How Can You Analyse A Journal To Improve Your Trading?

Journaling your trades offers an unparalleled opportunity to improve your trading skills – and to achieve better results.

But how does journaling help you to make changes?

First, it’s important to make comprehensive journal entries. Make sure that you include everything: Obviously, time, date and amount of the particular stock are essential, but also how you felt, why you chose to invest, what the market conditions were at the time, how you analysed the evolution of market conditions at that time. Anything you think might be relevant should be noted, including your opinion on what happened.

With all this information at hand for each trade, you can steadily improve your trading in a number of ways:

  • Avoid trade set ups that don’t work. A trading journal will show very clearly that specific strategies just don’t seem to work for you. You can determine whether the strategies just don’t work, or whether you aren’t applying them properly, by comparing the textbook plan for the strategy with how you are executing it. Or you can see if there is a factor that you are regularly failing to take into account.
  • Get a better understanding of winning trades. When your journal shows winning trades, do they have a factor in common? Is the strategy you are using behind the gains, or have market conditions just turned out favourable? Use your journal to determine the specific factors that are making you succeed so that you can apply them in a wider variety of market conditions.
  • Identify favourable trading conditions faster. As you note by analysing your journal, the factors that make your trades successful, you will be prepared to recognize the appearance of these factors in real-time market conditions. It will become almost second-nature for you to see a favourable trade setup and to execute the right trading strategy for it.
  • Take stock of your trading psychology. You trade with your emotions as much as your intellect, and, if you note these feelings in your journal, you can learn to understand and control them. You find the mistakes you’ve made clearly indicated in the journal. How many of them can you attribute to an emotional, rather than a rational response? What triggered that extreme emotional response? When it happens again, you should be conscious of the emotional reaction, and able to replace it with a logical response.
  • Review and improve your trading systems. Logic can also be reviewed and improved with journaling. Based on careful analysis of past experience, you can fine-tune your strategies for trading, taking a close look at what elements of your decision-making need to be improved. You may be failing to react to certain aspects of market conditions. In that case, you will see that these same aspects appear each time your strategy fails. Perhaps your system depends on events, so that, when there is no news, your strategy fails. Analysis of your journal will bring this out.

Take advantage of the tools available in a great journaling program like TraderSync, which even tracks your emotions for you. You’ll see the improvement in your results.