Psychology & Risk: POST 8
Okay, I know, I know, we keep bringing up the trading journal. You might be thinking, “Ugh, more paperwork!” But trust me on this one: if you only track the basic numbers (entry, exit, P&L), you’re missing out on the journal’s real superpower – its ability to act as your personal trading psychologist.
Seriously, think of your journal as the place you can have brutally honest conversations with the person who has the biggest impact on your trading results: You. It’s where you figure out why you do the crazy things you sometimes do when real money is on the line.
Going Deeper Than Dollars and Cents
Yeah, track the basics – entry, exit, date, strategy, profit/loss, risk/reward. That’s essential data. But for the psychological gold, you need to dig deeper. Ask yourself (and write down the answers!) for every trade:
- Headspace Check (Before): How was I feeling before I even placed this trade? Calm? Focused? Anxious? Rushed? Hungover? Overconfident from yesterday’s win? Why?
- The “Why” Behind the Trade: What exactly in my plan made me take this? Be specific. Was it a textbook A+ setup? Or was I kinda forcing it? Was FOMO whispering sweet nothings?
- Feelings On the Ride: What emotions popped up while the trade was open? Did fear grip you when it dipped? Did greed make you want to add more when it spiked? Did you think about breaking your rules (moving stop, exiting early)? What triggered that thought?
- The Exit Story: Did I follow my exit rules to the letter? If not, what feeling or thought made me deviate?
- Post-Mortem Feels: How do I feel right after closing the trade? Relieved? Angry? Thrilled? Bummed out? What’s the immediate takeaway?
- Lessons & Confessions: This is the goldmine. What mistake did I make (if any)? What specific bias or emotion might have tripped me up? [Link to Post 1: Understanding Cognitive Biases] What’s the one thing I need to do differently next time to stick to my process?
Why This Inner Monologue Matters
When you review these kinds of notes over time (not just glance at the P&L!), patterns jump out at you. It’s like finding the bugs in your own mental code:
- Trigger Happy? “Wow, looking back, I almost always force a trade out of frustration after two losses in a row.”
- Bias Blind Spots: “Okay, I consistently ignore sell signals when I’m long a stock I ‘believe’ in. Classic confirmation bias!”
- Discipline Leaks: “I keep taking profits way before my target whenever a trade gets close. Clearly, I don’t trust my plan when it counts.”
- Hidden Strengths: “Hey, I’m actually really good at patiently waiting for my specific reversal setup.”
If you don’t write this stuff down, it’s just vapor – thoughts that vanish. Journaling makes it real, tangible. It lets you look back objectively later, when the emotions of the moment have faded.
Making Your Journal Work For You:
- No BS Allowed: This is for YOUR eyes only (unless you share with a coach). Be ruthlessly honest. If you made a dumb mistake, write it down. The more honest you are, the more you’ll learn.
- Make it a Habit: Journal every single trade. Wins, losses, breakevens. Consistency builds the data set you need to see patterns. Make it part of your end-of-day routine.
- Use Prompts if Needed: Blank page scary? Create a template with those psychological questions above to guide your entries for each trade.
- Review, Review, Review: Don’t just write and forget! Schedule time each week or month to actually read your journal entries. Look for those recurring themes, mistakes, and emotional habits. That’s where the breakthroughs happen.
- Process Over P&L: Give yourself a high-five for trades where you followed your plan perfectly, even if they lost money. And kick yourself (gently) for trades where you broke the rules, even if you got lucky and won. Focus on what you control: your execution.
Used right, your trading journal becomes the most powerful self-improvement tool you have. It helps you stop being a victim of your own psychology and start consciously managing your mental game. It’s how you turn painful mistakes into valuable tuition and build the consistency that lasts.
- What’s Next? Consistent journaling builds self-awareness, which fuels resilience. Let’s talk about developing that mental toughness you need to survive the trading marathon.
