Here are the several steps you need to follow when keeping a trading journal:

First of all, you must write down why you are entering a position before actually committing yourself to it. This way an objective reasoning is ensured, which you can use at a later point, unbiased by a possible disappointment. Another positive side of keeping a daybook is that you can organize it as a spreadsheet that could show you the overall profit of single trades or a series of trades and produce an equity chart. Such a chart, showing a positive balance of your trading history, may be used to cheer you up and restore your confidence after a bad streak discourages you.

Writing down your thoughts before entering a trade will also make you think twice of your strategy. If you see you are entering the position for any other reason apart from following your strategy, you shouldn’t execute the order.

This also includes avoiding the so-called revenge trading. It usually happens when an inexperienced trader has a long losing streak or an unexpected big loss, which upsets and forces him to enter a transaction immediately in an attempt to offset the losses. This usually has a spiraling effect and leads to further losses. While experienced traders with years of experience will most likely remain calm and unaffected by such an event, novice market players should deal with it by taking a break and clearing their mind, instead of risking more money without thinking straight.

Second, you should write down your exit strategy before entering the position as well. In other words, the whole process of conducting a trade, from the entry to the exit, must be planned and written down in the trading journal beforehand.

It is crucial to have a pre-planned exit strategy in order to avoid the feelings of doubt or greed that can arise during the trade. Humans are impulsive and irrational and the best way to secure an unbiased exit point is to have it written before feeling pressured. Of course, during the course of trading you can decide not to follow your initial plan, but by looking at what you have written down, you must ask yourself “why?” and seek a rational explanation.

Third, you should write down why you closed a position after exiting the trade and especially, if you have deviated from your initial plan. This gives you food for thought. The most common reason for people to steer away from their pre-planned strategy is the lack of discipline, which requires years of practice to build up.

Screenshots, visualizing trade entries and exits, are also deemed very useful as they provide an exact picture with a time stamp of how the market moved and where you were positioned. You might not remember how a certain trade went, but a screenshot will visualize exactly what you were seeing at that time without the pressure of being on the market. This allows you to further analyze your strategy.

Fourth and most important, you must always analyze the results of your trade and learn from your mistakes. After having written down your trades and captured the entry and exit points via screenshots, you need to take your time and scrutinize not only your mistakes, but also the good moves you’ve made and what you could have done even better.

The best way to learn from errors is to have documented them in your personal trading journal, which you can use even years later. Such information cannot be found in any book or seminar, as each situation is unique to you. These comprehensive records will highlight not only your weaknesses, but also your strengths and your most profitable trades. Having a log dating way back will help you see a pattern of your most successful positions, which you can then use to focus on and earn even more money. Professional traders have a well-established self-awareness and utilize their strengths, while attempting to minimize their weaknesses.