There are some things that successful stock traders highly recommend but only to be overlooked by the beginners (and even the “pros”). This one is one of those “some things”…
Maintaining a trading journal is very important. It is even taught in several stock market courses.
It packs plenty of benefits.
However, there are many new stock traders who undermine the importance of this simple habit.
Are you one of them?
Here are 7 reasons why every stock trader must have a trading journal:
1. Helps in auditing
This is quite an obvious one. When you’re journaling, auditing your trades become seamlessly easier.
You can go through your previous trades at any time, collect up relevant data, and deploy that in decision-making.
Auditing is one of the key elements that stock traders require to smartly improve themselves.
2. Establish your trading style
There’s a reason why you shouldn’t copy other stock traders blindly. Because one’s trading style varies from the other.
Meaning, they have their own style that might not necessarily fit yours.
This is exactly why it’s essential to first establish what kind of stock trader you are. What’s your style? How do you like trading?
These are answers you can find when you’re journaling your trades.
You can go back to your previous trades, see through your track record, and figure out your trading style.
3. Find loopholes
Yes, you have gone through the best technical analysis course. You have made a lot of effort. You have spent so much of your time in this.
However, your trading strategy can never be perfect. There would always be loopholes.
This is especially for the new stock traders. Experience plays a big role in the process. So, even when you’re traditionally “qualified”, there could be a lot wrong with your trading strategy.
Identifying these loopholes and wrongs is only possible when you give your trades a hard look.
Journaling will help a lot here.
You can re-visit your trades, audit what went wrong and find out the problems.
4. Understand your weaknesses (and strengths)
What trading trait do you have? What are your weaknesses and strengths?
It’s essential to have these answers.
To make better trades, you should quadruple down on your strong features and make sufficient improvements to your weakness.
Your trading journal would be an open book here.
It outlines all your trade information, showing what went wrong and what went right. You can go through them, find a pattern, and figure out your strengths and weaknesses.
5. Keep track of your goals
You will end up lost if you know not where you’re going.
Knowing how far or close you are to your goals will help you stay on the right course – and maintain a good pace.
Your trading journal helps here.
It keeps your goals upfront and on the focus. So, that you’re always trading with a purpose and intent.
If your previous trades aren’t taking you close to your goals, you certainly need to adjust your trading habits.
6. Holds you accountable
Over the course of your trading journey, you will continue growing and getting better.
But this won’t happen automatically. It requires proactive effort on your end to actually improve.
And this proactive approach will follow only when you’re holding yourself accountable for the outcome of your trades.
A trading journal is like a clean mirror, reflecting all that you have done. You cannot escape it. If you have made a mistake, you will see that up and front. And you must hold yourself accountable so as to make improvements and build a better portfolio.
7. Make you a better trader
Collectively, all the benefits of maintaining a stock trading journal help you become a better trader.
It makes you more disciplined. You get better acquainted with the trading side of your personality. You get more informed about your trading style, strengths, and weakness. You discover more of your mistakes. You keep track of your progress.
These provide you with the right mindset, data, and approach so as to actively improve your strategy and make yourself a better stock trader.
These are seven reasons why every stock trader must maintain a trading journal. There are, of course, many other direct and indirect benefits of this simple habit.
So, do take the important measures like enrolling self in the best technical analysis course, outlining good risk management, following credible news, and more.
But, at the same time, focus also on the little details.
Maintaining a trading journal is one of those little details.
As a starting point, some of the basic information you can include in the journal are the names of security, the number of shares, date, gain and loss, descriptions of entry and exit signals, and the reasons behind your stop position.
As you progress and gain more hands-on experience, you will automatically get better at journaling your trades.