One of the main issues we see in traders in the lack of journaling. What many traders don't understand is, journaling is a stepping stone to becoming a profitable trader. The reasons behind this is, it helps you find out what is working and whats not. If you do not have a track record of what works and what doesn't, how do you know what works? The answer to that is you don't, not only will this serve as a track record of whats working and whats not but it will help you gain confidence in your system.
Lets look at a few items traders need to be recording in their journals.
Market Conditions:
This is commonly overlooked when traders are keeping a journal. The reason this is so important is so traders know how their system works in different environments and what adjustments they need to make. Many times we hear from our members in one on one sessions about how a month ago the signal worked 90% of the time but now it is not producing the same results. We then go back and look at what changed and 99% of the time the market conditions have changed.
Since the trader was not tracking market conditions he/she will then need to go back and record what happened and document the findings.
If traders keep track of these conditions they will know exactly how they need to modify their signals when the conditions present them selves.
Contracts:
How many contracts are you trading? This is a very simple part of our journal but what we have noticed is many times traders will reach their emotional contract threshold and start to have issues once they start increasing size.
Keep track of how many contracts you are trading and if you see a decline in results you know that the size it self might be causing some subconscious issues. If this is the case we strongly recommend traders read The Chimp Paradox to help address these issues.
Entry & Exit:
Traders need to keep track on when they enter and exit trades. Not only will they need to keep track of the entry and exit points, it is strongly suggested to keep track of why they entered at the level and why they set an exit at the level they did.
Also if traders end up closing a trade before their target, it is strongly recommended to leave a detailed reason as to why.
Mental State:
This is one of the more important parts of our journal. Many times we see traders placing lots of revenge trades or FOMO trades but they do not document this. The first part of identifying the problem is to admit there is a problem but this is extremely hard to do if you do not have the data showing whats going on.
If you are having issues with your trades, make a column on your journal dedicated to describing your emotional state before entering,during the trade and at the exit.
There were just a few key items traders will need to document throughout the trading process. Journaling might not be the most attractive aspect of trading but it is one of the most important.