The Single Most Important Tool For Any Trader

Written by Julie Brownlee on January 19th, 2017

The Single Most Important Tool For Any Trader

There’s something the elite traders use that you don’t.

It helps them bank more winners…

It helps them avoid the losers…

And it’s even the reason why they actually make money trading!

Some have called it a secret trading weapon, whilst others have lauded it as the single most important tool for traders.

No matter where you go or which professional trader you speak to, this tool is championed the world over.

That’s why today I want to reveal what it is, how to use it, and ultimately how it can make you a better more profitable trader.

Let’s get to it…


The Easiest Way To Improve Your Trading Success


Jesse Livermore famously once said, “The only way you get a real education in the market is to invest cash, track your trade, and study your mistakes”.

And what’s the best way to actually do that?

Yup, you guessed it…

Trading journals!

But what exactly is a trading journal?

A trading journal is essentially a diary of all your trades.

In its most basic form, it records how your trades have performed.

It’s the ultimate tool for trade performance management.

But to make the most of this tool, you need to include a lot more detail. And what you glean from this detail, you can use to improve your trading into the future.

By including a number of different aspects of your trades, which we’ll look at in a moment, you can learn so much more about your trading self.

If you take trading seriously, this is one tool you cannot be without.



What A Good Trading Journal Will Do For You


Taking the time to keep a trading journal is more than worth the effort.

By analysing your past trades and how you made them, you can find areas to improve upon.

You’ll also be able to notice if you’re making errors, which have a detrimental impact on your trades.

Not only that, a detailed journal lets you see how you react to specific scenarios and gives you a true insight into your trading behaviour.

And it helps you to improve your strategy over the long-term.

All of these points result in you becoming a better and more profitable trader.

But it’s not just a case of recording all your trades, the most vital thing is you spend time analysing it.

This gives you the opportunity to improve.


Why Every Trader Should Keep A Trading Journal


Ideally you should keep a trading journal from the minute you begin trading. Over time, it will evolve with you.

If you’re new to trading, your journal helps you to hone in on where your emotions are getting the better of you and where you need to exercise more discipline.

As you gain experience, your journal can focus more on managing your trades effectively.

By keeping a journal religiously, you are fully accountable for all your trading decisions.

Plus, you’ll be less likely to make rash trades and instead ensure you stick with your strategy and risk management techniques.


What To Include In Your Trading Journal


The important thing is not to scrimp on the detail you include.

It’s this that gives you the greatest insight and helps you to improve.

There are a number of basics you must include…

  • The date and time of when you entered and exit your trade, including its duration.
  • Details of what you are trading, such as which currency pair or stock.
  • Your entry level, stop loss level and take profit level.
  • The size of your trade.
  • Your risk to reward ratio.
  • What’s going on the market?
  • And the outcome of your trade.

These are the fundamentals that you need to include.

Now it’s time to add more detail, including…

  • Why you selected and made the trade in the first place.
  • How did you decide on your entry level, stop loss level and take profit level?
  • Your feelings about the trade. For instance, did you see any potential problems or risks?
  • Errors you made in the trade and how to improve going forward.
  • And any emotional triggers or feelings you experienced in the trade and how you can improve or change this in the future.

The more detail you include, the better, as you won’t remember all this information once you’re into a new trade.


3 Simple Ways To Keep A Trading Journal


When it comes to actually keeping track of everything, it’s very much up to you and how much you want to spend.

Trading Journal Option #1: Good Old Pen And Paper

If you want to stick to a more traditional way of doing this, you could use a notebook.

You can include all the aspects we looked at above.

You may find this a simple way to do it, but you may find it harder to keep track of what’s going on reading through reams of notes.

Trading Journal Option #2: Use A Spreadsheet

An easy and cost-free way of monitoring your trades is to set up a spreadsheet for the task.

You could create a template sheet with all the information you want to include in your journal and use this for each trade.

If you’re quite adept at using Excel, you can also make up a summary sheet that can keep track of win rates, overall profit and loss, etc.

Trading Journal Option #3: Use Trading Journal Software

Instead of trying to collate all the information yourself, perhaps the easiest decision is to opt for custom built trading journal software.

These are a wide variety available for you to use. Some of them are free to download and use, others require a subscription.

An example of free trading journal software is the one provided by TradeBench.

If you’re happy to pay for it, an excellent example is Edgewonk.

The major benefit of using this type of software is it makes the analysis extremely easy for you, which is the biggest benefit of keeping a journal.

A paid subscription is certainly worth the outlay if you’re a serious trader.


How To Bank More Winners With The Tool Most Traders Don’t Even Know About


Every trade you place means risking your cash on the market.

To ensure that you’re putting your money to work the best way you can, you need to use a tool to assist you in managing your performance.

A trading journal helps you achieve this.

Not only will you have a clear and concise record of all your trades, you have a tool to help you improve your strategy and method.

Plus, this tool will help you identify where your emotions and behaviours are interfering with your trading. You can then take steps to rectify these issues.

The result is a trading journal helps you become a much better and more profitable trader.

Well worth the additional effort.

Until then, here’s to profitable trading.

Julie Brownlee | The Money Lab

Julie Brownlee
Editorial Contributor
The Money Lab