July 22nd, 2016 → 2:35 pm @ reacoms
Before you make your first trade in your day trading career, you want to ensure the best chances for facilitating your success in your day trading. This includes creating a trade log book from which you will refer to again and again each day as you trade in day trading. In this blog, you will learn to create a log book and cultivate the habit of logging in the details of why you executed that trade. This is not as much of a burden as it sounds all the financial details in your day trading are already recorded in your trader account; you only need to jot down a daily record of your analysis.
Also, in this section, we will discuss the very basic steps and outline the basic terms of day trading that will get you started. You will learn how to open a basic account, how much you should have in it, and the importance of setting up your day trading station with the appropriate hardware and software.
Keep in mind that like exercises in the introductory chapter, you need to put in the time answering questions posed and performing needed tasks. If you are diligent about setting up an efficient and effective workstation, you will find that is half the victory.
What is a Log Book and why would it be important for you? If you have ever played a sport, you know that Log Books are an important tactical resource. It contains the techniques, strategies, and other important notes to support a sport’s team’s pursuit of victory. For a day trader working under the constant, unknowable pressures of the market, it is easy to get confused in the confusion of a highly volatile day. It is important to maintain perspective in the midst of daily financial turmoil.
In order to build your Log Book perfectly, keep notes either on your laptop or small notebook so that you can refer to the following questions quickly and easily:
1. Specify your profit goals and your loss limits by naming the threshold of gains you would at least like to make, and the absolute highest amounts you are willing to lose within a given timeline. For example: “Within 6 months, I would like to make at least this amount in profit, but cannot lose more than this amount in loss. At which point, specify what your next steps would be. Some suggested follow ups may be: “spend 3 months acquiring this % more capital to replenish my trade account” or “relegate day trading to monthly trading.” If you happen to reach your threshold gains, you should also specify your next steps. Examples of next steps include: “reinvest into an additional trade account” or “use profit to pay for analysis software.”
The purpose of specificity is crucial for creating continuity in your day trading practice. Without this forethought, you are more likely to make impulsive decisions whether you net profits or suffer losses. For example, some new traders are so ecstatic from their first successful trades that they quickly move this money into personal use when it may be wiser to reinvest into their trade accounts. Similarly, a major loss early on may be so discouraging that a new trader simply gives up before they gain the requisite insight that would help them with future trades.
2. Each day is different; learn from daily success and mistakes by logging your trades, which in turn, will give you the long view of the market and your trading practice. As part of your trading practice, it is important to create spreadsheets of your progress based on earnings and loss reports from your trade accounts. The additional features that you must log besides from net losses and gains is additional narrative information of the trade the company, your reasoning, analysis, how you used research and information, whether or not you used software, etc.
Over time, these spreadsheets yield an overall picture of your trading progress. Day by day, the market and your reactions to trading opportunities can meld into a chaotic blur given the frantic pace of the market, if you do not log your trading narrative, you will quickly forget what occurred and how you handled each transaction. A collection of your analysis over a few days, over a week, a month, and eventually, a year, is an extremely valuable resource for you to see not only the movement of the market, but sheds light on your trading propensities and habits.
These two rules are easy to remember, but in practice, are difficult to perform. That is why you must rely on your day trader’s essential character trait of self-discipline. Fold in the practice of your daily log keeping and of writing reviews of your trading practice into the end of your workday; consider it as natural as part of “punching the clock” for the end of day.
Making a habit of thoroughly logging not only your numbers (losses, gains, transactions-which would be automatically calculated for you via your trading account) but of what you did and how you made the trades will yield valuable dividends in the form of professional growth and greater analytical skill.
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