In the trading world, we consistently hear about how important Trading Journals for your trades. However, after speaking with friends within the community, I find that a very little percentage of traders actually implement this discipline. According to some, dedicating time to journaling your past trades may take time away from watching charts, and therefore, potentially missing out on an intraday opportunity. However, with that being said, isn’t this form of thinking worth journaling in of itself? This is a perfect example of “FOMO” (Fear Of Missing Out) – one of the greatest mental challenges every successful trader must learn to control. If we were to write this fear down and analyze the source of this way of thinking, wouldn’t it let us view this fear in perspective, and realize how this type of thinking is not conducive to our success? Journaling your trades is both a form of self-evaluation and self-evaluation. It’s an opportunity to organize your thoughts and reflect on both your success and mistakes. In this article, I’m going to list a few reasons as to why you should start journaling your trades, and how it will contribute to your long-term success as a trader.
Reason #1 You May Not Remember Why You Entered a Trade
When entering month/s long swing positions with an upcoming catalyst in mind, it’s sometimes easy to forget why we entered that trade in the first place, especially if we see that trade turn red. Seeing a swing position turn red from our initial entry will naturally entice a trader to want to sell a position. However, if we remember why we entered that trade in the first place, we may feel more confident holding through the red as the catalyst approaches. Journaling your reasoning as to why you’ve entered a specific trade will help us keep a clear mind and hold our conviction throughout daily volatility.
Reason #2 If you were following order flow, you may not remember the flow you were following
If you are an order flow trader like myself, you’re aware of how many put and call orders we see daily come in through the tape. Sometimes, with all of this information popping up constantly on our screens, it’s easy to forget which orders we are following, and why we are following them. Journaling the order details (expiry, strike price, premium paid, etc.) along with the implied volatility percentage and the Greeks, will allow us to remember what the buyer’s objective was of the flow we were following. For example:
If we were to journal these Greeks when following order, we would know that Theta was a factor, along with a high implied volatility percentage, which would factor into how long we may hold on to this trade, as well as where we may place our stop.
Also, journaling the daily volume and open interest the day we enter a trade, it’ll allow us to monitor when the flow we are following has closed out their position. By consistently checking the open interest the day after we enter the trade, it’ll indicate how long we should be holding the position.
Reason #3 You May Be Making The Same Mistake Over and Over, and not Realize it
It’s easy to not be completely aware of the mistakes you’re consistently making if you’re not taking the time to write down what you’ve learned. It’s easy to get caught up in the market, especially when it’s fast-moving. This is where the majority of mistakes are made. Keeping track of your results wins, and losses, while taking notes, will help you analyze what trading style works best for you.
Reason #4 You Are More Likely to Hold Yourself Accountable (Less Chance of Gambling)
Nowadays, with ‘sentiment only” leading rallies and retail YOLO trades, it’s easy to get caught up and enter too many lotto trades. This is only natural, and almost every trader working with their own capital will do this once in a while. Risks are a part of the business, right? Well, sometimes. When the opportunity presents itself, risks can be quite rewarding. However, taking unnecessary risks by entering into lotto trades will end up hurting your account over time. Tracking your daily returns, or weekly P/L is a good way to hold yourself accountable so you have a green P/L at the end of almost every week.
Reason #5 You Can Identify Your Strengths and Weaknesses; What Works and What Doesn’t
By journaling your trades, you can really zero in on what your strengths and weaknesses are as a trader, from both a technical and psychological standpoint. How many of your trades were
impulsive vs how many were thought out? Did you practice risk management, or did you hold trades for too long?
Reason #6 You Can Review Your Trades with a Trading Coach or Accountability Partner
Hiring a trading coach, or finding an accountability partner with different strengths and weaknesses, can take your trading journal approach one step further. Having a second set of eyes from either a professional, or another trader, read and review your trading journal can help you further analyze your trading style, and provide valuable insights that you may not have thought of yourself!
TradePro Academy’s Trading Journal, Accountability Partners Program, and Private Trading Coaching!
Recently, TradePro Academy launched its very own Accountability Partners program! These channels created on Echofin provide a safe space for our community to help each other review trades, as well as discuss possible NBT (next best trades). We have also recently created a trading journal, offered to our community, and private coaching sessions to our members!
To learn more about this you can join a community of well-versed traders that do this on a daily basis and a plethora of education, you can join TRADEPRO AcademyTM! Where we trade stocks and options daily!
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The information contained in this post is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO AcademyTM is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.