Trading Plan & Trading Journal, Two Tools To Help You Grow As A Better Trader

One of the established ways to determine whether you have developed a winning trading plan comes by reviewing your trading journal

. Smart traders of the stock and options market realize they must track their trader performance by seeing what has worked and what has failed to work in their investing. The best way is by logging your trades into a journal.

Some people prefer to write their trading plan into a spiral bound notebook, while others create a trading journal spreadsheet. The form that the trading journal takes is not relevant. The main thing is to use the material to determine whether you've made better trades.

A trading plan can help any individual set their goals, establish a time frame, and begin the process of trading without emotions. By putting goals in writing, a trader can set up guidelines to follow and institute benchmarks that help an individual see how they are learning and growing in their stock market knowledge and ability.

A good trading plan begins with education; you can't trade the stock market unless you know what you're doing, otherwise you could face fast financial setbacks. You need to establish a strategy to use and become proficient at it; don't try to use a dozen strategies, but rather become accomplished at one and continue to hone your ability. Learn how to read a stock chart and conduct technical analysis, which gives an individual the ability to spot market trends and potential movement. Find a mentor or a coach, someone who has experienced the market, and enlist their help. Then it's a matter or practice, practice, practice, until reaching a level of success that makes it imperative to begin funded trades.

Newcomers might not appreciate the value that comes with completing a daily trading journal. It may seem like busy work, but can actually remove some of the fear of the market and give a newcomer hope, if they see how their hard work and practice is making them more proficient in the market.

What should a trading journal include? Most veteran traders recommend that as much information as possible be included, since that makes it easier to identify why certain decisions were made or why mistakes occurred. Among the essentials to be included in a trading journal are these:

. The stock or option purchased, as well as how many shares of stock or options contracts were purchased.

. The amount of money invested in the trade, denoting whether it was risk capital or investment capital.

. The reason or signal that caused you to enter or exit the trade.

. Your entry strategy and exit strategy when starting the transaction.

. Your stop loss levels, whether a percentage of the trade or a dollar amount.

. Your technical analysis of the trade: what the indicators said, where the stock was in terms of support and resistance.

. A complete record of the trade, breaking down each day of the transaction.

A complete trading record over time stops you from repeating the same mistakes. An occasional review of your trading journal will serve as a reminder of what went wrong - and what went right. If you see a pattern of failure, you might discover that you've been duplicating the same error.

Be sure to keep a complete record when you add strategies to your trading plan. It's better to do this with non-funded trades, since the journal will point out the flaws in the process. If you are able to trade successfully in non-funded trades, you should be able to do the same thing when you switch to funded trades.

by: Matt kaldor

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