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Trading Education Posted by Team Topstep April 11, 2018

This Underutilized Habit Can Make the Difference in Your Trading


Study charts. Stalk market. Execute trade.

This is the habit for many traders. But it’s missing something. And that something could make a big difference between progress and stagnation — and ultimately between being a profitable trader and not.

What’s that habit? Writing down your trades. Here’s how to incorporate it into your trading and take your mechanics and psychology to the next level.

Trading Mechanics

Remember, being a successful trader isn’t purely about P&L. If you fly by the seat of your pants when making decisions, you will almost assuredly not be profitable in the long term. So recording the process of your decisions is a critical component to growth.

The first set of details to write down are all about your trading mechanics — essentially the what, when, and how of your trades. These might include:

  • The timing of your trades.
  • Entry and exit prices.
  • Your rationale for making a trade.
  • Your risk-to-reward ratio.
  • Your profit level.
  • The tools you used to plan your trades.

When you combine these with your performance statistics, you get a more complete picture of the impact your choices have on your overall success. Reviewing them helps you identify patterns, monitor mistakes, and develop strategies.

Trading Psychology

Next, take it one step further and detail your mental make-up while trading. This has to do with trade management. Are you nervous or rattled by a loss? Are you over-confident? Being aware is an extremely powerful tool to the modern trader.

Unfortunately, most people fail to recognize all of the internal processes that affect their actions and are therefore missing an opportunity to gain an edge.

You will start to notice patterns if you record your physical reaction during different trades. For instance, tense muscles and a dry mouth may indicate nervousness. An uptick in body temperature and a flushed face can mean you’re angry.

Once you recognize the signs, you can associate them with an event from your trading day and look for patterns, like:

  • Making bad choices when you’re angry.
  • Being anxious when you near your risk level.
  • Hesitating when the market shifts.

When you identify your emotional triggers, you can make a plan to combat the reaction. Say you discover that a few bad trades makes you angry, which then causes you to try and force the market your way. Rather than suffering more loss, you may decide to take a break and do something to relax. That way you can avoid tilt and live to trade another day.

Ultimately, keeping track of your trades gives you a record you can analyze to discover what works for you. It is essential for consistency and growth.

Any feedback or requests? Leave a message in the comments!