There’s one thing can help you dramatically improve your trading skills.
Starting a forex trading journal.
It can help you spot your mistakes and errors quickly.
Lots of traders don’t keep a proper trading journal, and many that do have one don’t know how to use it correctly. That means they won’t get the full benefits offered. That impacts their progress and performance.
Remember, you should think of trading forex like running a business. Most businesses fail within three years ― the vast majority fail within the first year. If you want to succeed with your business, you must learn quickly from your mistakes and make a plan to address them. In forex trading, the best way to do this is by starting a forex trading journal.
Why are trading journals helpful?
A journal is a document for writing day–to–day notes. A forex trading journal is similar, and it’s used for several purposes. Your journal may differ slightly from others’, but that’s okay.
The first purpose is for you to track your trades.
You should keep a log of all the wins and losses from every trade.
Your forex trading journal is where you should write down lessons, insights and things you want to keep track of. You have to consolidate your thoughts into one place, which is your trading journal’s role.
Remember, we learn more about ourselves during our best and worst moments. Those moments can happen before, during, or after we trade upon reflection. With this, your journal can play a key role in revealing something about yourself that otherwise you could have missed.
You can also use a trading journal in a traditional way. You can jot down your thoughts about specific trades, prior to trading them. You can write down your plan of attack, trading setups, and how you think your trades will work out.
At the end of the day, while you can jot down your thoughts before trading, the key is to summarise your forex trades afterwards. Whether you have won, lost, or have broken even, you have to summarise it. It’s important to note what worked and what didn’t, so that you can improve in the future.
At first, you might not think this is very important. But, when you eventually conduct a review of your trading journal (at the end of the week and/or month), you can think critically about your choices and opinions. With the benefit of hindsight, you can determine why you made particular moves and how can you improve.
Your journal is a powerful tool to improve your forex trading.
Pro forex traders take their journalling seriously.
Address your errors
If you are a serious forex trader, a thorough journal will be a lot of help.
You can review your performance, as you conduct trades.
If you don’t have a journal, how will you know how well you are trading? You won’t remember all the details of your trades ― no one does.
A good journal contains things that you might miss, which are critical for improving.
If you have a forex trading journal, you can track your thoughts over time. You can check your decisions, overall progress, and mistakes. It’s impossible to do these things just from viewing your trading statements.
Elite traders improve every day because they know their mistakes and learn for them. When you review your trading journal, you might see that something has been working…and try to do more of those forex trades in the future.
Forex traders who don’t use journals can’t analyse and modify their trading. They only have gut feeling to work from, and just assume that any changes they make will be good enough. That clearly isn’t going to make you a better trader.
With a good trading journal, you can review and make sound changes to improve your forex trading. You will know the aspects that didn’t work in your trading. You can review these aspects, after modifying them, to check if any adjustments are working.
Some things to add
Remember, how effective your journal is depends on the information that you can analyse and review, such as:
- Entry dates and exit dates of trades
- Your trade entries, targets and stops
- The mistakes and any thoughts for improvement
- The size of your trades
- The final results of your trades
Your trading journal must include these details to help you get to the next level. First, add the entry and exit details of all your trades, and then write down the reason for taking the trade. Write down your decision–making process as well.
Why did you take the trade?
What went wrong?
How can you improve?
When you review these thoughts in the future, you will be grateful for doing the work. You’ll be able to track your progress clearly and logically, and find gaps in your forex trading. The more details you jot down, the more it helps you to improve quicker.
We suggest putting three main sections in your journal:
- Trade details: Write the main details of your forex trades (i.e. entry, exit, and profit/loss);
- Your thoughts: Write down your trade rationale and any thoughts to improve on your mistakes.
- Forex trading summary: A summary of your trading plan (did you stick to it?) and other plans for the future, such as if you want to try something different.
If you can understand your mindset at the time you entered the trade ― when reviewing your trade sometime in the future ― then that’s great. That will save you lots of time when analysing your trades down the road. It will let you work on finding areas for improvement.
Save a chart picture
That said, our biggest tip when journalling is to add a chart of your trade. Most traders don’t include any images of their trades. If you don’t include a picture of your trades (i.e. the entries and exists), it severely limits your ability to remember the trade and analyse it. If you include images, you can recognise trades that you should have avoided.
Saving a chart is an easy and quick thing to do.
You can just use the ‘snipping’ tool.
Remember to include your entries and exists, as well as the date and the forex pair traded. At the end of the day, while it’s important to track your lessons and journey, adding charts helps you pinpoint your mistakes more easily. It’s a lot easier to look at a chart and remember what went wrong, than read a thousand words of text.
Make your life easier.
Your ‘Start with Forex’ takeaway
To be a great forex trader, you need to make good decisions consistently. You must be consistent in your routine, if you want consistent results. This starts with doing a trading journal every day, and reviewing it once a week. You can summarise the areas for improvement and what you’re doing well.
Most forex traders think a trading journal is a waste of time.
I hope you can see why most traders (businesses) fail.
If you want to become a consistently profitable forex trader, you must maintain a trading journal. Summarise your trades, spot your mistakes, and think critically of ways to improve your trading. Above all else, be consistent. The more you use your forex trading journal, the better your trading outcome will be because you will spot areas of weakness and strength.
Everyone’s trading journal is different. Just include what you think will help you in the future. As we’ve been saying throughout the course, simple is better. But try to be consistent with your journal. Otherwise, you will have trouble analysing your trading progress over time.
Remember, elite forex traders use trading journals to know where they are going wrong and to find ways to get better. It’s really as simple as doing that on a consistent basis.
I hope you gained something from this lesson and will start a trading journal. In the next lesson, we’ll tie everything together in your master guide to trading forex. If you want to read your master guide to trading forex, click here.
To your trading success,
Start With Forex
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