A trading journal is a record of all your trading activity. Many traders do not keep a trading journal and this may have some negative consequences. If you don’t know where to start, here’s a guide to creating a good trading journal.
Why Should You Keep a Trading Journal?
Here are a few reasons why you should keep a trading journal.
a) Trade Verifications
There have been occasions when brokers have tried to shortchange traders. A trader on a particular platform had a peculiar case. He opened a trade and forgot it for a number of months as he had to travel on an assignment. When he came back to his trade, he had made tens of thousands of dollars on it. He took a snapshot of the screen and closed the trade in profit. Hours later, the unscrupulous broker scrubbed that trade from his trading history, and removed the profit from his account. His snapshot, taken as part of his trading journal, decided the case in his favour when the matter went to the regulators.
“Keeping journals for each trading account, strategy and financial goal provides a means of comparison at a glance.”
A trading journal with such records can be the difference between you protecting your profits or losing them.
2) Measuring Your Trade Performance
A trading journal will show you at a glance if your trading is progressively getting better, worse or simply stagnant. The trading journal in such instances will be your performance database. You can tell which strategy is working for you, which currency pairs you have more proficiency in, what works for you and what doesn’t. You may also use it for your own historical studies of the market. Knowing why you lost at a trade is a new trade half won. This is what a trading journal can do for you.
3) Future Planning
Every trader enters the forex market to make money. But many do not have an idea as to how much money they want to make and how they intend to achieve their target. This is where the trading journal comes in. Your journal will tell you how to structure your trades using minimal risk so that you can achieve set profit targets. You will know those strategies which deliver good rewards per trade at minimal risk.
4) Psychological Reinforcement
The value of psychological reinforcement in any human venture cannot be ignored. When the temptation to act out some degree of confusion in forex comes, you can look at your trading journal and this may help you stick to the plan. Your written visions keep you in track so you do not step out of line.
How to Keep a Trading Journal
You may have several trading journals if:
a) You have several trading accounts.
b) You use several trading strategies.
c) You have different money goals (short term and long term income expectations).
Keeping journals for each trading account, strategy and financial goal provides a means of comparison at a glance. In addition to writing your vision, money goals, plans and strategies, you should also keep visual evidence of your trading activity so you avoid the kind of unpleasant surprises painted in the first paragraph of this article.