Trading journal created by an investor

Before we jump into understanding how to create a trading journal, let’s understand the what, why and when a trading journal required. What makes it a very important document? What types of traders need this trading journal?

What is a trade plan or a trading journal?

A trade plan or a trading journal is a document where a trader / investor note down his assessment of the market and all possible scenarios in a certain time frame. This timeframe varies on the investor’s trade horizon. If he/she is a long term investor then his timeframe could be one to many years. If he/she is an intraday trader then his/her timeframe would be one day. If he/she is a scalping trader then his assessments would be of minutes to hours. In that assessment he/she will plan various possible trades i.e. right time to enter the market, and right time to exit the market in profit or in loss. Then once trades are taken then they are noted diligently with comments on why that trade was taken and its outcome. It’s that simple!

Why a trade plan?

Trade plan or trading journal, is a very important log or document that a trader / investor maintains in order to assess his journey. This will help him/her to understand when or under what kind of circumstances he/she is going wrong in his/her trades. What are the triggers of those incorrect traders. Is it incorrect assessment of market sentiments? (for correct assessment you traders / investors should always take help of Sentiments Decoder) Is it emotion in those intense market hours, is it a bias with which he/she is approaching the market or is it something else? Once a trader / investor start recognizing patterns in his short falls he/she will start working towards it and sets up on the journey of becoming better trader/investor.

Who needs a trade plan?

A trade plan or trading journal is required only and only by serious investors / traders. Those are in stock market to get thrill or overnight success they will always be the one losing their money to the serious traders. For serious traders/investors every penny lost in the stock market matters and they definitely want to translate into a learning. Just to draw the analogy from technology sector it is like growth mindset! Where every wrong decision should be a learning for a trader / investor. This learning will translate into improved actions like reduction in losses to increase in profit with time. If traders takes trades out of gut feeling (emotions and bias) then also he should note it in the journal. This will help him in two ways, either he/she will recognize his gut feelings is not helping and he should further investigate on why so? Or he/she will recognize let’s drop gut feeling and be more scientific in approach.

Time period of a trade plan effectiveness?

Effectiveness of a trade plan or trading journal is gradual but very effective and permanent. Depending on the seriousness, diligence and self awareness a trader / investor can determine how quickly he can evolve into a profitable trader / investor.

Remember, a trade plan should be flexible yet disciplined. It should guide your decision-making process and help you stay focused on your trading goals while managing risk effectively. Regularly review and update your trade plan to reflect changes in market conditions, your trading objectives, and your evolving skills as a trader.

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