1. Identify, Review, Learn and Work on your weaknesses.
Go through all your trades and see where you went wrong and try to consider for your errors from now on and when the time comes to go over your trading journal again, compare the results of the two periods to see if you have made any progress. By consistently keeping a track of your trades, you will be able to see where you might be falling short to work on them.
2. Helps you set up your Goals
Set targets that are slightly better than your previous ones to avoid putting too much pressure on yourself while you are still learning. A journal is a perfect way to determine what goals you want to accomplish, how you will monitor your success, and what you will do to achieve your next targets.
3. Holds you responsible and sensible.
When you keep a trading log, you are less likely to make trades that are not part of your trading strategy. Impulsive trading is what usually causes most traders to lose money.
4. Helps you with risk management
A trading journal will help you identify areas where you might be making errors in risk management. It’s possible that you’re not taking enough risk to make a significant reward by setting the stop loss too close to the current price, or that your position is too small to lead in any kind of real benefit.
5. Brings consistency
When you are consistent with your trading journal, eventually your bad habits will start to disappear, and you will stop losing money as frequently as before. This is since you will be able to see the mistakes you are making, and you will strive to stop making them in the future. Therefore, it is important to be as accurate as possible in your log to identify those mistakes more easily.
6. Provides historical record and encourages performance growth.
The journal keeps track of all your trades over time. It will summarize all your trades and show you a brief status of your trading account. In other words, it will become your personal archive, allowing you to look back and see how often you traded, how good each trade was, which trades worked better for you, and much more.
The more you study your trading journal, the more you will be able to adapt your results for optimal trading and future performance growth.
7. Methodology Verification.
You will be able to see how the system works in evolving market conditions and will answer some of the questions you may have regarding your methodology (if it works in a trending market and different time frames, the impact of any trading decisions etc.).
8. Trading Journal as a Game Changer.
Once you have “mastered” some of your trading techniques, you will gain more confidence and you will be able to alter and differentiate your strategy, thus your profitable trades will finally make sense and your “predicted” losses can be avoided.
As seen from the above list, it is quite obvious that keeping a trading journal has many advantages.
Although it may be difficult at first to keep track of every single trade you make, it is noteworthy that keeping a trading journal is a smart strategy to enhance your performance and gain confidence, while learning how to be disciplined!
Forex trading success demands a lot of preparation and practice. Forex traders must go through a variety of learning processes to be consistently effective in trading. To that end, keeping a trading journal will not only help you get there faster but will also improve you as a trader in the long run.
Kamran Wadud | Financial Markets Trader & Mentor
