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The 1 Mistake Traders Make With Their Trading Journals

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Using a trading journal to monitor progress is one of the basic trader tools that can improve performance. The practice of putting pen to paper daily integrates learning and connects you deeper while mirroring your thoughts, feelings and emotions.

A trading journal gets you in a practice of observation which can open the gates to the development of mindfulness.

However, unless you know how to use your trading journal correctly it can do more damage than good.

In fact, I feel so strongly about this, that I have devoted a large section to it in my 8 week on-line trading psychology course. Having worked with many professional and independent traders I came to realize that most of them use their trading journals incorrectly. Traders focus on going over the “trading mistakes” they have made in the course of the trading day. This kind of “De-briefing” is believed to help avoiding the “trading mistakes” next time round.

Guess what: Exactly the opposite is true.

I know this may come as a surprise to many of you. We are so used to look at performance in a critical fashion believing that the critical evaluation is the fastest way to improve. The problem with this attitude is this:

When you focus on your perceived mistakes you are lowering your energy.

In other words; Focusing on mistakes makes you feel low and negative. When you feel low and negative it becomes even harder to make changes, because to make change requires energy. Focus on the negative, or focus on something expansive or positive requires the same amount of energy.

Every trader knows the theory:

Think positive, be disciplined, do the same thing over and over again and trading success will be yours.

The above sounds simple enough, yet it is also flawed with miss-perceptions of our reality.  The point is this: Your mind will only focus on a positive outcome if it is given the corresponding feeling experience as a reference point from which to create that focused thought.  While you are focusing on your mistakes, not only do you feel pretty low, you are also closing the door to opportunity.

You can’t be looking for opportunity in a positive, self assured and joyous manner while also criticizing yourself for all those trades you entered too late, or exited too early.

So what’s it to be?

Force yourself to think positive and ignore the mistakes, or spend your time on  extensively writing  runes on all the things you should and could do better?

The answer of course is that you shouldn’t do either.

The objective of your trading journal is to give you a simple reflection of your moods while also aligning you into harmony with yourself and the market.

Big words, I know.

Let’s get practical: Here is what you do:  Don’t write long runes. Your trading journal is not meant to be a life diary. It is meant to assist you to focus on what matters. What matters is that you re-train your mind to think naturally in terms of opportunities, even in the face of adversity.

Reflecting on the trading day is about passive observation, not about self judgement.

If you can get this you have made massive progress. If you can implement it in your trading life your trading must improve noticeably pretty much immediately.

Your trading journal simply is one of the many tools at your disposal to assist you with the objective of seeing opportunity. Seeing is akin to developing the internal structure, (the trading mindset), that creates the external structures, (correct trade management), of your trading.

What most traders fail to understand is that the internal structure comes first. It needs to be in place before the external structures can develop correctly. Yet most traders focus on the external structures and then wonder why they are struggling unnecessarily.

Incidentally, this is also true for you investors out there.

However, since investors have a longer time frame within which they measure success or failure, the day of reckoning tends to be postponed. Trading presents you with a report card every day, thus putting much more pressure on your mentally and physically.

Making sure that you have the correct internal structures in place goes a long way to success in all areas of life. In intra day trading it is vital. In investing it is a necessity if you want to make sound investing decisions, as we are all learning to deal with much change in the world at large.

Stay informed, learn about yourself and how your mind works.

Know that your trading journal is your ally and not your enemy.

Go over your trading journal. Read what you wrote over the last four weeks. How does it make you feel? What do those feelings tell you about your views of yourself, trading and your attitude in general. What are you not seeing, what are you missing? Get into the habit of noticing one opportunity every day, no matter how good or bad the trading day turned out to be and note that opportunity down.

Do this without fail every day for four weeks and then notice how you feel about yourself. I bet you, you will notice a positive change in your mental attitude and in your trading too.


Mercedes Oestermann van Essen is a trader, trading psychology coach and author of “The Buddhist Trader” and other books on trading psychology.  Sign up for her free course: 7 Little Known Secrets To Trading Success & Happiness HERE.

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