Keeping a trading diary is the most important factor to your success as a binary options trader, regardless of your trading strategy, the assets you are trading, or the time frame you are using.
A trading diary is the most powerful tool to work on yourself and become a more successful trader. Without a trading diary, you will eventually lose money.
Why do I need a trading diary?
Unfortunately, many traders shy away from keeping a trading diary. They think it means too much additional effort. Also, many traders are very technical thinkers and don’t like to write at all. Still, keeping a trading diary is an absolute necessity for every trader. Success or failure in binary options is not determined over one trade, or even over ten or twenty trades. Success or failure is a long term decision. Most failed traders did not fail because of big mistakes. Big mistakes are easy to correct. Almost no serious trader makes so many of them that they could ruin him.
Most failed traders did fail because of small mistakes they could never quite get rid of: Emotional trading, having a too complicated strategy, leaving too much room for personal judgment in their strategy, and so on. These small mistakes are viscous. Not only are they hard to notice, they can drag themselves through years of trading decisions.
The purpose of a trading diary is to help you notice and eliminate these small mistakes in a systematic way. Without a trading diary, you will always take one step forward and one step back.
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How do I keep a trading diary?
Keeping a trading diary is easy. With only one or two minutes of effort after a trade you can correct all your mistakes and become a much more successful trader.
Immediately after making an investment, take a screen-shot of the price chart. Write down what you saw in the market, what your prediction was, and why you thought this was a good opportunity for an investment. Also, pay attention to how you felt when you made the trade. Did you hurry into the investment because you hadn’t made a trade all day? Were you angry or happy because of what happened in your private life?
The most important part of your trading diary is to notice the little things. If you felt uncertainty, write down why. Did all indicators generate a clear trading signal? Where there any confusing candlesticks? Did you feel good about the trend?
After some time, you can come back to your diary and examine all your losing trades. Are there any elements they share? Did a certain part of your strategy cause you to have the most losing trades? Can you eliminate that part? Having a clear cut definition of which factors caused you to win trades and which cause you to lose them will point out weaknesses in your trading strategy you would have never found by just trading along for some time.
Did being angry about something cause you to lose more trades than when you were happy? Stop trading when you are angry. Did you never make clear decisions because your trading strategy is too complicated? Simplify it. Did you do well in currencies but lost money with stocks? Only invest in currencies from now. This is the invaluable advantage of a trading diary: It will show you which actions led to which outcome. Over time, you can keep those actions that cause you to be successful, and eliminate those that cause you to lose money.
The form in which you keep your trading diary does not matter. Choose whatever you like. You can keep a trading diary on your computer in a Word document, you can write a Google document, or you can do it the old fashioned way and use pen and paper. Just make sure you have both pictures and a written account of why you made a trade and how you felt at the time.