Why You Need To Start a Trading Journal And How
Alex

LEVEL 10 : SENIOR

REVIEWS 9 | REPLIES 84

#2062

Alex

September 15, 2015 at 5:48 pm

Keeping a journal should be at the top of any to-do list in any goal-oriented endeavor. You need to be able to measure, track, stay focused and improve your performance. A disciplined trader is a profitable trader. Starting a trading journal is the first step to building that discipline. You might be wondering why you should take the time to keep a trading journal if every broker provides real-time stats of your trades. The simple answer is that these statistics provide NO information about WHY you took the trade. It might sound easy to start your journal at first, but believe me, it can be very difficult.

Having a coach or mentor in anything in life will greatly speed up the process of your learning process. They are there to guide you every step of the way, pointing out your mistakes, recognize the things you did well, and keeping you disciplined throughout the journey. Finding a trading mentor can be hard to come by, so we as traders have the next best thing – a trading journal! An up to date and detailed Forex trading journal can be just as good as having a coach or mentor to watch over your shoulder. Keeping a journal might be time-consuming, but it could be more useful to review your own trades than to read a book or attend a seminar.

Benefits Of A Trading Journal

  • It will define your psychology and emotions in life.
  • A trading journal will help you keep track of your goals that you have set in your trading plan.
  • Evaluate your strengths and weaknesses in your ability to perform and handle pressure.
  • A well-kept trading journal will provide a way to improve on your own.
  • Learn where you do well and where you struggle. This way you can focus on what you are best at and see where you need to grow.
  • Lastly, it will help you in your mission to become a consistently profitable trader.

Things You Should Include In Your Trading Journal

No Forex trading journal will ever be the same. This is because we are all different, and we use different trading styles. However, there are a few key points that you should include in your daily journal entry.

  1. Goals
    Plot down what you want to achieve for the day. How many trades you want to take and what your financial objectives are.
  2. Daily Strategy
    Write down what strategy you will implement and how you will be using it to achieve your daily goal.
  3. Market Sentiment
    Write down what your market sentiment is for the day and why. In other words, are you looking to buy or sell?
  4. News
    Write down what news releases are expected for the day. Is there any high impact economic news being released? Will it have an impact on your pair that you are trading?
  5. The Trade
    Take a screenshot before and after the trade(s) that you took. Did you buy or sell? Insert the market price, the expiry time, expiry price and the trade size. It is important also to add why you took the trade.
  6. Trading Emotions
    Write down how you felt before, during and after the trade. Were you confident in your trade?

At the end of the day, you should go to all your trades. Identify what factors and steps you could have improved on. This is where your opportunity comes in to improve as an online trader. Don’t be vague; identify SPECIFIC steps that you will take to improve. There are no right or wrong answers here; you just need to be as honest with yourself as you can be. Here are a few factors that you should go over:

  1. Trade Follow-Up
    Did you execute your trades according to your rules set out in your Trading Plan? Find a reason why it was a good or bad trade. Could you have entered at a better price? How could you have chosen a better level? Were you patient enough to wait for the perfect trade or did you just jump in?
  2. Review Your Daily Goal
    Did you achieve your daily goal? If not, give your opinion why you think you did not reach your goal. Did you over trade? How can you stop overtrading? Maybe you didn’t take enough trades. Ask yourself how you can overcome the fear to take more trades.
  3. Objectives For The Next Day
    Plot down what you want to achieve for the next day. Analyze the market for potential opportunities for the next day. Focus on what your game plan will be. Remember always to have a backup plan if the market does not do what you think it would do.

You should follow the above steps every single day of the week that you trade. Don’t leave it till the following day, because you will forget or get lazy, trust me. At the end of the week or month, it is important that you go over all your trades and see where you made mistakes. Doing this, you can identify what is working, what is not and what you can improve on in the new month. Another crucial thing you need to do at the end of the month is you have to analyze your performance statistics. To do this you need to calculate and track the following statistics:

  • Net Profit:

This is your total gain minus your losses and expenses related to trading for the month.

  • Win Percentage:

Calculate this percentage by taking the total number of wins divided by the total number of trades you made and multiply it by 100. (e.g. 30 winners / 40 trades x 100 = 75% win rate)

  • Loss Percentage:

The easiest way to calculate this figure is to take the calculated win percentage above and minus it from 100. (e.g. 100% – 75% = 25%)

  • Largest number of consecutive losses:

Go over your trades and count what the largest number of trades was that you lost in a row. This number will determine your max draw down which is the worst possible scenario that you have experienced for the month. If this number is uncomfortably high, you need to make adjustments to your trading plan.

