Forex Journaling – Forex Academy

This is being written with the assumption you have looked into forex trading before, and in doing so have come across the term ‘trading journal’ previously. There is no way that you wouldn’t have because any website that you go to that is related to FX trading would have told you to get one, and to get one right from the start. That is just how important these diaries of sorts actually are.

They may have told you to ensure that you have one, but they may not have actually explained to you what a trading journal actually is or what the best practices are when keeping one. So that is what we are going to do now. We are going to look at the purpose of the journal, reasons why you should keep one, and then a few tips to help you keep one properly to ensure that you have included all the important bits of information that could help you improve and analyse yourself as a trader.

What Is a Trading Journal?

What exactly is a trading journal? A trading journal is basically what it sounds like, it is something where you are writing down everything that you are doing. It is full of your trading activities. You can then use it to learn quite a bit about how you are trading, the things that you are doing right, the things that you are doing wrong, what you need to work on and how you can make your strategies better.

Many people feel that there is actually no need for a trading journal, yet 99% of all successful traders will certainly have one in one form or another. The main point behind having a journal is the idea that you are never perfect, there is always room for improvement within all aspects of your trading. If you do not feel that you can still improve, then a journal will not help you, but you will also stagnate in your trading results. Keeping a journal can be one of the best and most beneficial decisions you can make as a trader.

The first reason to keep trading journals is that it will help you to find the trading style that suits you the most. When first starting out you are probably not aware of the majority of trading styles, you most likely would have seen one or two, or seen multiple different ones but not recognised them as different trading styles. It is a good idea to try out each one, but simply trying them will not really help you, unless of course, you are keeping a journal.

There are a few different things to think about. Try to jot down the reason you entered the market, the time you entered it, the price at which you entered it, how long you held the position open, the reason you exited the market, and how much you made or lost. With just those bits of information, you will be able to work out which style of trading you are naturally accustomed to. If you hold trades for days or weeks, then maybe swing trading is right for you. If you hold them for an hour and take small profits, then scalping may be the style for you. Include as much information that is right for you, at this stage we are trying to work out the right style for you.

The trading journal can be used to find your trading style, it can also be used to help improve the style that you are currently using. You need to remember that trading and learning to trade is a never ending process, you will never know everything, even the most successful traders are still learning new things, they are still keeping their journal as it is that journal that lets them know what it is that they need to learn next or that they are slacking behind in. One of the things that a trading journal is best at is letting you know exactly how consistent you are. It will tell you whether you are following your rules, whether you are entering and exiting the markets at the right times in line with the style that you are using.

Having said that, even if you are keeping a trading journal, it will be completely useless if you are not analysing it properly. Set yourself a bit of time out from trading where you can properly go over the journal. Do this at least once a month, as this timeframe seems to work for a lot of traders. Many traders find it beneficial to put their trades into a spreadsheet, this way you can easily see the similarities between those trades that have been successful and those that have not been.

The trading journal is there to let you know whether your strategy is working, which parts are and which parts are not. By looking through your results, you are able to see which variables within our trading are causing you issues, they may even be habits. These are the things that you can then work on getting rid of and you can also see the variables that are working well, allowing you to enhance them further. If you are not tracking your trades with a trading journal, you will have no idea what it is that you are doing well or not well. You won’t even be able to work out your overall pips and profit and losses. It will also help you to hone your risk management.

So we now know how to use the journal and what it is that we are looking for when using it, but simply having one is not always enough, so we are going to be looking at some tips that you can use when creating your journal, different things that you should be doing to ensure that your journal will actually help you and that you are putting in the right sort of information.

Be Honest

It’s human nature to try and make yourself look as good as possible, but you need to remember that the only person that is going to be seeing your trading journal is you. So you need to be honest when putting your data in, this is the only way that it is going to be at all beneficial to you. What this means is that you need to ensure that you are recording your data completely accurately, down to the pip, do not fool yourself by making it look like you did better than you did. Having said that, you should also not underestimate what you are doing or what you have achieved, you may actually be doing slightly better than you think. By being honest, it is the only way that you can actually be sure of what you are doing well and what you need to work on. Don’t forget that it is not only about the numbers, you also need to be looking at the reasons behind your trades, both entering and exiting them. Each trader is different which is why you need to be honest with yourself, as you will certainly need to improve on aspects that others do not and vise versa.

Don’t Worry If You Miss and Entry

You won’t always remember to use your journal. There will be times when you are so excited to trade or simply do not have time, so there will be times that you forget to use it entirely. Don’t punish yourself simply because you forgot it, it happens to everyone at one point or another. Just try to move on and try to remind yourself to use it next time. If you do forget, there is still some information that you can jot down, things like the entry and exit prices. Of course, the info won’t be as accurate as doing it at the time, but it will still be better than simply having a blank trade. Whatever you do, do not consider leaving the journal entirely simply because you forgot to put in a trade or two, you still need the journal if you want to carry on improving.

Track Your Emotions

Emotions are a huge thing when it comes to trading and they can actually make and break a strategy in certain situations. Many people though do not feel the need to record them, but they actually have quite a large role in how successful you will become. Knowing whether you are successful or not during different motions could help you to decide in the future when to trade or not. If when you are feeling a bit down you constantly lose trades, then try not to trade in the future when feeling that same way. The same goes for when you are successful. Try and trade more during times when you feel the same way.

Remember to Analyse the Markets

Most people when filling in their journal will only put down what it is that they have done and the decisions that they have made. The markets sometimes behave in quite strange ways, you may have done everything exactly right but then the markets decide to go a little crazy. This isn’t your fault, but your journal will make it look like you did something wrong, so be sure to jot down when it is the markets behaving badly rather than yourself. This would also mean including any important or major events that could have caused the markets to move, things like political speeches or natural disasters should be included within your journal.

