The Undiscovered Power of a Trading Journal?

0 Shares

pastedGraphic.png

A trading journal is a notebook or a sword a trader can swing to defeat the markets. Confused? Simply put, a trading journal is a space where you record your financial executions. To make it more appealing, investors also note any mistakes they make during executions. 

Regardless of your profession, constant hard work and note-keeping is an essential factor of success. Whether dieting, running or operating a Fortune 500 company, a journal can help you turn the tide in your favor. Trading is no different in this regard. Long-term consistency is only achievable when you diligently record all the errors and plus points. If you are just starting out in trading, you can use the MetaTrader 4 download option to trade the markets.

  Is Investing in Crypto Funds a Good Idea? [5 Reasons You Should]

I do not want to record a journal!

It’s vital to note that trading is not a regular job or regime you can master by spending 10000 hours. Even after spending thousands of hours in front of the charts, you can still lose 90% of the traders. 

Mistakes are common among beginners who think that trading is a get-rich-quick scheme. They make mistakes even while journaling, e.g., recording only the winning trades.

  The Crypto Market and the Credit Suisse Bank Crisis

What are the types of journaling?

Traders can record their journals through an expert advisor or a manual approach:

  • Expert advisor. Trading bots can connect with your software, collect all the trades, and journal them. They calculate the Sharpe ratio, drawdown, profit percentage, average winning trades, worse trading instruments, etc. MQL 5 and Myfxbook are some familiar options traders use to journal in the forex markets.
  • Manual approach. One of the best forms of journaling. Manually recording your trades within a diary allows for better learning and comprehension. This is the primary choice of the professionals. 
  The Future Of Forex: Emerging Trends In The South African Market

Some professionals keep their journals private, while others make it public. Having an open journal can allow other traders to critique and point out any mistakes in trading.

Example of an Automatic Journal

Myfxbook is quite popular amongst traders who like to use automatic journalling. Let us go through several screenshots of a trading account tracked via Myfxbook.

pastedGraphic.png
Image 1. A trading account at the MT5 platform shows the performance of a trader from September 14, 2021, till November 24, 2021. They have made an average monthly profit of 28.35% with a drawdown value of 18.47%. We can see that the investor trades with a small deposit of $11.96. 

pastedGraphic_1.png
Image 2. Myfxbook journal not only tells the deposits, profit, and trading duration. Further, inspection shows that the trader placed 176 trades with an average winning rate of 68% and a risk: reward ratio of 1.73. They have traded 1.76 lots in total, with an average trade length of 1 hour and 6 minutes. This points to a day trading approach. 

pastedGraphic_2.png

Image 3. We can see the true power of an automatic journal. The trader places trades on multiple currencies and has the best profit factor on AUDJPY, CADCHF, GBPUSD, NZDCHF, and NZDUSD. Using these stats, the investor can avoid trading on poor-performing pairs and focus only on the winning ones. 

Benefits of Automatic Journaling

Let’s sum up the wide-ranging benefits of automatic journaling as follows:

  • No need to manually enter all the trades, which is time-consuming
  • Provides deep insight into performance statistics
  • It eliminates the risk of human error. 
  • You can get immediate insights into your trading strategy

Example of Manual Journalling

Manually recording a trade is preferred by many as it has a better learning mechanism than auto journaling. Lets take a peek into a manual journal.

Symbol CAD/ CHF

Trade type: Buy

Confirmations:

1. 4hr market structure

2. 4hr previous support

3. Exhaustion candle on the daily chart

Trade Type: 4 hr trend trade

R/R: 2:1

Result: Loss

4hr chart

pastedGraphic_3.png

Daily Chart

pastedGraphic_4.png

Weekly Chart

pastedGraphic_5.png

Lessons:

1. I went against the doji candle on the weekly chart.

2. The overall analysis of the weekly chart shows the contracting pattern in which the market faces strong resistance on the top black line.

3. Should have waited for the break above the trend line or retested on the 15 minutes for the entry.

While this trader points out all the necessary points they should note to avoid future loss, they are making certain errors. Can you point them out? If not, here they are:

  • The charts are too complicated. 
  • There is no clear explanation in the lessons. While rereading the journal, they may find difficulty in comprehending them.
  • They are not taking the news into account.

Benefits of Manual Journaling

Here is a summary of all the benefits of manual journaling:

  • Provides deep insight into the trading strategy
  • It can help increase mindfulness as writing by hand requires more brain power and muscle memory
  • You develop a sense of self-accountability as you write down all the errors. This can help you learn from your mistakes and avoid them in the future
  • With complete control over the format of your journal, you can personalize it according to specific needs
  • You can define short and long-term goals and work them over time. Creating a separate section in your journal is recommended

0 Shares

Leave a Reply