The Forex trading journal is the most underutilized, and the most neglected aspect in most traders’ arsenal.
In this article I am going to reveal how to really make a Forex trading journal work for you, and show you ways to use your journal to improve your trading dramatically.
We’ve all heard it all before, and understand the importance of treating Forex as a business. It’s one of the first things you need to come to terms with when you transition from being a novice, to a professional trader.
Running a business means keeping records. If you don’t keep records, it’s only a matter of time before you lose complete control of your business.
The human brain is powerful, but it can’t keep track of every single variable. Try to take on too much, and your mental integrity breaks down. I’ve seen firsthand, what happens when business owners neglect their bookkeeping.
The end result was they spent more time stressing trying to find important information. Forex trading is no different, if you’re not keeping a Forex trading journal you’re setting yourself up for failure.
The problem with most Forex Trading Journals
You’ve probably come across Forex trading journal templates that have you mindlessly crunching numbers. Figures like your trade entry, stop, target price, the pair you trade, trade risk and trade return, etc. The boring stuff.
You’ve got to ask the question, “What is this information really going to do for me?”
Most of the information in common trade journals can be found in your trade history through your broker, with the exception of a few calculations that will probably just offend you or bring down your spirits.
Let’s face it, if you were doing well with your trading, you wouldn’t be reading this article. You’re here because you want a practical solution to correct your Forex trading mistakes.
Okay granted, it’s good to know how well you’re doing overall.
But, recording numbers alone is going to have a minimal impact on improving your future trading performance. For example, if your Forex trading journal is full of losing trades – those numbers won’t give you a solution. It’s going to make feel like the worst trader who ever lived, trust me I know, I’ve been there.
This kind of number crunching is just not a practical, or a productive solution to most traders’ problems.
You’re losing trades, so what do you do now? What’s going wrong? What can you do to fix the problem and move forward?
These are the questions most Forex trading journals don’t answer. Those few traders who do actually keep a trading journal are under utilizing the full potential of keeping a Forex trading journal.
A journal should be used as a self-improvement tool
Even with the best technical trading system, the ‘holy grail’ if you will, you will not succeed if your head isn’t in the right place. Most traders fail because of psychological reasons. The Forex trading journal is the perfect tool for highlighting your own weaknesses, and building on top of them to solidify mental toughness. This is the way to break the chains holding you down and give you the power to move forward.
“It’s not about the numbers, it’s about THE experiences”
Sure, record the typical information about your trades like price levels etc.; but more importantly, also include your feelings, thoughts and emotions inside your Forex trading journal.
Don’t just record how you feel when you place a trade. Have a space where you can record thoughts before, during and after the trade. Don’t be shy, everything must be recorded.
You’re only hurting yourself by holding back information. Your Forex trading journal is private and the only person who needs to look at it is you. There is no reason to put it on public display – when people are looking over your shoulder in can give you performance anxiety.
The extra data in your Forex trading journal is critical for making the journal help you perform the way you need it to. You will be able see what emotions were present when you suffered losses, and even what emotions were present/absent when you had winning trades. You’re keeping a Forex trading journal to reinforce good behavior. You need to highlight weaknesses so they can be avoided in the future.
By including the psychological aspect of your trading in your journal, it’s easy to change your actions from destructive to constructive. A correctly utilized Forex trading journal will remove any feeling of being random, or the feeling of being “lost”. The Forex trading journal will help cement consistency in your trading – one crucial element to your trading success.
As a Forex trader, you are the director of your own Forex trading business. You’re accountable for every decision you make. There is no one else to redirect the blame to, every decision falls back on you. Good or bad.
You’re accountable for following a trading plan, using proper money management and keeping records. If you neglect your responsibilities as a “business owner”, no one will be there to bail you out. Forex is a cut throat industry, you sink or swim. You need to do everything you can to ensure your head remains above water.
Being fully accountable is going to actually make your life a lot easier in many ways. The trading industry is filled with losers, excuse makers, pretenders and people with unrealistic expectations of Forex trading. These guys don’t take accountability seriously and will blame the market, or their broker when something goes wrong.
Your Forex trading journal is a superior way to reinforce accountability. If you step out of the confines of your trading plan, don’t use your better judgement, or just simply let emotions take over your actions. All of this needs to be recorded in your trading journal. No excuses!
I can’t stress this enough, no matter how embarrassed you may be about your mistakes. Don’t run away, face them head on! It’s essential to record everything, and have this data in your Forex trading journal for future reference. Recording negativity in your journal may seem counter constructive; but you can use this data , and turn it into a positive. It’s not about beating yourself up; it’s about self-improvement and moving forward. But you can’t do that unless you’re honest with yourself.
Making sure that what didn’t kill you, Makes you stronger
We all know very well the emotional roller coaster of being a Forex trader. We can use our past mistakes as a means to become better traders – so that the loss “experience” was not a complete waste.
In your Forex trading journal, you should be able to look through your losing trades; each position should have recorded your reasons for taking the trade, thought process, and actions throughout each position.
Sure we know that Forex losing streaks are very normal. What you’re looking to identify are the common denominators that keep appearing on trades you’ve lost. If you go through your losing positions and keeping seeing “I moved my stop too early” comments, then you can safely conclude adjusting your stop loss is not doing you any favors, and only hurting your trading performance.
Here is another one. You may see groups of losing streaks, and notice in your Forex trading journal recorded thoughts of desperation while you were trying to make up for previous losses. There wasn’t any good reason for taking each trade. These positions were opened from a feeling of ‘urgency’ to recoup recent stop outs.
