4 reasons why you need a trading diary

You may be wondering why it is necessary to keep a separate trading journal since almost every broker provides a real-time report of your trades. In fact, one could argue that the broker’s records also keep track of available buying power, margin usage, and profit and loss for each trade made. Nevertheless, there are advantages to keeping a separate trading journal, and here’s why.

Historic record

The journal will, for some time, provide a historical perspective. It will not only summarize all your trades, but it will provide an overview of the state of your trading account. In other words, it will be your personal performance database, giving you the opportunity to go back in time and determine how often you traded, how successful each trade was, which currency pairs performed better for you, and even which timeframes gave up the best winning percentages.

Planning tools

A good trading journal should not only record your actual trading data, but it should also provide information on what your plans are for each trade. This feature allows you to consider each trade before taking it by setting parameters for where you want to enter, how much risk you can accept on the trade, where your profit target will be set, and how you will manage the trade as it progresses. In other words, the journal becomes a way for you to record your thoughts in actual numbers and makes it possible to transform wishful thinking into practical reality. It forms the basis of a method for planning your trading and then trading with your plan.

Methodology verification

Another very important by-product of a trading journal is the fact that over time it will verify your methodology. You will be able to see how well your system performs under changing market conditions. It will answer questions like: How did my system perform in a trending market, a ranging market, different time frames, and the effects of your trading decisions such as placing stop-loss orders, too tight or too loose? To retain all the details of the logic behind a particular method, the trading journal must be comprehensive.

Modification of mind patterns

One of the most useful features of your diary is the concrete help it provides to force you to change your habits from destructive to constructive. As you learn to switch out your plan, you will develop a higher level of self-confidence. Your profitable trades will not feel so random, and your losses will be “planned for” and therefore will not disturb your psyche in a way that makes you feel that a loss means you are a loser. A very important mental and emotional factor in trading is your level of self-confidence. Self-confidence is the antidote to the fear and greed cycle in which many traders will get stuck. Fear and greed is a natural, hard-wired response in most people. If you win, you want to win more; if you lose, you feel fear and even panic as your account shrinks towards zero. Having a journal that collects your statistics creates a trading plan by defining parameters for necessary actions, provides a rearview mirror so you can measure how well you executed each trade, and most importantly, gives you feedback to develop and evolve your trading skills. You will find a great trading diary to be a best friend and mentor as you progress. (Market hours for Tokyo, London and New York determine the volatility peaks.)

The two-part journal

It is recommended to create a trade journal that performs two main concepts: – A chronological columnar list of trades that you can summarize and compile so that you can have a record of all your efforts. This is best done by entering all relevant data in the columns. Of course, you can keep records using an Excel spreadsheet that can automatically calculate for you, removing simple arithmetic errors. This depends on your own abilities in spreadsheet modeling. – A printout of the actual chart you used to determine the trade, indicating your entry level, your stop-loss level and your potential profit level should be clearly marked on the chart. Highlight the reasons why you made the trade at the bottom. Finally, you should create a journal for each type of trading method or system you use. Do not mix systems, as the results of your trades will come from too many variables and will then be incomplete. Therefore, if you have more than one trading system or methodology, you should keep a journal for each one. Each trade you record should be based on only one particular system, which then gives you the opportunity, after 20 trades or so, to calculate the expected or reliability of your system.

Here is the expectation formula:

Expectation=[1+WL]×P-1where:W=Average winning tradeL=Average losing tradeP=Percentage win ratioExpectation=[1+LW]×P-1where:W=Average winning tradeL=Average losing tradeP=Percentage win ratio Example: If you made 10 trades and six of them were winning trades, four losing, your percentage win ratio would be 6/10, or 60%. If your six trades made $2,400, then your average profit would be $2,400/6 = $400. If your losses were $1,200, then your average loss would be $1,200/4 = $300. Apply these results to the formula and you get: P=[1+400300]×.6-1=.4P=[1+300400]×.6-1=.4 or 40%. A positive expectation of 40% means that your system will give you an additional 40 cents on the dollar over the long term.

About the Vikingen

With Vikingen’s signals, you have a good chance of finding the winners and selling in time. There are many securities. With Vikingen’s autopilots or tables, you can sort out the most interesting ETFs, stocks, options, warrants, funds, and so on. Vikingen is one of Sweden’s oldest equity research programs.

Click here to see what Vikingen offers: Detailed comparison – Stock market program for those who want to get even richer (vikingen.se)