Today's post is by Alan Martin from Forex Calculator Online. I've known Alan for a while now, and I asked him give me a little insight into what he thinks makes a successful and disciplined trader. He responded with two words "Trade Log!" Be sure to take a look below at Alan's thoughts on the importance of recording your trades.
Why do I need a trade log?
The Primary function of the Trade log is to save time. It’s a simple and effective tool and I use it every time I trade.
There is never enough emphasis placed on the importance of keeping good records. This is one of the essential ingredients that separates the successful, well disciplined trader from the ex-trader.
Every successful and well disciplined trader keeps a trade journal. Every aspect of each trade is logged. They record the technical data, the history, functionality of each trade, and what made them take that trade. Most importantly, they record how they felt as they went into, during and when they exited the trade.
All this information is essential to track performance, follow strategies, learn from mistakes and work out plans for ongoing improvement. It is an essential ingredient in a profitable trading tool kit.
As the old saying goes, “A blunt pencil will always remember 100% more than the sharpest mind."
Record keeping is considered time consuming and non-productive, especially if you’re just beginning and don’t know how to do it. It can be devastating to not track your performance. How are you ever going to know when you are improving?
A few words of wisdom:
The inability to enter a trade demonstrates a trader's lack of discipline. Either it’s a “go” for the trade or it’s a "no go." If a trader’s system has too many poorly defined areas, it should be changed. Trading should be mechanical; either the squares are filled-in, or its no trade. Sounds simple, but egos want to shine and show that their ideas are better than some mechanical system.
Also, many traders may be trading money that they can’t afford to lose. This puts even more pressure on the trader to not be wrong. Once should always say to themselves, "If I lost this... would it affect my lifestyle?" Not only that, a good system establishes a minimum account drawdown limit; it’s like setting a stop-loss on your trading account. If you hit a predetermined drawdown level, trading comes to a stop until real changes are made-either in the system or the trader’s mental/emotional outlook.
But just talking about these things is not enough. Most of us aren’t very good at giving ourselves a valid self-appraisal. What we need to do is establish a report card giving a grade not only to our system, but also no our emotions and mental discipline. A trader needs to establish procedural constraints and then learn how to match feelings and thoughts to the trading process.
Being able to deal with a losing trade is what separates successful traders from ex-traders. As a matter of fact, it has been shown many times that it’s not so much the system, as it is the trader’s ability to maintain the proper mental discipline and emotional understanding. This gives the seasoned trader the ability to take the higher ground. One of the intangible benefits of learning to become a successful trader is the fact that you usually become a much more honest and introspective person. You learn to honestly appraise your performance and probe your weaknesses. You learn to stay humble, focused and accepting of things you can’t control. All of these things do more than make just successful traders; they can make for success in life.
In conclusion, one of the most essential ingredients in a profitable trading tool kit is keeping accurate records of each trade logged in your journal.
Alan is the creator of Forex Calculator Online. If you enjoyed this post be sure to visit his site for more from Alan.