As a retail investor in the stock market, you are no doubt eager to improve your trading skills – when to enter a trade? When to exit? How to maximize potential earnings?
One of the most effective ways to analyze your trading success is to keep a trading journal. A trading journal isn’t just a list of what you buy and sell. Every aspect of a trade should be entered in the journal, from the reason that the trade attracted your attention in the first place, to how the stock performed, pricing, etc.
Did you learn about the stock from a news story? What was it? Was it accurate? Should you continue to use this particular producer of news as a source for trading information? That is the kind of question that you can answer by keeping a trading journal.
Did you choose to invest in a certain stock because of what you perceived as a market trend? Was that trend accurate? Did you jump the trend at the start to maximize profit, or were you a latecomer? By tracking how your decisions affect your trading, you can spot potentially dangerous trends and work to correct them.
Using a trading journal will also help you to keep from making the wrong decisions. Suppose you are watching a stock, trying to decide whether or not to buy in? You can consult your trading journal, look up similar stocks that you might have bought under similar circumstances, and decide if your analysis of this one is correct.
The journal, with its accurate info, permits you to take note of what factors have a bearing on certain types of stock movements. Were there market factors, such as a flight from equities, that influenced the direction of trading? Did the fall in the price of oil drag down stocks on a given day? You can learn all this from your journal, and see how to make it work positively for you.
The journal will also help you to trade with more confidence. You’ll see where your system or approach is most effective, and where it seems to fall down. You can get a good sense of this over a long period of time, or just a short one, depending on how you are planning on trading in the future. Journaling also allows you to discover good and bad trading habits and how they affect your performance.
To make the journaling the most effective, all the relevant info has to be included. This is why journaling software like TraderSync is so useful: It makes pulling together all the separate bits of information easy and it allows you to organize them in the way that you prefer. Spreadsheets can’t provide this kind of flexibility and inclusiveness; this is why stepping up to journaling software will make a difference in your trading.