Keeping a forex trading journal is essential to every trader out there, and not just to keep, but to analyze and implement it on their trading journey as well. It allows traders to have a constructive reason to execute a trade. The forex trading journal is the Google map for a trader’s trading days.
What is a Forex Trading Journal?
The forex trading journal is a detailed compilation of executed trading details for each and every trade that a trader takes. It is a tracking method to get a good grip on your raiding decisions and risk management. A trading journal consists of trading decisions, predictions, pre-analysis of a trade, strategies, risk management, what psychology was going on with the trader, etc. This is a very personal documentation of good and bad trades. This journal is required to be analyzed every time traders start their trading day. It is nearly a deciding factor whether you will be profitable or not.
What to Write in the Trading Journal?
A trading journal is a trader’s Bible that assures profit opportunity with a solid risk management method. Let’s see what should be documented in the trading journal of a forex trader.
- Use Pen and Paper
– Although we have come a far way from using pen and paper to using Google sheets or e-notes. But it is highly recommended to use pen and paper, as this will leave a mark on the trader’s brain and they will remember what they have written.
- Analyze Often, if Possible, Every Day
– The purpose of journaling traders’ trading days is not to just write and close the book off; but to analyze and see what is going on with your trading, what sort of trading style you have, and what was the good thing for the profitable trade and what went wrong in the losing trade. The most important thing is that, via analyzing your trading journal, you will know your risk management strategies and your flaws to overcome in trading. Analyzing will assist you in avoiding unintentional or intentional errors on a regular basis.
- What Do You Think?
- Always take a good amount of time to write down what you think about a particular trade.
- What was your psychology telling you before taking the trade or what was going on in your mind while the trade was running?
- Most importantly, just right after the trade is completed, you must write about how the outcome has affected your mind and how you feel.
- What you think could have been done better and what could have been done differently is a must-write in the journal.
- Write down your observations about your strategies.
- Do not think that your strategy is the absolute right one. No, it is not. There is always room for improvement, even in your best trading strategies.
- If you have drifted away from your trading strategies as the market conditions were not in your favor, then you must write down all the plausible reasons that were the reason for changing your mind.
- Mandatory Trading Details
- Track the date and duration of trade; not just the opening and closing time of a trade, but at which hour of a particular session, the markets are moving in a certain direction. Eventually, you will find the similarity of the market movement at a definite time and execute the trade accordingly.
- The points to definitely set in your daily trading journal are position, the reason why to take the trade, entry position, stop loss and the reason for the stop loss position, take profit and the reason for the take profit position, the risk to reward ratio, the context of the break-even, the end position and the result, etc.
- Set solid, rational trading strategies to follow and write them down in your trading journal.
The Pros of Keeping a Forex Trading Journal
- Create better trading strategies
- You are not going to make the same mistake repeatedly
- This stops you from taking unlimited trades with the intention of making a great profit or with a solid trading plan.
- No more impulsive and revenge trading
- To create a good, constructive and rational trading decision
- You will be able to predict the market more accurately and execute accordingly
- You will know what your training strengths and weaknesses are