Contents
There are many tools a trader can use to improve his trading results. A trading journal is one of them. Thanks to it, a trader can recognise his strong and weak points and work on them.
Today's article will explain what is the trading journal, why it is so useful and how to make the most of it. This knowledge will take you closer to success in trading on IQ Option.
Key Takeaways🔑
| →A trading journal is an essential tool to improve trading results and track progress. |
| →Creating a personalized trading journal allows for better understanding of one's strengths and weaknesses. |
| →Consistently maintaining and analyzing the trading journal can lead to continuous improvement and success. |
How to create a trading journal
The trading journal is nothing else than a collection of all your transactions from the past. This is a place where you note the details of your actions. The form is not so important. It must suit your preferences. It may be a notebook where you will write everything down or the electronic version like an Excel file.
The trading journal should contain all your past trades. And for every transaction, you should note down the following information.
- What kind of transaction you made
- How the trade ended
- Why you decided to open such a position
- What kind of tools you applied
- What your feelings were.
There should be a place to write the name of a financial instrument, invested amount, expiration time, the direction of the trade, indicators used and a strategy you followed. Moreover, you should note the soft factors that are the place you were at the moment of trading, the time of the day and whether you were relaxed or tired, or maybe excited or anxious.
In fact, you can add any category you want. The trading journal is a personal thing so you must adapt it to your needs. Some traders do well without some of the points mentioned above, others need even more. Start with this information and see how that goes. Your trading journal will evolve together with your experience. With time, you will discover what suits you best.
Why the trading journal is so useful
Using the trading journal can effectively improve the results in trading binary and digital options. This is a fact. But why is it so useful? Here are the three most significant reasons.
The trading journal is required in order to earn money trading
Every trader had to begin somewhere. And the beginnings are often difficult. You do not know what is a perfect style and strategy for you. You do not have experience in using technical analysis tools. You do not know how to manage emotions. These are the problems that most traders have to pass through. And the trading journal is an excellent way of dealing with this phase.
You make notes in the journal and draw conclusions. Thanks to the analysis of your past trades you will be able to distinguish the situations that serve you and those that do not. And this means you will get to know what brings you money and what diminishes your capital.
For example, you can notice that most of the winning transactions you conducted in the mornings. This gives you information this is the best time for you. Or when you earn more money on a particular asset, this is a hint you should focus on it. It works similarly for expiration time, strategies applied and so on.
As you can see, the trading journal allows you to select the most efficient strategy for your trading and eliminate what simply does not work. Combine it with the demo account offered by IQ Option. This is an account credited with virtual money so your transactions are completely risk-free. You should practice there for a while, keep your trading journal, and then switch to the real account to make real money.
The trading journal helps you to make money continuously
Discovering your own strategy that brings you money is not all, though. There is always a risk you will become careless when your strategy worked well for a longer period of time. And when you lose focus, you make a place for mistakes. Furthermore, your strategy may work only under some conditions, for example during the crisis. But it will not necessarily work when there is a boom phase in the markets.
You may easily deal with these problems, meticulously documenting your performance in the trading journal.
The trading journal gives you an opportunity to review past trades and circumstances in which you made them. Keep track of your transactions and you will know immediately when you start losing. Then you will analyse the results and be able to come back on the right track very fast.
The trading journal helps you to be grander than others
In the trading world, someone wins and another person loses. The brokers are between these two. Their role is mediation and, of course, they get their share for it.
You want to be on the winning side. And to do that, you must be better than others. The trading journal will help you to reach this goal. If you are using it, you are already greater than those who do not.
You must realise that you ought to become better than other traders, not the brokers. The brokers will offer an average payout that is based on the average return an ordinary trader can make. That is the reason why you should be better than other traders if you want to make money.
How to make the most of the trading journal – 3 tips
1. Design the trading journal according to your needs
The first task is to understand yourself. You have to observe what makes you feel good, in which areas you feel confident and contented. Design the trading journal around these and then adjust it along with your trading journey. You should think about the following:
- Your state of mind. The circumstances have an effect on our actions. We behave in a different way when we are sad, hungry or have other unmet needs. Some work efficiently under the stress, others do not. Understand how the state of mind influences your trading and avoid opening transactions when it is not beneficial for you.
