The Importance of Keeping a Trading Journal

Trading in the stock market can be a challenging and rewarding experience. However, it is important to keep track of your progress, identify areas for improvement, and learn from your mistakes.

One of the best ways to do this is by keeping a trading journal.

In this article, we will discuss the importance of keeping a trading journal and provide examples from the Indian stock market to help you better understand its benefits.

Why Keep a Trading Journal?

A trading journal is a record of your trades, including the date, time, price, and quantity of each trade.

It can also include notes on your thought process, emotions, and any other relevant information.

Here are some reasons why keeping a trading journal is important:

1. Track Your Progress: By keeping a trading journal, you can track your progress over time. You can see how your trading performance has improved or declined, and identify patterns in your trading behavior.

2. Identify Areas for Improvement: A trading journal can help you identify areas for improvement in your trading strategy. For example, if you notice that you consistently make the same mistakes, you can work on correcting them.

3. Learn from Your Mistakes: A trading journal can help you learn from your mistakes. By reviewing your trades and analyzing what went wrong, you can avoid making the same mistakes in the future.

Let’s take a look at some examples from the Indian stock market to better understand the benefits of keeping a trading journal.

---

Example 1: Tracking Your Progress

Intraday Trade on Infosys
1st Entry in Journal
Date: September 10th, 2021
Time: 10:30 AM
Price: Bought at Rs. 1,200
Stoploss: 1190
Potential Risk: 1000 Rs
Target Price: 1220
Potential Reward: 2000 Rs
Quantity: 100 shares

Thought Process: The stock of Infosys has shown a strong upward trend in the morning session, and I believe it will continue to rise. Therefore, I decided to buy 100 shares at the current price.

2nd Entry in Journal
Date: September 10th, 2021
Time: 12:30 PM
Price Sold at Rs. 1,220
Quantity: 100 shares

Outcome: The stock of Infosys continued to rise throughout the day and reached a target price of Rs. 1,220. I sold my shares and made a profit of Rs. 2,000.

Lesson Learned: By tracking this trade in my journal, I learned the importance of identifying strong upward trends and taking advantage of them for profitable trades.

By keeping a trading journal, you can see how your trading performance has improved over time.

You can also identify patterns in your trading behavior, such as which stocks you tend to trade more frequently, and whether you are more successful with certain types of trades.

---

Example 2: Identifying Areas for Improvement

Suppose you have been intraday trading in the Indian stock market for a few months, and you have noticed that you consistently make the same mistakes.

Intraday Trade on Reliance
1st Entry in Journal
Date: March 15th, 2022
Time: 10:30 AM
Price: Bought at Rs. 2000
Stop Loss: 1980
Potential Risk: 2000 Rs. 
Target Price: 2050
Potential Reward: 5000
Quantity: 100 shares

Thought Process: The stock of Reliance has shown a strong upward trend in the morning session and currently has resistance at 2000 and a support level near 1980, and I believe it will continue to rise. Therefore, I decided to buy 100 shares at the current price.

2nd Entry in Journal
Date: March 15th, 2022
Time: 3:00 PM
Price: Sold at Rs. 1950
Quantity: 100 shares

Outcome: The stock of Reliance Industries Failed to maintain an upward trend and breached stop-loss still I waited the entire day for a bounce back of price and finally sold at Rs. 1950 with a loss of Rs. 5000. I made the mistake of not exiting when stop loss breached, and I held onto the stock for too long.

Lesson Learned:  Whenever the decided to stop loss breaches, I should exit from the trade to minimize the loss.

By reviewing your trades and analyzing what went wrong, you can identify areas for improvement in your trading strategy.

---

Example 3: Learning from Your Mistakes

Suppose you have identified Tata Motors Important Resistance and Support Level and decided to enter the trade once an important resistance level breakout occurs. You are waiting for an important level to break but got bored and took trade looking at the movement of stock and guessing that it will move upward.

Intraday Trade on Tata Motors
1st Entry in Journal
Date: June 21st, 2022
Time: 10:30 AM
Resistance Level: 485
Support Level: 475
Price: Bought at Rs. 483
Stop Loss: 475
Potential Risk: 800 Rs. 
Target Price: 500
Potential Reward: 2000
Quantity: 100 shares

Thought Process: The stock of Tata Motors has shown a strong upward trend in the morning session and currently has resistance at 485 and a support level near  475, and Currently it is trading at 483, I believe it will continue to rise and will break the resistance level of 485.  Therefore, I decided to buy 100 shares at the current price.

2nd Entry in Journal
Date: June 21st, 2022
Time: 3:00 PM
Price: Sold at Rs. 476
Quantity: 100 shares

Outcome: The stock of Tata Motors Failed to maintain an upward trend. I waited the entire day for a bounce back of price and finally sold at Rs. 476 with a loss of Rs. 700.

Lesson Learned:  I made the mistake of entering stock before the breakout of resistance occurs. I should keep patience and should have waited for the breakout level. 

By reviewing your trades and analyzing what went wrong, you can learn from your mistakes. 

---

Conclusion