If you are in the stock market, you already know the importance of data. Data holds immense value and comes in handy during critical stock market situations. From choosing your stock, whether fundamental or technical, to choosing the right time to execute your stocks, all are influenced by data. Data leads the way.
Data is extremely necessary to form new strategies or understand why certain strategies didn’t work. It is this data that helps you make all the crucial decisions. Now imagine having similar data for your own trades. Voila! That would be a game-changer.
What is a Trading Journal?
We have all maintained or seen someone maintain personal diaries. A diary where we store key events, important dates, important people and most importantly, a diary where we self-reflect. This is all we will do for a trading journal as well.
A trading journal is used to keep a log of all your trading activities and your pre and post-trading activities too. In very simple terms, you will record everything you did before making your trade, during the trade and after your trade.
Why is a Trading Journal Necessary?
A lot of you might wonder why we even need a trading journal. You may believe that your personal experience and your own memory are sufficient to help you learn. There is no denial. However, this learning can become better in multiple ways if done systematically through your trading journal.
A trading journal will help you analyse your strategies, help you decide or identify the sector that works well for your options trading journey, and this list goes on and on.
Benefits of Using a Trading Journal
To begin with, let us look at some of the key benefits of having a trading journal:
1) Records All Your Trades
You will be able to make a note of every move you make. This will help identify the mistakes you made or even help you identify what worked consistently.
2) Help You Analyze Your Strategies
It is key to understand your own moves in the stock market. One has to have the knowledge of what has worked and what didn’t so that one can make amendments, if necessary, to your method.
The dynamic nature of the market demands dynamic strategies. You need to be well-versed with many for the timely application of strategies. And it is not necessary that you might remember all of them and when they were used. However, having a trading journal can help you here. If you end up in a similar situation as before, your trading journal will show you how you responded to it, and this can help you see what needs to do in the current market situation.
3) Helps Identify Weaknesses
You have to sit down and face all your losses or mistakes to understand why they happened. This will help you to avoid such market blunders in the future. Your trading Journal will easily help you to identify such weak arenas.
You can reflect on where you went wrong. Was it in your fundamental or technical analysis, or was it during the execution? A lot will come to you with this simple act of trade journaling. Review what you’ve done and see what needs to be amplified and what needs to be avoided.
Trading can get addictive too. You need to learn to stop and rethink when you are going through losses, and a trading journal can help you understand why you are facing losses to help rectify them.
Trading is usually an emotional commitment. The sudden market changes and the huge capital at stake can make it really hard to remain calm. Trading is known to be stressful for many. However, at the end of the day, it is necessary that you sit down with all those experiences, allow your mind to calm down and allow yourself to reflect on what happened in those few stressful hours. This is where journaling can help.
5) Helps You Set a Goal
Trading mindlessly can be harmful in the long term. You need to be aware of profits and loss. Having a trading journal can also help you set goals for profit too. Having small incremental growth targets can also boost your trading methods and profits.
6) Make You More Disciplined
Discipline and dedication are key to every kind of success, and this remains true for succession trading too. This practice will help you discipline yourself not just in terms of your decision-making or self-reflection, but this sincerity can reflect in your trades. Trading calls for punctuality and determination, which you can potentially develop through trading.
Here are six main reasons why you should start your trading journal, but there are more. Trading journals have worked wonders for many. Successful traders carefully note every step they make to reflect, identify and analyse through their trading journal. Look at the trading journal as an additional tool for your learning, screening and analysis.