Whether you are new to the world of trading or whether you are much further along in your trading journey, a trading journal is essential! Today, the editors of FixyTrade would like to tell you about trading journals and what makes them such an excellent tool for every successful trader.

They allow you to analyse your performance and improve your strategies in no time at all. Once started, a trading journal quickly becomes your best friend. In this article, we will tell you everything you need to know in order to keep your own trading journal!

What is a trading journal?

If you have followed the bullet journal trend, you will have no trouble understanding what a trading journal is. It is a journal that allows you to track the progress of your trading performance day-by-day. Its purpose is to allow you to analyse, as you go, the different strategies that you have put in place, along with their results.

You have to take the time to complete your trading journal on a daily basis if it is going to be effective and help you actively learn from your mistakes and grow as a trader. It is important, if not essential, to keep the following information up to date:

• An inventory of each trade,
• The markets in which you trade,
• The details of your asset analyses,
• Your reasons for choosing one strategy over another,
• The nature of your investments and the type of trading,
• Your emotional state at the time of each transaction,
• Plus your balance at the start and end of the day.

If updated daily and rigorously, your trading journal will allow you to build a database that contains every detail of your journey. This exercise will allow you to analyse the development of your thinking as a trader. Plus, doing so will enable you to go back in order to identify your mistakes and avoid repeating them.

A trading journal is an exercise that we encourage all traders to carry out because it offers multiple advantages. Find out more!

Benefits of a trading journal

Trading journals can be a great exercise to help you become a better trader. They offer many advantages.

To name just a few, the editors will tell you how they enable you to:

• Be disciplined as a trader,
• Improve your risk management,
• Become emotionally detached when making decisions,
• And structure your trading routine.

It is possible to become more disciplined!

The first benefit that everyone who starts using a trading journal notices is that they become more disciplined. How? Often, and especially when you are just starting out, you will tend to overestimate your abilities. Sometimes, you might want to rush some research. The process of writing down everything you did during the day can rein in all of your bad habits. Being honest with yourself about what you do, how you do it and above all, why you do it, will allow you to grow as a trader, and also as a person.

You might be wondering, then, how this step can be of such tremendous benefit to your trading career? Quite simply because discipline is what will drive you to improve how you analyse and research your assets, to study each situation more carefully and therefore better measure the risks taken when investing in a financial asset. You can find out more about this below!

Why is emotional detachment an advantage?

As mentioned above, it is important to track changes in your mood and emotional state throughout your day in your trading journal. You are probably wondering why, and we will explain. In fact, beyond the therapeutic effect that this may have, it is useful to have this data to hand in order to see how your emotions influence your judgment.

An important part of good trader psychology is remaining as neutral as possible. One of the tips you will tend to hear is that you should act like you are a machine that manages financial assets. But this is impossible for human beings.

So, what we suggest is that you control your emotions as fully as possible by knowing exactly what mood works best for each stage of the process (research, opening and holding a position, etc.). This will enable you to avoid becoming dispirited when you realize that your current mood is preventing you from thinking clearly.

So to summarise, in and of itself, tracking your emotions will enable you to identify when you are controlling them and when are they controlling you, and what effect that has on your strategy.

What the trading journal promises: significantly reducing the risks involved

And if you are wondering, the trading journal delivers on this promise! In fact, what trading journals enable you to do is to track the results of each risk taken and to adjust your behaviour as a trader accordingly. It is impossible to achieve zero risk, because risk is an inherent factor in the stock market. Nevertheless, it is perfectly possible to avoid opening positions that lose you money unnecessarily.

By tracking your progress, you will be able to find out what is preventing you from achieving the best possible gains:

• Maintaining a position for too long for fear of missing the perfect trade,
• Reckless risk-taking on a position that is too large,
• Maintaining a position for too short a time,
• Letting yourself be controlled by FOMO.

*FOMO is short for the “fear of missing out”, i.e., the fear of missing the right time to exit a position.

How does a trading journal help structure your routine?

When we write down each step of our day on a daily basis, we create patterns and models that we repeat over time, even unconsciously. This is a good thing because it allows you to get the most out of your day while making the maximum profits. A good trading routine will also have a positive impact on your morale, which will directly influence your performance, as explained above!

So having a trading journal is a great thing, right? So what are you waiting for, get started!

Creating an effective trading journal – the FixyTrade guide

Here are some ideas for building the perfect trading journal:

• Start by noting the dates, the time ranges, and your entry and exit prices,
• Set your budgets,
• Write down your thoughts about the market overview,
• Note the parameters that you think are useful to take into account,
• Document your research and your analytical strategy,
• Take the losses from each investment into account.

This last point is all the more useful because if you notice that your losses are too large, you can set up a strategy that involves automatically selling an asset as soon as it reaches a certain price.

You should also learn to document the trends before each transaction, in order to better understand what skewed your analysis and led to your results, whether losses or gains. Try to find patterns that will help you create a good trade instead.

Analysing your trading journal

The last step is to analyse! There is no point in spending so much time documenting every step of your day if you do not use it to retrace your steps. Analyse what you have done and the results of your actions. A trading journal is a training tool that can help you to progress quickly, provided you resolve to use it correctly.

This database, which is only accessible by you, is a complete summary of who you are as a trader and what you could become, provided you exploit it to its full potential. Make graphs, summaries of your notes, and trends that resulted in good or bad trades.

So what are you waiting for? Start your trading journal!