Trading psychology articles often advise binary options traders to try keeping a trading journal as a step toward becoming a more consistent and profitable trader. There are numerous benefits to maintaining a trading journal. You can look back at past trades that went right and wrong, the conditions encapsulating those trades, and the emotions that you felt while you were trading, before, and after your trades were complete. Using this information, you can then make improvements to your trading system, and you can also identify behavioral patterns and thought processes which are beneficial or detrimental to your trading and get those under better control. A journal can help you through all the steps to becoming a binary options trader.
Sometimes trading journals do not seem to work the way we would like, though. A journal is supposed to provide a space for reflection, but when is the last time you reflected on your journal itself? If you find that your journal does not seem to be providing you with useful answers and information, and it does not appear to be helping you to improve your trading, then ask yourself this: Is filling out your trading journal becoming a rote exercise? Do you just do it because you know you are supposed to, and you write in it to get it done? This is nothing to be ashamed of, just something to fix. It is easy for anyone to get set on automatic now and again, especially with something as tedious and repetitious as trading often is. Here are some ideas for improving your trading journal.
1.Make the entries more specific.
Do your entries read like this?
Today I placed a trade which was not an “A” trade. While the setup was not the best, I took it anyway, because I got greedy. I recognize that this is a form of overtrading. I will not be tempted by another “B” trade.
This entry may look fine at a first glance, but look more closely at it. The entry says “the setup was not the best,” but fails to specify why. Were the indicators imperfect? Was confluence missing that the trader would generally look for to confirm an entry? Was there a line of support or resistance in the way? Was the trade against the trend? Why was it a bad trade? All the notes about overtrading in the world aren’t going to help you if you look back at them a week or a month later and wonder what the actual mechanical error was.
Today I used the early close feature to get out of a binary options trade at a partial profit. I did this because I was worried that the trade might not go through to hit the trigger point I specified. I should not have exited early as the trade was profitable.
What’s wrong with this one? It makes it clear that a trade was exited when it shouldn’t have been, but there is nothing here which says why the trader should have stayed in or why he quit early. Was it anxiety that prompted the early exit? Irrational anxiety or anxiety caused by something specific?
2.Keep your journal when you are winning and when you are losing.
You may think of your journal as a place to record your mistakes, but that does not mean you should not also be keeping notes about your wins. Knowing what not to do is a big part of trading, but knowing what you should do is equally important. What have you done right in the past? It is easy to forget good habits, and a journal can help you to recollect them. So record your wins, not just your losses, and record why you won your trades. That way you not only have a way to look back over things that don’t work, but also things that do. You will learn which entry criteria are most trustworthy, and what a truly good market context looks like for your trades. This helps you make improvements during your tests and while trading live. Click here to find out how much testing you should do.
3.Record not just the trade, but also what you did before and after the trade. Try doing it in real time.
It may be tempting to use your trading journal to record only what went on during your trade—your entry, your rationale, your emotions during the trade, and what caused you to close your trade (on time or early), whether you won or lost, and how that felt. But you can also use your journal to discuss what you did to prepare for your trades that day, and what you felt an hour later, a day later, a week later.
You do not have to wait until after your trade is complete to start recording notes for the day. You can use the journal to help you plan your trades in the first place. Write down the setups you anticipate and your rationale for taking an interest in them. Write about what you are thinking and how you are feeling in real time. This helps you to stay honest, and not to base your entire entry off of your loss or win as it comes to pass later.
Then write in your journal while your trade is in progress (unless of course it is a 60 Second trade or another trade that has a very swift expiry period, in which case you will not have time). This again keeps you honest, and may help you to think more clearly. Once the trade is complete, you can then record your immediate impressions (keep them specific). If you are at a loss as to why you lost a trade, then come back to it an hour later, or a day later, or at some point in the future when your head is clearer. If you took clear notes before and during your trade, you will probably have a much easier time analyzing a loss and figuring out what went wrong.
When you do figure out the cause of a lost trade, take specific notes on what happened! Don’t leave any aspects of your trading out of your analysis. Write down detailed information about the mechanics.
- Why did you place the trade?
- Which entry criteria were met?
- Were there any which were not met?
- What was the market doing at the time of the trade?
- Where were your pivot points?
- Did you stay in the trade until the time expired, or did you close early?
- Did you use double up or rollover?
- How much of your account did you invest as a percentage?
- Did you win the trade or lose?
- Was it a partial or total win or loss?
- What was the payout?
But don’t leave out your emotions either.
- How did you feel about the trade before you placed it?
- How about during its progress?
- What about afterwards?
- How about after you took some time away from the computer and looked back at it?
- Did your emotions play into the choices you made?
By being thorough, taking notes as your trading schedule unfolds and not just after completion, and not ignoring your winning trades when you make your journal entries, you are far likelier to benefit from your trading journal.
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