A forex trading journal is basically when you log all of your trading activity. This can be in the form of hand written notes, in excel or in a word document. Whatever way you decide to log your trading activity, creating and maintaining a forex trading journal can be a very beneficial thing to do.
Why do you need a forex trading journal?
Learn from your trading mistakes
If you are always recording your mistakes, you can take time to reflect on them, understanding why you made them and how you can prevent them from happening again. Sometimes traders will ignore the fact that they have made a mistake and carry on without actually acknowledging what went wrong. This can lead to repeating the same mistakes over and over. By having them written down, you can refer back to them prior to taking a decision that you are not sure of. The sooner you accept the mistakes that you make, the sooner you can work on rectifying them.
Improve you trading strategy
A forex trading journal will allow you to record the performance of your trading strategy and look for areas in which it can be improved. The more trading activity that you record within the journal, the more data you will have to analyze for what is working and what needs to be changed.
Within your forex trading journal, you could record the hours you spend trading along with the currency pairs and chart time frames. You may start to notice a pattern in your performance which will allow you to pin point what is working best for your trading style.
Your forex trading journal should include the profit or loss for each trade, day, week, month, etc. This can be a good reference point to see if you are comfortable with the risk you are taking and if your money management needs to be changed to something more suitable.
A forex trading journal can be part of an overall forex trading plan and thus give structure to your daily trading activities. It can help to maintain focus on the task ahead whilst presenting you with the opportunity to reflect when not actively trading. Just like having a strict gym routine that you follow, committing to maintaining a journal can make things feel more structured.
Improve trading psychology and discipline
Trading successfully can require immense patience and discipline. Having to maintain a forex trading journal can train you to remain disciplined whilst you can improve your trading emotions by frequently jotting down how you feel and reflecting on it later. You could spot reasons as to why you were feeling any negative emotions such as fear, anger and greed. This will give you a chance to eliminate the factors that caused these emotions next time you are in a similar situation.
Gain feedback from other traders
If you have a forex trading journal to share with other traders, they may be able to identify areas in which you can improve your trading. It can also be useful to refer to other trading journals to take some inspiration and see if there are things that you would like to implement within your own trading strategy.
What to include in a forex trading journal?
This can depend on the information which is most important to you but there are some things that you should always try to include within your trading journal including:
- Hours that you spent trading
- Dates and times of trades
- Currency pairs or other trading instruments you are watching
- Potential trading opportunities that you are following
- Buy or sell entry along with the reason as to why you took the trade
- Money management including the risk to reward ratio
- Potential exits you will look for on the trade
- Exit and why the trade was closed
- Any thoughts or feelings you had during trading
Forex Trading Journal Summary
Hopefully by now you will have a clear idea of how to develop a forex trading journal and some of the key benefits that it can bring. Whilst it may seem like an arduous task to some, it can help a trader to set clear goals and stay focused on achieving them.