A trading journal or a notebook allows you to keep records of all your market activity neat and detailed. Doing so benefits investors to pinpoint their shortcomings and the edge over charts. It is possible to note down your risk/reward ratio, winning rate, best setups, trading conditions, mindset, etc.

Blindly spending time in trading trying to reach the 10000-hour rule(practice something for a total of 10000 hours will make you a master) will not get you anywhere. Working smart is the better option here which can be achieved via journaling. This holds for all formats, whether you are an athlete, doctor, pilot, engineer, and so on.

10000 HOUR RULE?

Sitting constantly in front of the economic calendar and the charts will only tire you out. This is popular with beginners who are always trying to find some holy grail indicator. Keeping everything simple and recorded will ensure that an investor is not complicating the charts and is adhering to the game plan.

AUTOMATIC AND MANUAL JOURNALLING

With an automatic journal, the trader records their market activity through third-party software. Depending on the available features, they can determine the best trading conditions for their strategy and the areas to improve. Myfxbook is a popular choice amongst many to get a detailed analysis of their account.

The industry-standard MetaTrader 4 and 5 platforms also provide a detailed performance report. However, it is not as efficient as proper journals.

Manual journaling may be time-consuming for some, but it provides more profound benefits. This is the primary choice of many professional traders who work in big banks, hedge funds, and prop firms.

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Image 1. The advanced statistics section on Myfxbook shows some crucial information such as win rate, no of trades, Sharpe ratio, and the profit factor.

AN EXAMPLE OF MANUAL JOURNALLING

Let us go through a journal of a swing trader who wishes to record all of their executions manually.
Symbol: EURUSD
Confirmations:

  1. Weekly resistance
  2. Daily candle with a little wick around 33 percent
  3. H4 bearish

Trade Type: Price action swing trader R/R 1:2
Result: loss
Weekly

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The weekly chart showed that the market is in a downtrend. The previous candle was bearish with a huge wick. Preparing to take an entry but let’s confirm from a lower time frame.

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Diving straight to the H4 chart, I observed a bearish engulfing pattern that gave me my entry. The previous supply zone provided further confluence.

Lessons:

  1. News took me out of the trade. The Brexit deal had an impact on EURUSD, which went up as the bears favored the greenback.
  2. I should make the charts clean.
  3. Take confirmation from the daily chart before diving into H4.
  4. I should take better screenshots from the website.

Over an extensive duration, this market participant gathers several lessons which they utilize to avoid mistakes in the future. Cutting the losses can help them maintain drawdown while bulking up on the profits.

Even though this trader does not have a detailed statistics report and has poor journalling skills, they will gradually develop those vital skills via trial and error. Their learning curve is much steeper than that of average investors.

SOME KEY BENEFITS OF JOURNALLING

Some vital benefits of journalling are as follows:

• Strengths. Traders can swiftly comprehend their ups and downsides. They can then remove all of the drawbacks one by one.

  • Mindset. Recording all of your feelings can help you manage them with ease. Emotions such as fear, greed, anger, and happiness have no place in the markets.
  • Setups. As you remember your favorite trades, you will not hesitate to press the buy or sell buttons once a similar pattern forms.
  • Targets. It is possible to set up your goals neatly on paper and follow them with ease.
  • Discipline. Plan to trade. Trade to plan is a common term amongst the best in Wall Street for maintaining consistency in trading. To achieve this feat, investors have to strictly write down their risk management and follow it.
  • Virtual testing. Demo trading is a great way to learn in the initial stages of your trading career. Write down all of your trades on your journal and see if you can beat the markets before proceeding over to the live account.
  • Accountability. A trading journal will keep you accountable for all the errors and hold you dear to the rules and regulations.Apart from this, a detailed record of trades can provide you with data on the instruments where you have the best profitability. Later on, you can start trading those assets right away without wasting time on other currencies or equities.THE RIGHT TIME TO JOURNAL

    Before getting up from your desk, traders should note down all their trades. Delaying the activity to the weekend will result in poor journalling due to memory loss. This is vital for scalpers and day traders who place multiple executions within 24 hours.

    SUMMING UP

    A trading journal can help you enter the 5% of investors who withdraw their profits frequently. While the deed may seem hard at first, it can help you a long way and probably save your portfolio from complete liquidation.

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