Journaling & the Psychology of Consistent Traders
Winning Starts Within
Throughout my trading journey, I’ve realized that the potential fears as well as over confidence are components you need to drown out before taking trades. I have seen so many traders inevitably hit one or both of these thought processes:
A. Highly inflated ego masked as confidence that they have the market figured out
B. Become so scared and afraid from losing that they take trades in fear
Most traders can never figure out how to get past these two hurdles. The common theme with these two thought processes is the feeling of being rushed.
You have to go full risk on for the next trade and it has to hit really big.
You need to quickly enter this trade and take profit at +5% because the market might screw you over like it did the last time.
And here’s where I might lose a lot of readers, the solution isn’t in the charts or in technical analysis. It’s in how you treat money and how well of a system you have developed.
I will openly admit that I have gone through both thought processes. I used to think money was the end goal of all pursuits. If there was no money involved, what’s the point? Eventually, you’ll likely get the money and success. But you’ll discover that it was never about the money, you might even feel an emptiness and not know what to do next. Some people will stay ignorant and think that they just need more money and continue the endless cycle of pursuing a meaningless goal.
The secret sauce is that it’s all about the process and self fulfillment. You need a very strong foundation to develop a trading strategy that you can replicate over and over EVEN when it produces unprofitable trades. To define a solid process, you need to come to terms with what you are pursuing and understand how you treat money.
Is money something that used to be hard to come by? Is money in abundance but you’re not satisfied and you think more money will give you that “image of success”? The REAL definition of “making it” and having success is having the freedom to do what you want in life on your own terms. I love traveling and so “making it” for me would be having the ability to travel whenever I want and to wherever I want. It’s never about having more money. You will end up trying to fill an endless pit and be left wondering why you are never content with what you have.
🧱Building Strong Foundations🧱
“You do not rise to the level of your goals. You fall to the level of your systems.” - James Clear, Atomic Habits
When things in life aren’t going your way, your brain instinctively falls back on the system you have in place to figure a way out. If you have no faith in your trading strategy or your ability to trade, you will inevitably fail. Every losing trade is a mirror—showing you how much trust you really have in your system.
A strong foundation means having a system for defining what a trade entails. This means:
Know when the market conditions fit your trading strategy
Define a Stop Loss (SL) level
Define a Take Profit (TP) level
Execute on the trade
Stick to your trade plan and do not deviate
I see traders deviate from their trade plan way too often. They enter a trade without an actual trade plan and when the stock doesn’t immediately go the direction they hoped for, they begin to panic and have no idea what to do. Please realize and accept that entering trades without a trade plan is literally just gambling. You’ll probably have better odds of making money at a Blackjack table.
Traders also encounter the problem of doubting their trade plan and closing out trades in limbo. I like to call the time period in the market where a stock just consolidates or moves a little but hasn’t quite hit a SL or TP as being in limbo. This is where a lot of traders make a FATAL mistake: they close out their trade preemptively.
“I shouldn’t have sold there, it went to exactly where I thought it would go.”
Sounds familiar?
This is where a small leap of faith is required. You have to trust your trade process and just let the trade marinate. This also means you can’t get discouraged when you end up taking a losing trade. Losing is part of the game; how you respond to the loss is what determines your longevity in trading.
📓Journaling📓
I don’t think it is possible to ever achieve 100% confidence in your trade plan 100% of the time. 7 years into trading, I STILL get moments where I doubt the trade I’m in. I think it’s human nature for this to happen, which is also why being consistently profitable in the stock market is possible. Every market participant is as equally susceptible to emotional reactions to the market as you and I are.
The key to success is constant iterations of your process to improve, even if it’s just 1%. I try to never make the same mistake twice: if I preemptively close out a trade from fear, I take note of this and give myself reminders to not do so in future trades.
A fantastic way to do this is to keep a trade journal. Something as simple as an excel spreadsheet or google sheet documenting your trades can work magic.
Or you can go more advanced with a platform like TradeZella. No, I don’t have a referral link. I just think their platform is very seamless and can be extremely beneficial. They can auto sync your broker and you’re able to journal daily to critique your trades.
Think of trading as any other business venture you’d be a part of in your life. Every trade you take is a business decision to invest in something. You have to always assess the potential risk you’re taking on, the capital requirement, and potential reward. Documenting EVERY trade with all these parameters is the perfect way to develop a solid foundation to your trading strategy. You’ll be able to pinpoint kinks in the armor, and figure out what works really well and iterate to create that strong foundation.
Great read