What is a trading diary and how to use it?

What is a trading diary? Most novice traders begin their adventure in forex trading by throwing themselves in the head . They focus on aspects directly related to profitability. Why, after all, why negotiate if not to make money? Right?

Some of the main priorities of a list of novice traders will be to find out which indicators to use, when entering the trade, which lot size to use, which pair to trade with… and the list goes on. Many of them operate lightly and it usually doesn't take long to suffer their first loss. For some, it is only a matter of time before they encounter a chain of losses.

Then, the dreaded question appears: "What went wrong?"

Certainly, it would be easier to blame the market and say that things did not go as expected. However, by answering the question in this way, we are depriving ourselves of the opportunity to improve. A more constructive way to find the solution to a loss chain is to keep a trading journal.

What is a trading diary?

Simply put, it is a document that allows you to enter the details of your operations . It may contain specific details , such as: the market in which it operates, the time when it opened its operations, the time when its operations were closed , the technical and fundamental analysis on which the operations were based, the levels of stop loss and profit , the result of its operations and its observations on its own operations management.

Something more important than tracking your gains and losses, the goal of a trading diary is to make you more aware . Keeping a diary has been shown to help improve self-awareness. He can easily tell you what to keep doing and what practices to stop.

How do I create a trading journal?

You can easily write your diary on a notebook or perhaps in an application or software such as Google docs or Microsoft Excel. You can mark the columns with the details listed above, add more or remove some of them as you see fit.

It is important to remember that, as with any other tool, your trading diary will only work if you use it correctly. The following are the best practices for maintaining your trading journal:

It has to be constant.

The logic is simple: the more data you have, the easier it will be to find out what works and what doesn't. You can't just write about entries in winning trades, because some of the biggest trading lessons can only be learned from losers. Don't get me wrong, you will also need to write about how to win trades and what you are doing right to focus on them.

In my case, my trading diary helped me discover that I gain more profitability by trading with larger currency pairs (all involving the US dollar) than with commodities and crosses. So, I'm just looking for trades with pairs of dollars. When I don't see potential trades, I don't waste time forcing on trading in a market that I know I don't feel comfortable with.

You have to appreciate the changes you've made in the past.

You should create your diary so that it is easy to review your performance and your thinking. It is important that you are able to write down what may have improved with each operation. I am a strong advocate that even a winning trade can be done better. Under these circumstances, I asked myself: how could I obtain more profitability? Perhaps getting profits at the first sign of reversal or escalating the position would have worked. So he would leave me reminders to be prepared if I found myself on the same stage again.

Use it to define your goals.

A trading target is not necessarily equal to the amount of X dollars in your account at the end of the month. It can be as simple as developing a good habit every time.

One of the biggest challenges I faced when I started trading was doing a lot of trading at the same time, without realizing that I was doubling the risk of one to two currencies. After discovering this in my diary, I set a goal to be more rigorous when evaluating which currency pair to trade with and to hold only one position in one currency at a time.

Trading is a constant learning process. And therefore, you must be self-critical to work on a better version of yourself and become a better operator. A trading diary will help to do just that.