How to grow your trading account: Trading Journal ; a tool necessary for succeeding in the financial markets.
Record management is knowing what you have, where you have it, and how long you have to keep it
"It is easy to make money in the financial markets but the problem lies in holding on to that money" a wise man once said
A lot of people ask questions as to why people make a lot of money in the forex market and lose the majority of that same money leaving them with zero to nothing. I also asked this same question for a year or two till I finally understood the reason. What I discovered is that most traders make money but the problem they have is making it consistently.
In this post, I will be giving one pivotal reason why people are not profitable in the financial market.
1. Poor record keeping
There is a saying that awareness is the first step to change. A lot of amateur traders are not aware of their trading performance. They don’t know their statistics as regards their risk to reward ratio, their percentage per trade, their maximum drawdown, and a whole lot of things. They just trade as it comes. This makes it difficult for them to identify their problems and hence makes working on it becomes difficult. To solve this problem a method of keeping records should be adopted in ones trading life.
What is a trading journal?
A trading journal is a record of trades that are being executed by a trader for the purpose of record-keeping, performance tracking, and reevaluation of one's trading strategy.
Most amateur traders take trading as a gamble or just a game of luck whereas it should be treated as a very serious business. Now ask yourself if you have ever seen any business succeed without proper record keeping? I am sure you know the obvious answer. So the first step is to get a trading journal and record every one of your parameters for entering and exiting a trade.
What should a trading journal contain?
A trading journal can contain a lot of things based on preference but there are some basic things that it should contain. They include;
- Entry date: This is the date on which your trade was executed.
- Direction of the trade: This column shows if you are going long or shot.
- Symbol/ currency pair: if you are trading stocks you use symbols and if you are trading forex you use currency pair
- Strategy: This refers to the strategy you are executing for a particular trade. This helps to know when a particular strategy is doing well or doing poorly. It also helps you know when to reevaluate your strategy.
- Entry price
- Stop loss price: This is an important part of a trading journal. It is meant to be calculated based on the percentage a trader is willing to lose. This is where risk management comes into play. I have talked about risk management in my previous post.
- Target price
- Reward: This should be represented to the risk. So if you risk 1R and get two times the risk as profit, the reward would be represented as 2R
- Exit price
I hope with this post you know the importance of a trading journal. I also hope you know what a trading journal contains.
On this note, I will like to end this post with a quote from one of my mentors;
keeping records enhances the pleasure of the search and the chance of finding order and meaning in these events
When you keep records you discover things. Start keeping records today...
Thank you for reading my blog.