a journal, and losing trades become an unconscious repetition. With a journal you will be able to review notes and analyze: did I follow my plan? Did I over-leverage?Did I make this trade purely from FOMO? In due course, these deliberations would mitigate eventual recurrent missteps and enhance your discipline.

It's similar to an athlete studying the game tape. They don't just look at the wins, they look at the mistakes. Progress is made through the analysis of mistakes.

Developing Confidence Over Time

Confidence in trading does not originate from a few lucky trades. It is built on confidence that your system operates as you have tested, tracked it, and observed repeatable success. Obviously, keeping a journal provides the verification for that confidence. Instead of operating with self-doubt, you will have a journal with repeated accounts of trades that supports your strategy's edge. You can’t put a price on that expectation, especially when the market feels out of control.

Where to Begin Your Own Journal

Beginning your own journal in simpler than you think, however, it does require an ongoing commitment. You can journal with a notebook, a spreadsheet, or perhaps even an app that monitors trades. The important thing is to record the important aspects each time. At minimum consider documenting:

Trade information: pair, direction (long or short), entry, exit, stop loss, and take profit.

Thoughts: Why you entered, what you noticed on the chart and what you were feeling.

At first, keep it simple! As you develop the habit, you can expand the information you document to include screen shots of winning chart setups or notes on news events impacting the markets. The key is to develop a resource that you continue to use rather than inevitably abandon after a week.

Journaling = Professionalism

If you have the perspective of a journal being your own personal coach, you would naturally seek some type of review process in every profession. Professional athletes, musicians, doctors-­ every professional seeks to improve their performance through the evaluation of their performance. Trading should not be any exception. If you want an escape from random results and start to grow, then journaling is the bridge. It extracts elements of luck and chance and starts the process of continual improvement.

In Conclusion

Keeping a trading journal is not the most exciting thing to do, but it is one of the most powerful habits to develop; it keeps you honest, brings clarity to your patterns, gives your discipline permanence and allows you the confidence to trade with expectations. The variables of the markets will not stop testing you, but with a journal in hand, you will always have a way to learn from the past to act intentionally in the future.

If you would like to take a deeper dive into practical tools and strategies you can begin implementing into your own trading journey, check out the Learn section of Wikilix. The Learn section is a mechanism to support aspiring traders that want growth.