What about winning trades? Go through your Forex trading journal and find consistencies with all the trades that worked out. Perhaps one recurring comment surfacing is “set and forget the trade”. You stuck to the plan left the market do what it had to do. Or maybe you recorded “as soon as I took the trade I closed my charting software down and only check the market once a day at the New York close”. Removing any temptation to intervene on my trade”
Every trader is different and they are going to have unique challenges to face in their trading. By using the Forex trading journal in this way, you can quickly focus on the areas that need attention and really get to the ‘root of your problems’.
Here is a list of things you should consider including in your Forex trading journal…
- Trade Date
- Signal taken
- Entry/stop/exit price
- Entry method
- Forecasted risk reward
- Actual Trade ROI
- $ Gained
- $ Lost
- Reasons for taking trade
- How you feel when you take the trade
- Did you stick to your trading plan
- What actions did you take while the trade was open and your reasons for it
- Did your actions effect the trade negatively or positively
- What emotions influenced your trade
- How do you think you could do better in the future
Before taking action, consult your Forex Trading journal
Another powerful way to use your Forex trading journal is to review it before taking any action in the market. Prior to opening a trade, have a look through your journal and refresh yourself on what’s been working for you and what hasn’t. Remind yourself where your own thought process is working against you and avoid repeating past mistakes.
For example, you may be thinking about entering a pin bar trade. The original plan was to go for the retracement entry. The market doesn’t look like it’s going to hit your retracement entry price and is moving without you. You’re thinking of jumping in anyway because you “don’t want to miss out”.
After you look through your Forex trading journal, you can quickly reflect on the many times when you have entered trades impulsively in the past with an undesirable outcome; this should be a red flag to you.
Alarm bells should ring inside your head when you have the urge to enter a Forex trade on the back of you chasing price around the chart again. If market breaks out and ends up turning into a breakout trap, your Forex trading journal would have saved you from entering a bad position.
Don’t just consult the Forex trading journal when you’re opening a trade. Review it when you have those urges to intervene on an open position, like: moving your stop, closing the trade early, or maybe even removing your stop. Your previous experiences should be able to ‘advise’, or ‘mentor’ you to help you decide if it is a good idea or not.
A Forex trading journal is there to profile your personality, your behavioral patterns and what works best for you and your trading account. It is a real wakeup call when you’re about to do something stupid. Forex trading journals are like having an experienced trader next to you, giving the best advice for each situation.
A Forex trader’s best friend
The Forex trading journal is the ultimate ‘mentor’. A journal remains 100% logical at all times.
They don’t get emotional and are not influenced by external factors. When you start utilizing the full potential of a Forex trading journal, it becomes your best friend each time a trading decision needs to be made.
The Forex trading journal keeps you accountable, forces you to learn from your mistakes and gives you crucial feedback that you need to develop your trading skills. By highlighting your accomplishments and red flagging your dangerous trading mistakes, there is no better way of self improvement to help you reach the ultimate level of confidence in front of the charts.
‘Plan your trade then trade your plan’
Remove the randomness and doubt, build a winning mindset and become the disciplined trader. At the start of each day, read through your Forex trading journal to prepare yourself mentally and emotionally before hitting the charts. You will have these thoughts fresh in your head the moment you look at the markets.
It’s even a good idea to read back through this list each time you’re about to make a trading decision. Just keep reminding yourself of the dos and the don’ts. It’s quite easy to slip out of a disciplined mindset and start making mistakes again without even realizing it. Do everything you can to keep yourself disciplined.
Hopefully after reading this article you view Forex trading journals not as that ‘boring spreadsheet of price data’, but a means of: identifying weaknesses, reinforcing strengths, and red flagging your dangerous trading mistakes, there is no better way.
If you’re ready to move forward from here and embrace trading as your own business (which you are fully accountable for), and finally become a professional trader – you can check out our Forex War Room community membership. As a Forex trading community we all support each other, and keep one another on track with trading. Trading can be a lonely venture, it’s always good to have other like-minded traders to bounce ideas off and socialize with. I hope to see you on the other side.
Until next time, all the best with your price action trading. Please share this article using the social buttons below.
Supper excellent work. This is knowledge. Thank you for sharing. Big up man
The article is very good to read as a forex trader
Thanks Dale.What can help me to become a very profitable trader as a newbie
This is very good wisdom about the trader’s journey. Traders need Accountability in any way they can get it. And self-feedback is invaluable. There is no excuse not to try.
I’m utilizing my log book much better now that I am a swing trader. Before, I was entering and exiting at least 5-10 trades per day. I hardly had time to enter anything but the P&L. Now that I have a limit of 2 trades per week, I can relax and let my thoughts run. My logbook is now more like a diary. I used to enter a trade just to reach my “quota.” Now, I have to have “3 darn good reasons.”
I have more time for education, also. I think I am going to like this new way better.
In the list above, I assume that by “Signal taken” you are refering to rejection candles, The Indecision Candle, etc. right?
But I’m not sure what you are refering to by “Entry method”
Replying to: Antonio
Yes, what ever signal you used to enter the trade.
Use MaxProfit Pro 3.0. It’s the best trading journal software
Hi Forex Guy,
I just wanted to let you know how much I appreciated this article. I’ve been reading through all these and though I’ve been impressed by them – I almost skipped this one! I’ve never taken “journaling” seriously and it’s not a topic that really interested me. But after reading your take on it, I see how valuable of a tool it could be to help me improve and be more disciplined in my trading. Anyway, thanks a million.