The Advantages of Keeping an FX Trading Journal
Your Forex journal is part of your Forex plan and should be part of your overall trading plan for profit. It helps you organize your trading and gives you a clear record of how you are doing over time. Currency trading success is all about having a plan, staying on track and giving you a record of your performance – All the best traders plan and look a the performance of their trading signals and you should to.
My FX Trading Journal
My currency trading journal contains the following info per trading signal
Pair: This is the pair your trading
Entry Level: This is the entry level either a buy or a sell on the relevant pair
Date: The date you enter the trade.
Stop Loss: This is your stop and you should write it in and execute your stop loss straight away. Many novice traders try and use mental stops but you will overide them if you do this and end up running losses which is the major error most beginners make with their Forex trading strategy.
Target: Your target is where you expect the trade to go to where you will either tighten your stop loss or take your profit.
Percentage of Equity: This is the risk as a percentage of my overall equity which is adjusted in terms of how well I am doing in the markets which I will come to in a moment but on my trading system the amount risked is normally between 1 – 5%.
The journal should be updated everyday, in terms of the target and stop loss. Many traders make the mistake of thinking that once there in a trade, they should wait for their stop loss or their target to be hit but you shouldn't.
Currency markets are constantly in a state of change, so you need to look each day and update your stop and target. Also one of the statements I have written on my journal is ”if in doubt get out” If I have any doubts about a trade I liquidate it and move to the sidelines and this has served me well over the years. You will often have your sub conscious mind tell you a trade is not going to work – listen to it. Always remember, when you are out of a currency pair, you can't lose money in it and also, you can always get back in.
The first part of the trading journal gives me a record of entry and the expected result from the trade. The second part of the journal gives me the result of my actions.
Exit Price: This is the liquidation and end of the trade.
Pips Made / Lost: This is the profit or loss of the trade.
Expected R/R: This was the expected rate of return on entry I expected to make.
Actual R/R: This was the actual rate of return of the trade made.
As a general rule – I am looking for trades which will make me 3 times as much profit as the risk I am taking (although this will vary from trade to trade) a risk to reward is just an opinion and many trades will of course lose and some will be less than my target. My aim as a long term trend trader is to make money on 35 – 50% of my trades. I know my style of trading means my strategy is going to have a lot of losers so my aim is to maximize the profit per trade.
Also in my trading journal I keep a record of the percentage of winners and an open equity balance and closed equity balance. This is important because, when I am losing my trading size is decreased and increased when I am making money. Variation of bet size is a proven way to ensure good money management on your account and also increase its profit potential.
Maintaining Discipline and Focus
The whole idea of a Forex trading journal is to create a routine and measure results over the long term on my trading strategy. I am not bothered about the individual trades, I am looking at the long term and the journal keeps me focused on my trading plan for success. It might all sound obvious but there are many traders, who simply have no plan which leads to a lack of focus and discipline.
I don't bother in having notes on my journal about what I could do better ( although many people do) and this is because - my rules of trading are set and I follow them but beginner traders might want to put this option in, as there experimenting with their trading system rules.
A currency trading journal is part of my routine and my trading day is organized. My trading is organized at all levels - in terms of the times I trade, the records I keep and even the way my trading area is organized. I am a firm believer that you need to create order and structure, to maximize the profits your trading strategy makes. A Forex trading journal is an important part of this structure so keep a trading journal – it will help you become a better trader, keep you on track and help you make bigger profits.