The One Thing All Successful Traders Do
Separate yourself from the average retail investor in 2021
As we roll into 2021 and the new trading year, it’s important to reflect on the trades we made in the past year. With the S&P 500 and Nasdaq up nearly 70% and 87% from their March lows, respectively, it is very easy to be complacent with one’s trading rules. A quick way to ensure you stay strict with your rules and learn from every trade is to create and document your trades in a trading journal, just like the most successful traders of all time do.
From scalpers to long-term investors and everyone in between, trading journals have been quoted repeatedly as one of the fundamental factors in the best professional investors' outstanding returns. So without further ado, let’s dive into the four reasons trading journals are vital to any trading strategy!
Why are trading journals so important?
1. Trading Journals provide invaluable performance metrics
Depending on where and how you document your trades, a journal can provide important summary data on your performance, such as profit-to-loss ratio, risk-to-reward ratio, and average gains. While not indicative of future results, these metrics can indicate which trading strategies are working to help reach your financial goals.
The link to the trading journal I use can be found here.
Note: You must sign up with an email and your name to receive access to this trading journal. I am not associated with/sponsored by the Disciplined Trader Academy, but I can attest to the value of their trading journal.
With the trading log I use, the statistics shown in the screenshot above automatically update every time I input a new trade into the sheet. For unprofitable strategies, specifically, these statistics help you understand where you may be going wrong. For example, a trader with a 75% win rate but a profit-loss ratio of 0.5 would be unprofitable in the long run because the losses they incur are much larger than the…