Discipline is one of the most valuable traits a trader on the foreign exchange market can have. Every single successful trader either already possessed that quality or they taught themselves how to stay in control when a trade is not going according to their plan. Keeping a detailed trading journal definitely helped them to stay on the track, be consistent and what is most important in the world of the foreign exchange market – make a profit.
It might seem silly and simple, but a trading journal is the first step a trader should take in order to improve their trading discipline. Before you actually start documenting your investments, it will look easy, but soon enough you will realize that the task ahead of you is a bit more complicated. Many traders give up after only a couple of days of journaling and they end up using the data provided by a trading platform they trade within order to track their progress. Surely, that information is valuable as well, but it is always better to write down everything on paper. A trader needs to document other details such as why they entered or exited a trade when they did.
This means that the numbers you see on your screen are not the most important data you need to record. Being a disciplined trader means that you have to keep your emotions at bay and writing down the way you feel before, during, and after a trade can elevate your trading skills a lot.
Keeping a trading journal can prevent the emotional trading and as a result, your account will not empty out quickly because you will be aware of the mistakes you are possibly making and you will have an opportunity to fix them during your next trade.
Benefits of keeping a trading journal
A trading journal should be viewed as a guide on your forex journey and keeping the important data can improve your trading over a longer period of time. The majority of traders who are active on the foreign exchange market are not professionals and they had to learn how to trade by themselves. They did the research and informed themselves properly but they still needed some sort of data keeping. That is where a trading journal comes in handy. Even if keeping a journal seems boring to you, you might benefit more from reviewing your past trades and the way you handled those than from reading a book written about the forex market. It is well known that people learn best from their mistakes and going over the trades you made in the past can make you think more clearly in the future.
Setting the goals and reaching them is the best way to improve your trading skills. When you write those goals and aspirations down, you are more likely to achieve them. Trading journal is the ideal place to commit them to paper because if you are serious about trading on the foreign exchange market, you will be using your journal on a daily basis and those goals will be visible to you often. It will be easier to reach them when you are constantly reminded of their existence.
It has already been mentioned that a trading journal can help you out with the discipline and emotional trading. Going over your past entries will point out your trading strengths and flaws so you will be aware of the things that are going well for you as a trader, as well as the weaknesses you need to remove from your trading style in order to progress in the future. It is also important to be honest when you are writing an entry in your journal. It doesn’t matter how you personally feel about a certain move you made, it is crucial to note it down so you will know how to deal with a certain situation if you ever end up in the same position again.
Data you should write down in your journal
What you need to understand before you start trading on the foreign exchange market is that trading is a skill that can be learned and perfected regardless of your previous knowledge or background. Your profit depends on your ability to analyze the market properly, the trading method you decided to implement and a bit of luck as well.
When it comes to journaling, you need to write down your personal thoughts and assessment of each day you spend trading on the market. The market changes very quickly and you should note down your personal impressions and opinions.
As we mentioned before, being honest with yourself is the way to move forward in the market. That means you have to write down every missed opportunity or a wrong move you made during your trading day. Once you have those on the paper, you will be less likely to repeat the same mistake again because you can always remind yourself of the past mistakes.
The numbers shouldn’t be ignored either. They are hard data which can give you the wider picture of your trading and help you move forward. Also, remember to journal before, during, and after your trade. Of course, a trading journal is an individual creation and you are free to add whatever you feel necessary for you at that moment. You can customize it as much as you want.
Reviewing your past performance on the market
In order to make a good review of your past trades, you ought to be trading on the foreign exchange market for some time, meaning that it is impossible to review your past trading after a single trade. You need to have at least a couple of completed trades if you want to make a quality assessment of your performance. The analysis is pretty simple – read through the collected data and see what is working and continue doing so, and find out what made you lose some funds and try to avoid doing those actions in the future.
If you are unsure how to do it, try to analyze the data in different ways, such as looking at the overall picture of your trading week or focus on some of the pairs you have been trading with. It is also good to have a set of questions you will ask yourself every time you are doing a review, such as which currency pairs are more profitable for you in comparison with all the pairs you have traded or are you following your trading strategy every single day?
Once you get a hold of reviewing your performance, it will become easier and quicker. Keeping the data and writing everything down will eventually lead you to the point of being able to recognize the way in which the market moves and how you deal with certain situations.
Keeping a journal might seem really hard or even almost impossible to some traders, but once you start, you will quickly see the benefits. Maintaining this habit is not unmanageable and it is far better than losing all of your investment money quickly and giving up on trading before you even started to figure out the market. Journaling looks like a boring task but always keep in mind that it is a way to get all the details of your trades right in front of you instead of trying to recall them from your memory.
Your journal should focus on the trading plan you have created for yourself and it should make you stick to it. The details you think are crucial for your trading should be logged in with your every trade. If you fail at providing the information that can actually help you out in analyzing your performance, it becomes hard to get a proper evaluation.
If you truly want to succeed, you will find enough motivation to journal on a daily basis. It will teach you how to be disciplined and once you have enough entries, you will be able to get a clearer picture of the way you trade, including both your positive traits and flaws. Don’t forget to focus on your personal emotional state as well as on the market. Surely, noting down how you feel that day is very useful, but don’t neglect the state of the market at that moment as well. Writing about significant changes that happened during your trading day can also be helpful once you start going back through your old entries.
A trader should embrace journaling and view it as an excellent way to learn a lot about them and the way they behave on the foreign exchange market as well as about the market itself. It is important to log everything in, even the days when you feel unmotivated and you don’t want to spent time researching and analyzing – every single detail can be valuable in the future. So stick to it and you will quickly realize why keeping a journal was a smart decision.