Trading Psychology – Five Common Mistakes Traders Make in Keeping a Trading Journal
Keeping a trading journal is vital to developing your trading and trading psychology. Here are five common mistakes traders make in keeping the journal and wha options spreads you can do about them:
Mistake #1 – Fail to Keep a Trading Journal – I know this sounds silly, but many traders don’t keep a trading journal. They think it’s unnecessary, don’t know how, or think it’s too much trouble. Some traders are reluctant to record their trading losses and errors.
Solution: Keep a Trading Journal! Make it your goal to get a notebook and make an entry in your journal before your head hits the pillow tonight. Set aside notions that it’s unnecessary and too much trouble. Keeping a trading journal is necessary if you want to become a competent trader. And, if you are reluctant to look at your losses and errors, keep in mind that hiding from them will not help you correct your errors. You need to understand first what is going wrong before it can be fixed.
Mistake #2 – Only Trades Are Recorded – Although recording trades is very important, it’s insufficient. If all you have are the trades you took, you don’t have much useful information because it doesn’t help you get better.
Solution: Summarize why you took the trade. How was the market trading when you took this trade? Adding this information can help you understand conditions under which a trade is likely to work verses when it isn’t likely to work.
Mistake #3 – Important Market Data Are Not Recorded – Traders may ignore writing down data like the day’s high, low, and close, but knowing these can keep you in sync with the markets you trade.
Solution: Keep track of your market by writing down key data. Add important indicators you follow and general market statistics such as advancing and declining issues. After a while, you may surprise yourself at how well you begin to pick up on the nuances of your market.
Mistake #4 – Important Data About You Are Not Recorded – Trading psychology is a key part of trading. Just like trade patterns that set up regularly, traders have patterns, too. It is important to know these.
Solution: On each trade, record your thoughts and feelings. This is the best way to understand your personal trading psychology. Look for patterns in your actions. Are you constantly trying to counter trade a trending market? Are you scaring yourself out of good trades? Look to identify and address your patterns.
Mistake # 5 – No Review of the Journal – Some traders think that if they write down what happened while trading today then that’s good enough. It’s not. You need to do more to capitalize on the benefits offered by the trading journal.
Solution: Review your journal regularly. A weekly review is a good practice. Regular review will not only help you see where your trading can be improved; it will also help you see progress. Watching yourself develop will lead to greater confidence in your trading – another benefit of keeping a trading journal.