  • Average number of consecutive losses:

This number will indicate what your average draw down per month will be. By knowing this, you can control your potential risk for a series of losses for the month. The formula to calculate this is pretty complex so I would suggest writing all your consecutive losses down and spot with your eye what the average will be more or less. (e.g. 2, 2, 2, 3, 4, 4, 4, 4, 5 – you can see that your average losing streak was 4 losses in a row.)

Calculating the above statistics will enable you to find ways to maximize your trading profitability, find the correct trade size and determine the best trading situations for you and your trading style.

Reviewing Your Trading Journal

Now after all this information you have gathered and analyzed, what do you do next? It’s actually pretty simple to tell you the truth. Find out what works and stick to it. Find out what doesn’t work for you and stop doing it. In order to find out what works and what doesn’t, you need to ask yourself some of the following types of questions:

  • Which indicators or patterns work the best for you? Which of them do not work as well?
  • How can I get into trades earlier or at better prices?
  • How can I avoid potential traps in the future?
  • Did I follow my trading plan? How often did I deviate from it?
  • Is my trading plan working for me? Do I need to make any changes?
  • Am I doing better in ranging or trending markets?
  • Is my win percentage higher with certain currency pairs?
  • What trading sessions have been the most profitable for me?
  • Are there certain days of the week that I tend to do better than other?
  • Are my goals achievable? Should I make any adjustments?
  • What news events do I need to avoid?

Conclusion

You should ask yourself – do I want to go the extra mile or do I want to be lazy and risk failing? Many Forex traders make a go at a trading journal, but they fail to push through and give up. To build the necessary skills, you must have the will to maintain a trading journal. My advice for a helpful trading journal is:

-Write down everything that comes to mind. Be honest and don’t let anything out. Nothing is too silly to add.

-Pay close attention to your emotions and make sure to write them down.

Once you know what your trading system’s expectancy is, you can act with confidence. Confidence will enable you to execute trades according to your plan. It will keep you from second guessing yourself. Having a trading journal will be an invaluable investment for you and your future trading success.

Deandre Hershman

LEVEL 1 : NEWBIE

REVIEWS 6 | REPLIES 2

#2092

tradeisme

September 16, 2015 at 2:42 am

Alex…. I think you outdid yourself. Thank you for all the valuable information and doing as you said you would, really means a lot! I am going to start using my journal as soon as possible. Hopefully this will force me to be stricter and help me to stick to my trading plan.

Thanks again, you are the man 🙂

Alex

LEVEL 10 : SENIOR

REVIEWS 9 | REPLIES 84

#2094

Alex

September 16, 2015 at 7:08 am

Hey Deandre, I put a lot of thought into it so I’m super stoked that you liked the article.

I am sure that it will be of benefit to your trading in some way or the other. The name of the game is to keep your journal as detailed as possible and to actually go over the trades you took like I outlined in the article.

Don’t give up! If there is anything that you need me to explain just shout.

Regards,
Alex

Arnulfo Boeck

LEVEL 1 : NEWBIE

REVIEWS 7 | REPLIES 2

#2104

bumber

September 16, 2015 at 8:25 pm

Keeping a trading journal sure does sound like a lot of trouble, but I would try anything at this point to increase my chances of succeeding. Does anybody else use one? And do you find it usefull?

 

Albert Hannah

LEVEL 1 : NEWBIE

REVIEWS 7 | REPLIES 2

#2105

dooops

September 16, 2015 at 9:03 pm

I made a go at keeping a journal a while back but I only managed to do it for 3 weeks. It was just so time consuming.

I must add that I did learn a few tricks during that time though.

Maybe I should start one again. . .

Donald Lessley

LEVEL 2 : NOVICE

REVIEWS 6 | REPLIES 4

#2106

donaldronald

September 17, 2015 at 5:24 am

Great Idea! I will start one from tomorrow onwards!

Thanks for the tip 😉
Cheers

Merrill Bart

LEVEL 2 : NOVICE

REVIEWS 6 | REPLIES 4

#2107

merrillbart

September 17, 2015 at 10:13 am

My emotions are KILLING me, I just can’t stay disciplined! I currently have a trading journal but I never actually look back at what I did. I think this is where my problem lies. I will make a point of it from now on to review all my trades.

 

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