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For example, a trader plans a position, sets their stop loss, and take profit levels and closes out their trading terminal for some lunch. When they return, they see that their take profit was hit, but no profits were booked – only losses.
This is because their stop loss level was reached before the take profit was. If a stop loss level is reached too often, adjustments will need to be made. Either entries need to be taken lower due to the level of risk allocated, or risk needs to be adjusted to allow for stop losses to be placed further away from entries.
By keeping a trading journal, it arms a trader with quantifiable data about themselves and their actions that can be used to improve.
