Having a trading journal is one of the main factors that sets rookie traders apart from the profitable traders. In the forex markets, even profitable traders only have a very slight edge over the markets so every small adjustment can make a monumental difference. By collating a huge amount of data points in your trading journal, you’ll be able to assess, tweak and refine your trading to hopefully increase your edge in the markets. But how do you actually create a trading journal?
There are a few main data points you need to include when journalling your forex trades. These include:
- Date, time, currency pair
- Relevant market news
- Screenshots before the trade
- Screenshot when entered
- Screenshot after the trade
- Any emotions you’re feeling
Let’s take a further look…
The Importance Of Journalling Your Trades
It might not seem too important at the time, but journalling your forex trades is by far the most important aspect in growing as a trader. You can hop from strategy to strategy, mentor to mentor but if you’re not looking at the mistakes you’re making and adjustments that could be made, you’re never going to reach that next level in your trading career.
For example, let’s say you never journal your trades. On average, out of 10 trades, you take 3 trades on an AUD pair during the time of the day where their markets are completely shut. 3/3 of these trades lose and you do this for years. That simple mistake could be the difference between you having an edge and not being profitable in the markets and the reality is, unless you journal these trades, you would never even notice!
Trading is completely data driven, or it should be anyway. By creating a trading journal, you are giving yourself access to a huge amount of objective data that can be tested, tweaked and developed in order to create amazing trading strategies and risk management ideas.
By being able to identify weak points, you’re able to remove them completely from your trading. For instance, I had a much higher edge working on the higher time frames, with fundamental bias, than I did on the lower time frames working just with price action. I didn’t realise this for years though and wasted a lot of time with a much worse edge – all because I didn’t collect the data.
What You Need To Include In Your Trading Journal
Whether you’re collecting data in your trading journal using a manual based system like Excel or Evernote, or a more automated system like ForexBook, the data you’re going to include should be exactly the same. Let’s look at what you need to include and why…
1. The date, time and currency pair
This is very important as you can use this data point to determine whether or not you have an edge at certain times on certain pairs. For instance, are your JPY trades profitable out of session? You’ll never know until you journal!
2. Relevant market news
If you’re trading a USD pair, it could be really important to know what recent news has occurred that maybe relevant to the USD. You may find that you only actually win trades when you’re going with a fundamental bias too, not just technical.
3. Any emotions you’re feeling
Emotions can play a huge role in trading. The most common emotions traders feel are greed and fear. Emotions can literally take a trader from being profitable to completely unprofitable within a few minutes – so tracking this is very important to help manage how you’re feeling.
A picture says a thousand words and this very much rings true in trading. I would recommend a screenshot before, during and after the trade if possible. This will help you notice patterns that you can either double down on, or avoid completely.
5. Risk parameters
Tracking your risk is going to be extremely important to. Risk per trade, drawdown, duration of trade are all metrics I would advise tracking if you’re serious about refining your edge to the best of your ability.
Maintaining Your Trading Journal
Creating a great trading journal is only a part of the battle. I’ve helped many traders set up a high quality, objective and useful trading journal, only to see the trader not progress at all in their trading career. Why is this?
The key to a useful trading journal is the data. Not only the quality of data but the amount of data. It’s impossible to make objective decisions and hypothesis about a trading system if you only have 20 data points. To actually be sure you’re making the right changes, you’re going to want at least hundreds of trade examples, if not thousands.
Of course, the longer you’re trading, the more data there will be in your trading journal but the key is to keep updating this in every single trade. Not just your winning trades, not just your losing trades but every time you enter the market.
Once you have a large amount of data in your journal, at this point you can start combing through the data and finding patterns. For instance, do you lose most of your AUD trades when it’s out of the Sydney session? Do your JPY trades consolidate out of session? Do you get more drawdown in the morning (GMT) when trading USD pairs – would it be worth entering USD pairs when the US session starts, instead? There are literally hundreds of potential tweaks you could be making to your trading systems to increase your edge and profitability.
In short, my biggest advise is just to keep up with your trading journal. If you look after the data, it’ll look after you.
Tools To Help You Journal Trades
I’m personally a big fan of manual trading journals. By this I mean using programs like Excel & Evernote to document all of the metrics I am looking for. However, for traders like like a more automated approach there are a number of great tools to use.
ForexBook allows you to connect your MT4/MT5 broker accounts to the platform and automated some of the trading journal process. You’re able to connect multiple accounts and actually import your past trading data so you could already have hundreds of trades to add to your journal! The best feature of ForexBook is the fact that they offer a completely free plan! The paid plan is $19 per month but for the majority of hobby retail traders, the free plan offers more than enough support to effectively journal trades.
Conclusion – How Can You Effectively Journal Forex Trades?
In summary, you can effectively journal your forex trades but collating all of the data points that maybe useful when it comes to refining your trading. It’s important to get as much data as possible and be as objective as possible too. Even if you trade outside of your trading plan purely based off emotions – this needs to be included in your trading journal.
Once you have hundreds of trades, it’s time to go through the data and find tweaks/refinements to try to get your edge as high as possible within the markets.
If you have anything to add or any questions please do drop a comment down below, I’d love to hear your feedback and how your journal your forex trades!