One of the most effective ways to become a more successful trader is also one of the easiest and most overlooked things. That would be logging all of your trades on a stock trading log. Most, if not all, of the successful traders that I have known had one thing in common. They studied very hard and kept track of all of their trades. The reasoning is rather simple.
SAVE TRADE DATA FOR REVIEW
When you are in the heat of the moment taking on trades, especially day traders, there are a lot of things going through your head. You don’t have much time to analyze where you entered, where you exited, and what happened after the trade. Yet these things are very important to the development of any trader. If you log your trades, you can study them later when your mind is more relaxed and things have calmed down. This is best down outside market hours. Take a look at when you entered, where you exited, and what the stock or instrument did after the trade was over. Then critique yourself on how you did and what you could’ve done better with. I would bet that you will find a lot of things you did wrong that you would’ve never known while trading.
TYPES OF TRADING LOGS
There are different degrees of trading logs that your can dive into. They can be as easy as a entry and exit on a piece of scratch paper all the way up to complex spreadsheets that you can log trades, profits, losses, percentage winners, percentage losers, equity curves, etc. While a trading log with all the bells and whistles is nice, here are the most important things to log: You entry, why you entered there, your exit, and why you exited there. With this information, you can look back and determine how you did and how you can improve.
Keep this in mind if you are questioning whether or not you need to spend the time logging trades. There is a winner and a loser on every trade, every transaction. It’s you against all of the other traders throughout the world. In order to be successful you need to better than your competition, and in order to do that, you need to work harder than them and get better everyday. There are few things in my mind that will help you as much as keeping and studying your stock trading log.