A trading journal is a complete record of all your trading activity over time. It consists of writing down the results of all your trades in order to later assess your overall performance. Keeping such detailed chronicles also allows you to draw objective information when feeling upset and doubting your trading system after a series of trades gone wrong.
Most inexperienced traders downplay the significance of having such a journal, thinking they will have no problem memorizing their biggest mistakes, or successes. But keeping such a daybook is not just a reminder of failures, rather a way to keep extensive records on your trading practice and thus feed you with viable information when assessing how successful your trading system is and which are its flaws.
Trading logbooks appear to be handy, particularly after you’ve begun experiencing negative trading results, which lead to demoralization. Sometimes, you might not be able to find a clear reason for the poor results, which is when you need to refer to your journal.
Answering questions such as “Is my trading system still working?” or “Should I continue trading the same way despite my recent losses?” would be a lot easier, if you could take a look at your previous trading sessions. For example, you could find a deviation from your initial trading strategy, which you haven’t even noticed before.
Having a comprehensive log of data will also allow you to identify certain time intervals, during which your average profits are off by a certain amount, although you’ve been sticking to your trading strategy. This could be due to the regular release of economic indicators, seasonality of certain events etc.
The main goal of keeping a detailed trading journal is to prevent you from taking impulsive actions, which will ultimately result in saving you money. This is why you must write down as much sorted data as you can, including trade entries and exits. It is also useful to record your thoughts and visualize everything by capturing your trading session with screenshots on your platform.
What should you write down in the trade journal? It means recording as below:
- Who you are and your motivations for forex trading?
To find the right trading method for you, your lifestyle considerations, why you do the things you do and you have to know who you are
- Market views and philosophy.
This is how you understand and frame the markets and how you make the decisions to act and manage the risk to your account as it is very important.
- Observations of the market.
Each day is different in the market but that does not mean there are certain “tendencies” or “behaviors” that you can take advantage of. Careful and consistent observation you can find these “tendencies” and create or adjust your strategies to them. Also, if the environment changes, you’ll be on top of the situation and change with it!
- Trading mistakes and missed opportunities.
Mistakes and missed opportunities are just as detrimental to your success as the market going against your trade. Closing trades too early, not taking legit setups, entering the wrong entry levels or positions sizes and etc. It should be recorded in your journal so that you will not repeat the same mistake twice!
- Performance statistics.
Many aspects of your forex trading performance can be quantified into hard data. This gives you a realistic, no BS picture of how you’re doing as the numbers don’t lie. Sometimes a shot of reality can give you the kick in the butt you need to kick up your game!
5 basic elements that you must include in the trade journal are:
- Potential trading area
- Entry trigger
- Position size
- Trade management rules
- Trade retrospective
