The best book you can read to become a successful trader.
Many a times, people ask us to suggest some books which can help them gain mastery in trading. Though books cannot substitute for the practical knowledge, there is one book which makes you become a consistently successful trader in the long run. That magic book which contains all the secrets is known as your trading journal.
What is a trading journal?
A trading journal is a book which contains all the details which form the basis of all your trades. It includes your entry,exit and stoploss prices, the reason for entering a trade, the observations after completing the trade along with the record of your emotions. It can be either written on a diary or typed down in an excel worksheet. But the second approach is better as it can give us a connection with our trades.
Essential details to be journaled:
- Entry, Exit and stoploss prices;
- Reason to take a trade;
- Emotional behaviour during trades.
- Profit booking levels.
- Trailing SL Levels
How does trading journal work?
Since it contains all the information about our trades, any mistakes that we make can be easily identified and avoided. For example, if you trade large sizes, it can be identified by the recordings of your emotions. You will automatically feel tensed. In case if trade your hunches, it can also be identified as you will not have a solid fact behind your trades. Mistakes of this kind and such can be effectively identified and efficiently avoided with such a tool.
So start this habit today, whenever you take a trade hereafter, pen down the important points and other details which can impact the outcome of your trades.
What to do with the journal?
Do a post trade analysis, whether it is a winner or a looser and figure out why it ended as such. This will help you improve your analysis skills and to rewire your thinking pattern.
Record your emotions before, after and during a trade.
It will give you an idea about correct position sizing and proper risk management.
Read this book often, read it again and again. Read in your winning as well as loosing streak. This will help you to maintain your emotional balance and analytical edge.