So those are some of the hints that should help you complete your journal. It seems like a lot of work, and when you are just starting out it will be, but you will get used to doing it, it will end up taking seconds to fill out instead of minutes. Get used to making one, get used to analysis and referring back to it and it will make your trading journey a much smoother and a much more successful one.

When we try to get better, we learn. Learning is a process where we consume relevant information and use it for our goal. Forex is no different, and journaling is one element in this process. Now, what happens when we have too much information or when we have bad ones? Well, it is worse than not knowing anything about a topic, we will also need an open mind to accept what we know might not be true. Objectivity is common to scientists, but this mindset is extremely helpful to forex traders too. When we have an open mind to accept what is producing better results, only success awaits us on the forex. Journaling is the keeper of what we are doing, what works, what not, what is better. It is not a debate if you should have one if you plan to become top among the 1% who make it in this game.

According to many professional prop traders, and other professionals, most of the information is redundant when you start learning. You will need to synthesize what is good and what is bad. This is not easy to do when you do not have experience. To pick up good things for you is even harder with so many forex trading indicators, strategies, tools, and robots. Even if they are good in practice, they might not work for your personality, needs, setup, etc. The right way to journal your activity when trading is also obscured with too much redundant information out there. This is the point where this article tries to help, there are so many sources about journaling that do not give you the good stuff, at least not right away. You will have to dig it, and know where to dig.

Professional traders keep it simple, not just about trading, but journaling too. If you have spent some time reading about forex, maybe you have stumbled upon the phrase “Keep It Simple Stupid” – KISS. Keep that one in your mind, it also applies to journaling. Now, when we take a look at one of the “best” places where to learn forex, babypips.com, and regarding their Journaling 5 most important things article, you will notice a lot of theories before you get 5 bullets what you should have. So all that information above is just to fill up the webpage. According to prop traders, you do not even need the first four.

The point is all about getting the mistakes out. Mistakes are easy to find out, the biggest losses are the result of those mistake trades. The nature of the mistake could be technical, your indicators are not suitable for that timeframe, for example. It may be psychological, moving Stop Loss levels. It also could be inadequate Risk Management, but you should first define an optimal plan about this before any trading. For every mistake you have ironed out, know that you have added (approx.) 1% to your account. It has the same effect as finding that “perfect” confirmation indicator you have spent months searching.

Of course, some traders do not journal, some do. If you would have to pick one to invest in if they are equal in all other points, who would you choose? Not a hard choice, by some statistics, the ones that have a journal are way better performers. Is it because of the mindset or is it the mistakes ironed out from journaling? It is both, one implies the other. Here is how to put it together, the easy way.

For starters, you need a spreadsheet. You can use Google Sheets or Microsoft Excel, it is the same. Once you become advanced you may use specialized products for journaling but for now, you do not need them. You need only 5 columns. You should already have your Risk Plan set up, it should be constant in percentage terms per position for multiple assets> so you do not need to enter the position sizing, it is always 1% of your account, for example. Then, if you go to the daily timeframe – the best timeframe that is suggested by some trend-following prop traders, you can also scratch that column out too. To make it even simpler, you do not need to enter your entry times! More about this later. So by making it simpler, it takes a second to fill it and not overwhelm with the information you do not need.

The first column you need is the currency pair. That GBP/JPY might be running nicely for you but it is a matter of time when it will start to consolidate, but the column is just for reference. In the second column is the Short or Long trade direction. Also for reference. The third column is the number of pips you have gained or lost from a trade. Do not enter the dollar amount here. Note that if you have a complex scaling in and out position management then the result of the final pips needs to reflect it correctly. Depending on how complex it is, you may need some averaging and IF formulas.

The column four is a bit different than the usual journaling. It should contain a screenshot link of a trade. You can sign up with a service for this where you upload your images. You may need to draw a line when you have entered and exited. Note that the MT4 also has the drag and drop feature for this. Open a Journal tab and just drag and drop the position entry from the list onto a chart window, you will see a dashed line that represents the entry and closure of that trade. This way you can see if you have exited at the right time, where was your Stop Loss, was all this a good idea, etc. This is a much better alternative than to enter your entry and exit time stamps.

Column no 5 is your comments area. All normal trades like your Take Profit was hit, you exited, everything is fine, do not need a comment. There is no mistake here. If you have a losing trade but just because the trade did not go your way, it is still not for comment. Do not try to win every trade, try to trade as the system says. Now, have you made exceptions to your system and let a trade go farther? That was not the system, that was your emotions and gut feeling and these are catastrophic to your account. Also, you may see a resistance line coming up and took that trade off before the exit signal. If this is not a part of your system or plan, then this is a mistake. So write these mistakes down.

These mistakes are now nicely visible. Do they repeat? If the answer is yes, half of the problem is solved, you know what is bringing your account down. The other part is of course the solving process. Most of the mistakes made are not accidental mouse clicks, they are psychological. You are on the way to make your trading system work. Now, the power of the journal cannot iron these out but it will give you pointers of your weak spots. Eliminating weak spots can be done in various ways, depending on nature, as described in another article. Journaling may expose you in a way you will not like. It is something you do not like to see in front of a mirror, so most will be ignorant. It is a form of self-criticism and revealing what is not good about you when it comes to decision making but also in life.

In forex, journaling is a must for top traders. You may wonder why your system and Money Management does not give you results at one point, and the reason will be the lack of journaling. This is the element that separates the best from those who fail. The best put in the work. There is no quick way to getting to the top where you can consistently make money out of forex. This article has shown you a simple way to make one, cutting all the redundancy, and get the most important out of journaling – to find your mistakes. People who have put in the work do not have to wait for the effects to reflect on their account, it is instant! Do it right and, as it is usually said about forex, the sky is the limit.