So what does keeping a journal have to do with becoming a successful trader? Well: the more information you can collect about your trades, the easier it is to become a better trader. Believe it or not, a forex trading log isn’t just about making neat sums. It’s a way for you to track, review, and improve your performance. Let’s dig in with our top tips for keeping your forex trading log.
How to Keep an Effective Forex Trading Log
What is a forex trading log - and why keep one?
A trading log is essentially an accounting book that includes every trade you make. Keeping a forex trading log will enable you to identify your strengths, weaknesses, and trading patterns that you can use to improve your performance. You'll also see what works best for your style of trading and what doesn't. With a clear focus, you can manage risk and achieve higher profitability. So: let's get to it.
The truth behind the myths: how much do forex traders REALLY make? Read our blog on the average trader salary here>>
What should you include in your trading log?
Logging entries can be as simple as recording whether it was a buy or sell and the number of pips gained or lost, and maybe the lot size. For more advanced trading, you can record other aspects of the trade, such as P/L at hourly intervals, planning, etc. Your forex trading log will be tailored to you, so there is no one-size-fits-all approach.
Your journal is a tool through which you can more comprehensively analyse your performance. It is the centrepiece to attaining mastery over your trading psychology. Using a spreadsheet, notebook or word document, journal entries are ideally broken down by the following elements.
How often you log your trades will depend on your trading schedule. Here's how to find trading strategies to suit your day job>>
11 things to include in your trading log
Entry and Exit price: Entry and exit prices are essential for building a forex trading log that you can refer back to. This makes it easy to see what price you sold at and what price you bought at. Memorising data is very useful in the currency market because it will help with quick thinking. If you know how much profit or loss you made, it is easy to decide if the trade was worth it.
Stop-loss logic: A trader should document any stop-loss tinkering in his/her forex trading log, along with specific strategies or techniques. Users can't review stop-loss settings if they don't know what they are implementing. It's generally not advised to tweak your stop loss too much if you're first starting out - but once you're a seasoned trader, if you do decide to do this, make sure to document your reasoning every time you change, add or remove stop losses. Here's where to set your stop loss - and why it's important>>
Entry logic: The best entry is the one that keeps you within the parameters of your trade plan. After all, you want to give yourself the best chance possible to stay on track with your strategy, right?
Position size: Position size and price are two critical considerations when developing a forex trading strategy. Log transaction entries by position size and price to quickly get a sense of average position size per currency. Additionally, indicate how they move against each other. Here are 5 best currencies to trade - and here's why >>
On which side was the trader (long or short): Futures traders should log the details of their trading positions after each trading day. This track record makes useful reference information when the trader desires to examine their performance trending over time.
Amount of units traded: The amount of units traded is one of the most important things you should include in your forex trading log. It will help you see if you are increasing or decreasing your risk per trade. Here's a guide to risk-reward ratio>>
Trade setups: When you have a strong opinion on a market, jot it down in your forex trading log. Where you identify a potential trend reversal (i.e., changed RSI and CCI) or any other trade setup, please write it down in a few words. That will ensure you only note your most important ideas, so your journal won't be long and uncontrollable. For example, you can jot down "Aussie has broken above long term resistance (res.1.09500), stochastic is at overbought levels, and RSI is overbought area (50)"
Reason for the trade: The “reason for the trade” section is one of the best ways to track your overall trading progress. So many people place stop-loss orders on each entry, but never really think about why they bought or sold a specific currency pair.
Did you get stopped out in the trade because of some real news? Was it technical? If the US dollar is weak, why did you buy it? If it is just because you thought it would go up, that may not be good enough in your trading journal. It should explain why you got involved in the first place from both technical and fundamental perspectives. Read our interview with the queen of trading psychology, Mandi Rafsendjani>>
Additional notes: When trading forex, it is essential to note each trade's psychological elements. To do this, record how you feel about the transaction before you enter it and when exiting the trade. This will give you an idea of whether or not your feelings are affecting your trading. Read 4 essential risk management tips>>
Timestamps: You can quickly recreate the chronological order of your trading activities with a time stamp. Check if your brokers are doing their job correctly and match orders promptly.
How often should you keep a trading log?
Once you get into the habit of keeping a forex trading log, you'll never want to be without one. They're terrific for monitoring your performance and progress over time. You can build up valuable skills from the records of your work.
Some traders like to keep detailed records, while others prefer to keep a simple document containing only the most relevant and essential information. It's up to you. There is no set rule for how often or when you need to record all your trade entries. Depending on your schedule and preferences, you may want to record your trades after every market session, daily or weekly.
These days, you can save a bit of time by keeping your trading records in electronic format (word doc, email, spreadsheet, note on your phone, and more). The best way to prove that you're a genius would be to maintain your records digitally, so there would always be the chance for a quick review whenever you need it.