Alexander Gerchik
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Alexander Gerchik in Alexander,

Why it is important to keep a trader’s log book

Every successful businessman will tell you that a trader’s log book is critical for business efficiency. Both manufacturing of sophisticated tools and sale of bath foam require recording and analysis of operations to refine and optimize business process. 

When it comes to online trading, only a few traders record and look through their transactions. Trading with instant execution of trades and an automatic accounting system makes it easy to forget about the discipline and a log book.

Keeping a log should be easy. It should contain the following three items:

1) What did I trade and why?

The reason for a deal could be based on your trading system, or if you want to check some indicators, there should also be a reason for this. The reason why many individuals trade is the fact that the price fell or rose “enough”, although they don’t ever bother to prove their opinion. To make matters worse, many traders enter positions because they are bored and force their hand. Even if the reason for trading is boredom, a trader’s log will highlight this factor and make it easier for the trader to analyze such behavior.

2) Where is my stop order, where is my take profit and why?

Oddly enough, many traders make deals without having any idea about stop loss or taking profit. When a trader pre-sets these exit criteria, he/she deliberately protects an account against mishaps that may occur. Even if a trader ignores a stop order (e.g., cancels it), keeping a log will be instrumental in analyzing a mistake and strengthening discipline the next time a deal is made.

3) Was the deal executed the way I wanted it to be?

Forecasting and turning a real profit are two totally different things. By examining the difference between what you expect and what you get, you learn the strong and weak points of your strategy and improve its long-term effectiveness.