What Is Forex Trading Log and Do You Need It?
So, a trading journal or diary is a way to track your trades, analyze your strengths and weaknesses, and improve your future performance in Forex. Keeping a track of your trades may seem a little boring and uninteresting. But after a couple of weeks, you will start getting the first useful results and you won’t agree to ever stop doing that. For each trader, such notes have unique benefits, but we’ll take a look at several main advantages:
- Discipline. When you learn to carefully document all your trading actions, you will become more disciplined and eventually become a more successful trader.
- Learning from your mistakes. When you have a complete picture of a loss transaction right in front of your eyes, you can assess the situation with a clear head, with no emotions involved. Once you understand what your mistake is, you can avoid it in the future.
- Improving your trading plan. By analyzing your overall performance for the past week and even the past month, you can note which trades work perfectly for you, which ones take too much effort considering potential profits, and which trades don't work for you at all. Based on these findings, you can improve the trading strategy and trading plan.
- Control over emotions. Mark your reaction to different market situations. Later, after analyzing your emotions, it will be easier for you to control them.
How to Create a Trading Diary?
Each trader has his own approach to journaling. There is a high chance that your way of making notes will change over time, as you will find out what exactly you need to record and what works best for you. A trading journal should be one of the first steps for beginner traders. Remember always to be honest and thorough. Record successful and unsuccessful trades in your trading diary, follow your plan, and be disciplined. I guarantee you will become more consistent and learn more about your psychology if you do everything right. Use the following list for a quick start:
- Market conditions. Describe in detail the market situation at the time of entering a specific trade.
- Trading strategy. Make sure to indicate your current trading strategy. This will help evaluate whether this strategy works for you.
- Details of a trade. Here you can point the following information:
- Date
- Currency pair
- Chart type
- Opening and closing time
- Type of transaction (Buy/Sell)
- Position size
- Balance before and after the trade
- Profit/Loss (in pips and in currency)
- Details of your trading decision. Provide details of the technical analysis you’ve made. Mark if there was any news release coming out at that moment. Indicate whether you followed your trading plan and trading strategy. Mark if you used any indicators, etc.
- Describe your feelings. It may seem silly, but that way you can evaluate whether you are making decisions based on your emotions. If so, this will help you avoid this in the future.
- Take a screenshot of the chart. A photo will help you remember and evaluate the market situation at that moment. You may note that you’ve made a technical analysis incorrectly or missed some clear signal to action. If you keep records manually, you can store screenshots separately on a computer with transaction numbers or print and paste them into your journal.
- Analysis and conclusions about the trade. This might be the most important point in journaling. Here you draw a conclusion on each trading decision, which you can later use to improve your trading plan and trading strategy.
A Few More Tips
Remember that this is YOUR journal and no one can tell you what to write in it. Write about what you want. You can even describe your mood at the time you entered trading and mark which events caused it. Maybe this will help you to understand at what points you better not trade at all.
For quick and convenient use of the journal, you can make notes of the most successful and unfortunate trades in order to analyze them again. If you keep a journal manually, you can make margin notes. If your records are stored on a computer, create a common table of your transactions, where you will mark the necessary transactions in color.
And one more thing: keeping a journal should not take longer than trading itself. Do not dwell on this and do not try to achieve perfection.
Well, I hope that now you are all set and ready to start keeping a successful trading journal. Trust me, the most difficult thing is to start, but the results won’t take long and will definitely surprise you.