How to create a forex trading journal
What is a Forex Trading Journal?
A forex trading journal is a detailed record of your trading activity. Every serious trader should keep a journal of their trades to eliminate and manage their emotions and to track the performance of technical setups.
Emotional trading is one of the biggest mistakes forex traders can make. Recording your trades, how they are affected by your strategy, and your personal feelings at the time can help bring clarity to your trades and ultimately improve your methodology.
Your goal with a trading journal is to monitor the performance of your trading journal trading strategy and your ability to successfully apply this strategy. A well thought out trading strategy is the key to successful trading, but it doesn’t matter if you can’t follow it. A trading journal should help you with this.
Trading journals can take many forms and apply to any market. Whether you prefer an old-school notebook or an organized Excel spreadsheet, this article covers all the information you should record and how you can reflect on that information to analyze your trading activity.
Trade journals require a great deal of time and dedication, but when used properly, they can be your most valuable trade asset.
Why should you keep a trading journal?
Trading journals help you execute your trading strategy the way it should be executed. Proper use of a journal can ensure you are taking stock of proper fundamental analysis, performing technical analysis as intended, and Manage your risk appropriate. These goals can be divided into four categories.
Historic record
No trader can remember the success and failure of all his past trades. They also fail to understand why these trades turned out the way they did. By recording your past trades and the information surrounding them, you can analyze past performance. The records kept help you learn which currency pairs are performing best with your strategies and whether your technical analysis accurately predicted performance.
planning tool
You can use a wide variety of indicators and strategies when trading forex, which can make it difficult to stay organized and keep track of your intentions. A trading diary allows you to clearly plan trades before and during your orders and helps you stick to your pre-planned strategies. Sticking to your plans and not trading on emotions is crucial to successful trading.
Alignment of strategy
By tracking your trading strategy and its success over time, you can refine your methods amid changing market conditions. A comprehensive diary not only contains all the details of your trades, but also the market conditions, so you can adjust your strategies as needed for different environments.
habit correction
Internal biases and habits are one of the most powerful but intangible effects on your trading. Emotion-based trading is a major hurdle for forex traders, and a trading journal helps to be more objective about your trades and your own impulses.
What should you write in a trading journal?
Your trading journal should document everything. The market conditions at the time of trading, the strategy used and your level of confidence are some of the many variables that you should track.
These elements can be viewed in two parts. The first is the technical details of your trade: currency pair, size, direction, etc. It is recommended to include printouts or screenshots of the actual chart representing your trade. Many trading platforms already keep records of this data, but the power of a journal lies in placing this data alongside your personal comments. These notes make up the second part and include your goals, mindset, rules, setup, etc. Basically your entire methodology behind the trade.
Below is a checklist of items to include in every journal entry. As you become more experienced, you may not need to write as much about your chosen currency pair or direction. Instead, you can spend more time analyzing the market and refining your strategies in response to past performance.
Information to include in your trading journal:
- The currency pair you are trading
- The size of your trade
- The direction of your trade. Did you buy (go long) or sell (go short)?
- The period in which your trade took place. When did you enter the trade and when did you close it?
- The strategy(s) you used. Is this trade based on big market news? What technical analysis did you read before opening the position?
- The level you entered in all assignments. At what price are your stop-loss and limit orders placed?
- Your belief before entering the trade. How confident are you about the opportunity?
- Total score that shifted your position. How many pips did your trade go up or down?
- Whether it was successful or not. Did you win or lose money on your trade?
- How you felt during trading and after closing your position. Did you interpret signs that the market would move against you and close early? Or did you get greedy and wait too long to close, falling behind and eating away at your profits?
- Final Thoughts. Why do you think your trade was successful or not? How well did your strategy work and why?
What does a good trading journal look like?
Your trading journal can take many forms. What is recorded in the journal is more important than its structure as long as the layout is understandable to you. Many traders create their own trading diaries in Excel or Google Sheets, for which you can download ready-made templates. Others use online project management software like Trello or Asana. And if you’re old school, you can jot down your trading entries in a notebook. There are many pre-printed notebooks and planners specifically designed as trade journals.
H3: Comparison of different trade journals |
|||
|
Notebook |
Excel/Google spreadsheet |
software |
|
|
Access |
Offline |
Offline |
On-line |
|
organization |
Good |
Good |
Big |
|
integration |
none |
Manual |
Manual |
|
Costs |
Less than $10 |
Small fee/free |
Most expensive, but some offers restrict free accounts |
|
best for |
New traders |
Many businesses |
day trader |
There is also software specifically designed to act as integrated trading journals compatible with most major trading platforms. These are the most expensive options and often have monthly fees on top of a basic payment. However, they are undoubtedly the easiest journals to set up.
Performance analysis software is offered with all FOREX.com accounts, providing real-time statistics on your trades and compiling much of the information required for a trading journal. Performance Analytics is a more statistical view of your trades, using charts and other visual aids to break down your current and past trades.
Performance Analytics offers several tools to monitor running trades. For example, PlayMaker monitors your trades in real-time to mitigate risk, prevent emotional trading, and track metrics on open trades. Learn more about performance analytics and PlayMaker here.
The medium you choose for your journal depends on what you are comfortable with. For example, Excel may be less attractive if you are new to spreadsheet modeling. Experiment with the different options and choose what feels right for you. What you put in your journal is most important, but an organized structure is also key to helping you understand and learn from your trading activities.
Example trading journal
Now that we’ve discussed the content of trade journals and various templates, let’s look at an example. This example was created in Excel and includes all of the categories mentioned, but you should organize them in the way that makes most sense to you.
Practice using a forex trading journal with FOREX.com
You can practice tracking your trades with a journal like the one above with a FOREX.com demo account. Trade the Forex market within minutes of opening your account with $50,000 worth of virtual funds.
Already an experienced forex trader? Login to your FOREX.com account here or create an account with us today.