Trading is a performance skill, regardless of your trading style or method.
Your outcome is determined by how well you analyze the market environment, your ability to create a plan or trading method, how well you execute that plan, and luck.
There are many variables that lead to success, so you have to write down everything to determine your weak and strong points.
For traders, that means recording:
- Who you are and your motivations for forex trading. To find the right trading method for you, you have to know who you are, your lifestyle considerations, and why you do the things you do.
- Market views and philosophy. This is how you understand and frame the markets, and how you make the decisions to act and manage the risk to your account.
- Observations of the market. Each day is different in the market, but that doesn’t mean there are certain “tendencies” or “behaviors” that you can take advantage of. With careful and consistent observation, you can find these “tendencies” and create or adjust your strategies to them. Also, if the environment changes, you’ll be on top of the situation and change with it!
- Trading mistakes and missed opportunities. Mistakes and missed opportunities are just as detrimental to your success as the market going against your trade. Closing trades too early, not taking legit setups, entering the wrong entry levels or positions sizes, etc. should be recorded in your journal so that you avoid the same mistakes in the future.
- Performance statistics. Many aspects of your forex trading performance can be quantified into hard data. This gives you a realistic, no BS picture of how you’re doing. Like Shakira’s hips, the numbers don’t lie. And sometimes a shot of reality can give you the kick in the butt you need to kick up your game!
Truth be told, this sounds like a lot. So to make it easier for you to get started, here are what we feel are the bare minimum. Our “must-have” elements of a trading journal.
Before we reveal our list, we just want to point that this is what we believe should be included in a trading plan.
We simply provide this list so you can have a better idea of what to include in your own plan, but you don’t necessarily have to follow it exactly.
All right, here are our 5 “must-have” elements of a forex trading journal:
- Potential trading area
- Entry trigger
- Position size
- Trade management rules
- Trade retrospective
Again, It’s up to you.
It’s your trading journal.
Just like your custom World of Warcraft character, you should customize your trading journal as you see fit.
Remember, you are the one who’s going to benefit from writing a forex trading journal. So write down what you think you would benefit the most from!