There are so many tools that are recommended to forex traders in order for them to develop their trading skills. So many techniques and formulas for calculating possibilities. However, there is one particular tool that is usually not taken so seriously, which is a trading journal.
One of the reasons trading journals are usually overlooked is the amazing stick-to-itiveness it takes to actually fill out the journal accurately and with the necessary details.
It takes a truly disciplined trader to keep up with a trading journal over the long run. But the benefits are boundless and plentiful if you put in the work. This is why in this article we want to go into the details of a trading journal to see exactly what it is and how you can create your own trading journal.
The Notion Behind Forex Trading Journal
Simply put, a forex trading journal is a notebook used for careful tracking and record keeping of all your trading behavior, including every move you make and all the wins and losses. This is so you can eventually learn from the patterns that you have repeated in the past, whether positively or negatively.
More importantly, when you jot everything down, you would be able to see precisely what mistakes you have made that led you to lose money. You can then use this data to improve upon your trading plan.
Even though the essence of any trading journal is to keep a full and exhaustive record of all trades, there can be various formats to create your journal in. Furthermore, there is a lot of room for personal touches. But we will get the “how” of creating the journal later. First, let’s talk about the “why.”
Why Should You Keep a Trading Journal?
As was mentioned above, having a trading journal can sometimes be a rather tedious act as it requires a lot of care and attention. But it needs to be mentioned that it is really easy at the same time.
Behind this simple idea of a trading journal lies a variety of advantages and reasons to keep a trading journal in forex:
- First and foremost, a trading journal will allow you to improve your trading plan by identifying where the issues of your trading approach might be.
- Honing your trading style is also another important advantage of keeping a trading journal. Because it will allow you to find out what are your strong and weak spots as a trader.
- Having a trading journal will instill a sense of discipline in you, which is one of the most desired and necessary traits for a successful trader.
- A trading plan will not just help you avoid mistakes, it will also give you the chance to repeat your winning strategies and good decisions you had made before that led to profits.
These are just a few of the benefits and improvements that can come along with a trading journal. To reiterate, because it could take such a long time to keep a detailed journal, many traders avoid it. But let’s see how you can begin your own trading journal in forex and have an amazing competitive edge over other traders.
How to Create a Trading Journal in Forex?
First of all, before we tell you the necessary details for a proper trading journal, you need to know that a trading journal can be created with the help of a number of different tools. Microsoft Excel is obviously the number one tool for keeping a detailed spreadsheet of all the trades carried out in any financial market including the foreign exchange market. Although it is interesting to point out that there are some traders who keep an actual handwritten journal. But that might be better left to hardcore traders only.
Moreover, if you don’t know how to work with excel very well, there is no need to worry. Because there are so many other tools, including software and even online tools that allow you to keep a journal of all your trades easily.
Regardless of the platform you choose to manifest this idea, there are essential bits and pieces you need to observe nonetheless.
So here are the essential pieces of info to track in your forex trading journal:
|What information to include in a forex trading journal?|
|The precise time of the trade|
|The trading pair|
|Type of position|
|Stop loss limit|
|Points of entry and exit|
|Outcome of the trade|
Of course, depending on what kind of trading style you have chosen, extra data can be added to this list. But supposing that you have chosen what kind of data to collect, let’s see exactly how they are to be collected.
- Step 1: make sure to write down every little detail. Of course this depends on what kinds of info you have previously decided to include in your journal. But whatever your list may include, make sure to jot every single one of them for each trade. Detail is key in keeping a trading journal.
- Step 2: after having recorded all the important info regarding the trade(s), it might also be a really good idea to include a snapshot of the actual chart in your recorded data. This snapshot could entail vital and important information regarding the actual trade itself; this includes support and resistance lines.
- Step 3: furthermore, make sure to include your own ideas about the trade. This could be anything that went through your head while making the trade, such as your emotions or any other thought.
- Step 4: Finally, double or even triple check that everything is absolutely correct in your special forex spreadsheet. Remember, the whole point of having a trading journal is so that you can later look back and analyze past trades. So it is obviously vitally important that the information is accurate.
In the end, please keep in mind that unlike many other tools and techniques that are recommended to forex traders, that ought to be followed exactly according to the formula, a trading journal is different. A journal is where you can exert your own personal touches and adjust it exactly to your own needs.
So the best forex trading journal is one that you are most comfortable with and one that gives you the most amount of insight precisely because of that reason.
Trading journals are regarded among the most beneficial tools in forex trading. Especially in light of the fact that they can be implemented by anyone. It doesn’t matter how much experience you have, whether you have been trading your whole life or you have only started to trade recently. Anyone can start keeping a trading journal at any point in their trading journey.
Contrary to the simplicity behind the notion of a trading journal, it can also be taken to the extreme and made much more complex with heavy analysis rituals over past trades.
In either case, the goal of keeping a trading journal in forex is to understand your strengths and weaknesses as a trader and how to improve upon your trading behavior and trading plan.