Why keep a trading journal?
First of all, a trading journal is a document that you should always have with you when you trade. It will allow you to learn faster and refine your strategies to make them more and more effective according to market conditions.
Professional traders almost always keep a trading diary and at least make notes of every trade they make.
It is of course over the long term that your trading journal will allow you to improve your strategies. Over time and by analyzing the diary, you will see that certain patterns are repeated and this will allow you to define a more accurate model of the most effective strategies. You will be able to sort out the strategies that worked and those that proved to be losers.
But that's not the only advantage of a trading journal. Indeed, the psychological aspect is also to be taken into consideration since writing down all your decisions and the elements that motivated them will allow you to avoid giving in to stress or other emotions that could make you make bad decisions.
What should you enter in your trading journal:
A good trading diary should of course include a number of elements related to your market positions. You will need to know the entry and exit prices of your asset, the times you took your position and the size of your position.
In addition to these factual elements, you will also need to record in your trading journal the elements on which you based your decision. This could be a major economic news item, an important publication or one or more technical indicators such as a volatility or trend indicator.
The emotional state of each decision should also be noted in the diary.
The form of the trading journal that you will set up is also free. You can opt for a table or a simple manuscript. However, it is advisable to organize the information as much as possible so that it can be found and cross-referenced more easily later on. Think in particular of adding colour codes to the information that is there for better visibility.
A trading journal that looks like you:
If you talk to other traders, you will soon realize that everyone has their own method of keeping trading journals. So, your diary should be different from other investors' diaries because it should be like you.
Again, with time and experience you can refine your trading journal by deleting data that is of little or no use to you or by adding new items. In any case, it is best to start by recording all the details you can about your position in your trading journal and then sorting through them.
Your trading journal should be based on your psychology. Depending on your temperament and the way you live things, you will not be affected in the same way by any of the data collected in it.
In conclusion, no matter what form your trading journal takes, it will be indispensable because it is not possible for anyone to retain all the details and information that led you to make a decision and, without it, you will not be able to analyze your successes and failures to develop an effective and reliable strategy.