Keeping a trading journal plays an integral part in becoming and staying a profitable Forex trader. The professional traders and the best traders know this and they always keep a trading journal.
So, what is a trading journal?
Essentially, a trading journal is a written record of all trading activities of the trader such as the rationale behind the taken trades, the plan for the trades and the outcome of each taken trade. A trading journal can take many different forms and can be as detailed as the trader wants it to be.
Traders need a trading journal because there is no other way to record every bit of detail that is going on in the moments of making a trading decision. A trade can be taken based on technicals, fundamentals, sentiment or a combination of the three. If you just look at the trading history from your platform, it’s going to be rather hard to remember why you took and why you closed a particular trade a few months or a few years ago. In your trading journal you have everything written down, and thus, for any trade you go back to, you’ll exactly know how and what happened from the point of entering to the point of closing that trade.
Keeping a trading journal is a great learning experience that is also very personal. Essentially, it serves as a self-monitoring mechanism and it’s the best way to catch your mistakes early on.
The more detailed the journal the better. Try to record everything that you can think of. This way, you’ll have a lot of material to go back to for studying in order to gain an insight into your trading strategies, style, and psychology.
In fact, trading psychology is a crucial but very tricky aspect of trading. Keeping a trading journal is one of the best ways to improve on your psychological weaknesses and take full advantage of your strengths.
So, without more ado, here are a few ideas on what to write down in the trading journal for each trade:
Reasons for entry such as the technical trade setup or perhaps the fundamentals
Target/aim with this trade and reasons for that
Stop loss - Invalidation point for the trade
Your expectations for how well the trade will go
The actual outcome of the trade
As you are building experience in Forex trading and keeping a trading journal you will be getting better at it over time. Having detailed records of all your past trades can turn into a huge advantage in the future.
Unfortunately, most retail Forex traders don’t keep a trading journal, but, most retail Forex traders also lose. So, it’s definitely worth and highly recommended to keep your detailed trading journal as discussed above. The benefits of it, far outweigh the minor nuisances to keep it.
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