Lesson 7. Diary of a Binary Options Trader

Keeping a trading journal (diary) is a great way to speed up the process of developing trading skills. You will be able to analyze the situation on the market and the chosen strategy with its help. The journal will allow you to objectively and self-critically evaluate your own behavior patterns. You can better understand what exactly is going on in your head during trading.

In this lesson, you will learn how to lay the foundation for self-development. We will tell you how to distract yourself from problems and focus on their solutions instead. You will learn:

Lesson Topics:

1. Benefits of a trading journal
2. Basics of keeping a trading journal
3. Technical part of the trading journal
4. Psychological part of the trading journal
5. Questions for analyzing trading activity

Keeping a Trading Journal

Right after the end of a trading session, you have vivid memories of the transactions carried out, as well as the thoughts and emotions that accompanied each of them. After several days, you will most likely forget many details or your brain will suppress the memories.

Your ego is a master of self-deception. It is able to block or reconsider unpleasant events. To avoid such a situation, it is of paramount importance that the last day's trading activities have been recorded properly in the journal. You don't want to deceive yourself, do you?

Your ego has a habit of concentrating on what it wants to see. The diary allows you to notice what you need to see for successful trading.

Indeed, you will need self-discipline to record and evaluate your transactions on a daily basis. Recording information about every action in the market is not an easy task. However, if you ignore it, you will miss valuable information that may upgrade your level of trading. It would be a shame to miss such an opportunity.

You can simplify the process of keeping a journal using a special software for traders. The best platforms provide it by default. For example, the Pocket Option trading platform offers detailed statistics about transactions for all users. It can be accessed absolutely free of charge and facilitates keeping a trading diary.

Analyzing the transactions helps you realize important points that you might have missed in the midst of trading. You'll be able to see your actions in a new light by looking back. Moving away from them, you will keep track of your behavior and way of thinking. You will start learning from your mistakes. This is unpleasant for your ego, but otherwise you simply will not be able to develop.

Basics of Keeping a Trading Journal

Your trading journal should include two parts:

• Technical part;
• Psychological part.

The technical part clearly records how and what actions you performed during the trading day. The psychological part explains why you acted exactly the way you acted. In other words, what prompted you to make certain decisions.

Note down all completed transactions in your trading journal. Write about the feelings you experienced during each of them. Records of all transactions, both profitable and unprofitable, will help you improve your trading skills in the future.

The analysis will show whether you manage to earn by following the chosen strategy. Even if at first it seems illogical, in general it is better to complete the planned transaction with a loss, without deviating from the original plan, than to break your own trading plan for the chance to close with a profit. Perhaps you're lacking the discipline and confidence needed to succeed on your own strategy?

Accidental success rejoices and lulls you into a false sense of safety. Your ego triumphs and you start to believe that you have a great intuition. It is likely that your pride will lead you to continue to break the rules and engage in impulsive behavior. Do not overestimate your capabilities. You can succeed even by breaking the rules. However, don't attribute this luck to some magical flair or intuition. Don't confuse accidents with capabilities.

You are under the control of your emotions without rules. At some point, it's going to get a little bit out of hand and you'll lose control over the situation and a lot of money.

Accidental success is not an indicator of successful trading. If you have a proven and profitable strategy, the profit will come by itself if the rules are followed.

Remember: your goal is to learn from every transaction. Use your experience to constantly improve. This strengthens psychological stability and self-confidence. Keeping a trading journal lays the foundation for your development.

Technical Part of the Trading Journal

In the technical part of the trading journal, it is necessary to analyze the market and evaluate the transactions made. Among other things, you should be able to answer the following questions:

• Did you properly conduct the technical and fundamental analysis?
• Where did you make a mistake and what did you miss?
• What did you do right?
• Did your strategy match the market situation?
• How did you choose the entry and exit time of the transaction?

Daily analysis helps to constantly improve trading. You will be able to assess the maturity of your trading ideas. Develop your processes and strategies in a calm manner without being distracted by small fluctuations in the market.

Experienced traders use the trading diary as a tool for pattern recognition. They find graphic patterns and formations that can be missed in the hustle and bustle of everyday work. Such a process of daily repetition improves the recognition of implicit patterns. In short, you train your intuition and find new trading ideas.

Psychological Part of the Trading Journal

First of all, the psychological component of a trading journal is a tool for identifying patterns in a trader's work. It allows you to improve concentration and attention during trading. Usually the patterns include:

• Repetitive patterns of thinking and behavior;
• Repetitive emotional reactions in certain situations.

Psychological problems of traders often remain unnoticed and develop according to the same scenario.Example: you carefully prepare for a trading day and make transactions strictly following the trading rules. At a certain point something goes wrong, after which you start losing money. You get angry and subconsciously try to recoup the losses by starting to break the rules or ignore the loss limit, losing even more money as a result. You're just going to keep burying yourself in the hope that you'll end the day with a profit. Eventually you lose your emotional balance.

In this example, the emotional model becomes clear: you recorded a losing transaction and feel like a loser. This triggers a chain reaction of wrong decisions caused by your depressed state. You start breaking your own rules.

Questions For the Psychological Part of the Journal

Fill in the psychological part of the journal with answers to the following questions:

• Do certain market situations cause you fear?
• Do you tend to force transactions to make money faster, or do you patiently wait for the convenient opportunity?
• Do you often engage in revanchist trading, trying to recover lost money?
• How often do you miss out on good opportunities to open transactions?
• Do you feel incompetent if you don't see a single good trading signal throughout the trading day?
• Do you often alter your trading strategy if it doesn't work?
• Do you always behave the same way regardless of how the market changes?
• Do you tend to act against the market or do you prefer to follow the majority?
• Are there certain market phases when you feel really comfortable and confident?

Perhaps you will remember other questions and problems that are relevant specifically for you. When your list is ready, do the following:

1. Rate the questions on a scale from 1 to 10, where 1 is the minimum and 10 is the maximum impact on trading. Such scaling is often used by psychotherapists. Subjective perceptions and emotions are not amenable to objective measurement, so distributing the scores allows you to compare and weigh them.
2. Organize your problems, starting with the most serious ones. Create a table with two columns. Write down problems of a large weight in the left column, and possible solutions on the right. Most often they lie on the surface, but traders simply pay too little attention to them.

The above-mentioned exercise will help you identify your main problems and focus on solving them.

Summary

Trader's diary (trading journal) involves statistical information on transactions made during trading.

Scaling is one of the ways to simulate real processes by means of numerical combinations.