The Importance of a Trading Journal

Have you ever tried keeping a journal in a form of multiple annotated charts? If you haven’t you should consider in doing so when you venture in the trading industry. Some traders like to look for every turning point in stock market and try to investigate every major pattern in indicating the price/volume pattern that is prone for potential change in the trend.  

Tips on how to start your journal

1. You can begin your trading journal by tracking your individual trade and focus on every situation in which your mind-set took out a proper execution of those trade ideas

2. Replay these trade in your mind or take a video while you’re trading and observing them. Make sure to jot down what set you off

Example Column A – What set you off; Column B – What is going in your mind; Column C- How it is affecting your trading.

3. Zero in on how much money that trigger situation cost you; with practice you started developing your internal observer and can easily start to notice these situations whenever they occur.

When we keep a trading journal, the principles and learning are not that different. At first we see that it’s a tool in recognizing every possible pattern as traders. So here are some factors which includes

  • Behavioural patterns— When you have the tendencies to act in particular ways in given situations.
  • Emotional patterns— When you have the tendencies to enter particular states or moods in reaction to particular events.

  • Cognitive patterns— When you have the tendencies to enter into specific pattern of thinking or frame of mind in a face of personal or market-related situations.

Many of the trading patterns are amalgamations of its three patterns: in response to an immediate environment, we think, act, and feel a certain way. These characteristic pattern works against every trader’s best interest. These then lead us to make a lot of rash decisions and interfere with the best market analysis and planning. It is with this kind of situations, we look at journals and other psychological exercises to help us change our patterns of distress.

But how does this pattern exist? Why would someone repeat the same unfulfilling pattern of behaviour and thoughts all over again? Sometimes traders get frustrated with their consistent failure or negative pattern that they are sabotaging their future. This just magnifies frustration instead of easing it. 

Maladaptive patterns usually begin as a manifestation to any challenging situation. We learn a lot of way how to cope with any difficult events. As a result, we learn from at it and thus set a healthy habit or pattern. 

One good example is when you blame yourself when there are conflicts with others. This then triggers to self-blame and depression, and can lead to someone beating up himself with his losses. When we repeat certain pattern in trading that consistently lead us to loss of a lot of money. The odds are actually good that we are replaying coping strategies from our early phase in our life. Our task then is to unlearn these patterns. That is where our trading journal comes useful- to be keenly aware with our actions and pattern, feelings and thus prevent us to repeat any negative decisions.

About the Author Brian Chai

Brian Chai is an author, investor, trader and entrepreneur. Since his early education days, Brian has always had a keen interest in the finance field. He started out his career as a financial advisor and later went on to work for one of the top investment banks in the world. Capitalizing on his finance and trading knowledge, Brian went on to be a successful trader and investor in the financial market where he achieved massive portfolio gains. Wanting to share his expertise and passion in trading and investing, Brian left his banking job and went on to be a full time trader and his mission is to help people grow their wealth and live their dream life.

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