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.
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.