- Risk tolerance. Everyone is different. There are people who are bored with safe trading. There are also those, who are terrified by the huge risk of losing their money. Get to know your risk tolerance and use this knowledge to create a personal trading journal.
- Approach to winning. Again, there are different approaches to winning and you cannot say one is better than the other. Both are good when they match your personality. If you like to be always right, then maybe you should try opening many transactions for a small amount of money, but with a high probability of winning. On the other hand, if you would rather have a big reward occasionally, you can try to maximise the profit from a single transaction and accept some losings on the way. Just understand what is your approach and act accordingly.
These are only a few examples of how you need to understand yourself first and then build the trading journal around it. It has to be yours, otherwise, it will simply not work.
2. Use a form of a table
The trading journal must be ready for quick analysis. A table is easier to read than full sentences. That is why I recommend such a form.
You can use numbers instead of the whole sentences. For example, you can make your own scale on which you will estimate the state of mind. Or you can use just a single word or symbols to name the indicators you used.
Describing the circumstances associated with a particular session in a long paragraph makes it difficult to read afterwards. You probably do not want to miss any details, but it is better to shorten it as much as you can. You will soon find out you do not even have time to read such long paragraphs. Besides, they are difficult to compare and evaluate.
3. Do not be afraid of modern technology
Using a spreadsheet file to write your journal is a wonderful thing just because it significantly simplifies calculations. A Google Sheets or OpenOffice Calc are free tools that can be used as your best trading journal software. Many parameters will be automatically calculated within seconds. It saves you time and helps to make trading decisions faster.
I do not want to say that the journals on paper are bad. They are not. However, using modern technology makes the process of evaluating your trading much faster and simpler. That is why I recommend you give it a try.
Pros and Cons
Pros:
- đź‘Ť Helps in identifying personal trading patterns and trends
- đź‘Ť Allows for constant evaluation and improvement of trading strategies
- đź‘Ť Enhances self-awareness and emotional control during trading
Cons:
- đź‘Ž Requires time and dedication to maintain and analyze
- đź‘Ž May not provide immediate results or improvements
- đź‘Ž Not a guarantee for success in trading
| Effective Trading Journal Components | Benefits |
|---|---|
| Detailed record of each trade | Allows for in-depth analysis of trading performance |
| Emotional state during trades | Helps in identifying emotional triggers and improving emotional control |
| Customization according to personal needs | Ensures relevance and usefulness for individual traders |
| Consistent updating and reviewing | Promotes continuous improvement and adaptability to changing market conditions |
Summary
I am sure you understand now why it is so important to keep the trading journal. It is an excellent tool you can use to build your trading success. With it, you will be able to analyse your mistakes, draw conclusions, choose the best time and asset and thus, make more money.
The best trading journals are designed around your personal characteristics. They are in the table form and written with the use of modern technology.
Keep the trading journal, learn from mistakes and become a better trader in no time. Remember to practice in the IQ Option demo account. Like this, you will not risk losing your money but you will have an opportunity to learn about yourself and your trading style.
Enjoy trading!
Q&A
- Q: How often should I update my trading journal?
- A: Ideally, update your trading journal after every trade to maintain accuracy and consistency in the information recorded.
- Q: Can I use a pre-made trading journal template?
- A: Yes, you can use a template as a starting point, but it's important to customize it according to your needs and preferences for maximum effectiveness.
- Q: How do I analyze the data in my trading journal?
- A: Look for patterns, trends, and correlations between different variables in your journal to identify areas of improvement and develop better strategies.
- Q: Will maintaining a trading journal guarantee success in trading?
- A: No, a trading journal is a helpful tool for improvement but does not guarantee success. It's important to combine the insights gained from your journal with discipline, practice, and ongoing learning.
- Q: Can a trading journal help me manage my emotions while trading?
- A: Yes, by recording your emotional state during trades, you can identify emotional triggers and work on strategies to manage and control your emotions more effectively.