A forex trading journal is an excellent way to learn how to trade and to improve your trading strategy.
But just what is a forex trading journal? Why do traders need one?
In short, a forex trading journal is a log of all your trading activity.
With it, you can learn a lot about what you are doing right, but more importantly, you can learn a lot about what you are doing wrong and make your strategy better.
In this article, we’ll look at why people use a forex trading journal and the top tips for using one correctly.
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Why use a forex trading journal?
There is a philosophy behind keeping a trading journal; you can always be better. If you do not think in this way, then keeping a forex trading journal will not be beneficial to you.
In the end, keeping a forex trading journal could be one of the best decisions you make as a trader!
To find your forex trading style
For beginners at least, finding your trading style is the biggest reason to keep a forex trading journal.
As a novice forex trader, you likely do not know much about different trading strategies and so it is a good idea to try a variety of different ones out to see if they work for you.
And what better way to keep track of your performance than writing it down?
What do most forex trading journals typically include?
- The reason you entered the market. This can literally be anything, don’t shy away from the truth here.
- The time you entered the market. This is tightly linked to the below.
- The price you entered the market at. Be precise, right down to the pip.
- How long you had the position open. This could be minutes, hours, days, etc.
- The reason you exited the market. Just like the reason you entered the market; you should be honest.
- How much you made or lost. What matters most - the fruits of your labour.
You can buy any blank notebook and add these columns to get started. Ideally, a grid notebook would be best as it will be easier to add columns.
Of course, you can be as detailed as you like and include more columns.
Though for starters, the above list is enough, and you can think about more columns as you become more experienced and add more variables to your trading strategy.
Some traders may ditch their trading journal as they become more accomplished, but the majority of professional traders will keep using their trading journal, recognising its immense value.
To improve your forex trading style
Over time, your trading journal will become not so much a way to explore different trading strategies, but to improve the strategies you have built.
Remember, learning to trade is a never-ending process. Professionals are still learning and, of course, they still keep a trading journal as well!
The moment you think you know it all and stop dedicating time to learning how to trade forex is the moment you started putting yourself at risk.
Not only are you ignoring potentially better ways to trade, but you are more likely to forget important elements of your trading strategy.
Further to that, a forex trading journal can also take note of your consistency. Being consistent in how you trade is how you master your strategy and ensure you turn a profit.
In the end, it is more likely that poor trading performance is the result of not properly following the rules of your trading plan and not a trader’s inability.
However, having a trading journal is worthless if you do not analyse it. Set yourself a time to go back and read through all your entries, at least once a month works for many traders.
If you really want to do a dive deep into your trading performance, you can even put all your entries into a spreadsheet and look for similarities in successful or unsuccessful trades.
With a forex trading journal, you can see what parts of your trading strategy are working for you and what parts aren’t.
You can then look into ways to remove risky variables that tend to have a negative effect on your trading strategy and enhance variables that you know are working.
If you don’t track your trades, how can you know how well you are trading? You can’t even work out how many pips you made over a certain period or your win-loss rate, which is very important.
Plus, having a forex trading journal will also help you build an effective risk management strategy, which should always be part of your trading strategy.
Top tips for using a forex trading journal
There are plenty of things you can do to ensure your forex trading journal is bringing you value.
Be honest with yourself
The only way a forex trading journal will be of any use to you is if you are honest with what you have achieved.
That means being precise and logging every detail to the pip. Don’t go around fooling yourself that you did better than you really did! It’s not helping you one iota!
But this point swings in two directions; you also shouldn’t underestimate what you have achieved either - you may be trading better than you think.
By being completely honest with what you have accomplished, you will be clearly able to see where you are succeeding and where you need to improve.
And it’s not just about the numbers, it’s also about the reasons behind your trades. Specifically, what you were thinking when you made them.
In the end, being honest with yourself is the best way to learn how to trade because it is 100% about what you need to do to improve as a trader; completely personalised to your abilities.
It’s okay if you forget to use it
You will not remember to use your forex trading journal all the time, that’s just a fact, but you shouldn’t be too harsh on yourself if you forget.
Simply move on and try to find a way to remind yourself to do it next time.
If possible, try to log the ones you forgot to write down. Of course, they will not be as accurate as if you wrote them down at the moment, but it is better than nothing.
Further to that, steer clear from thinking that because you forgot it you should stop using it. This is a toxic thought that can be extremely damaging to learning how to trade forex.
Keep track of your emotions
When it comes to forex trading, emotions are often not regarded as very important, but the truth is they play a very big role in how successful you are. It often comes down to how stressed you are.
Remember that you rely on yourself to make money, that’s why it is super important to understand your processes and thought patterns and how to improve on them.
This may lead you to not only make changes to your trading strategy but also your daily routine, which you may notice is impacting your trading strategy.
Don’t forget to analyse the market
Typically, forex trading journals focus mostly on a trader’s actions and forget that there are some things the trader simply cannot control. Note these down too!
One of the biggest things to include is how the market acting that day. It’s important because it will affect your results.
Sometimes the market is tough to get in and out of unscathed, and no matter how well you stick to your strategy, you will still make a loss.
Further to that, make sure you include any important events that happened throughout the day, such as announcements from major central banks.
You may even notice that in certain market cycles, your trading strategy works better or worse, or you may even develop different trading strategies to deploy in different market scenarios.
If you remember anything from this article, make it these key points.
- Keeping a forex trading journal is a great way for beginners to learn how to trade. They can put theory into practice and see how well it works for them.
- Over time your forex trading journal will be useful for improving your strategy. The only way you will ever improve is if you keep track of what you did.
- Keep track of your emotions and be honest with yourself. Your emotions also play a big role in how you trade as does your honesty about your trading performance.
- Don’t forget to note how the market is behaving. Some markets are just unwinnable and will affect how well your trading strategy will perform.
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