Trading in the forex market generally affects people in different ways and on different levels. Keeping a trading journal can provide you with some very useful feedback about yourself and why a journal can offer some major advantages to your trading process.
In essence, keeping a record of how you feel when making a trade, and the way that your performance is affected, can be very beneficial to understanding your trading mindset.
This information can also help you become a better forex trader over time as you react to the feedback you receive from your trading journal and refine your trading methods.
What a Trade Journal Includes
In order to be an effective gauge of your trading, a trading journal would usually need to include an outline of:
The strategy behind each trade.
What the market did after executing each trade.
How your emotional state felt after executing the trade.
By keeping this information and having it available to you in the course of your trading, you can sharpen your trading skills to the point of becoming not just a good trader, but a great trader.
Furthermore, by having the knowledge of successful trading situations, the events can often be revisited mentally, and the successful trading situation reproduced to make even more successful trades.
Also, by having a good idea of how an unsuccessful trade develops, and the mindset you had at the time, the situations that result in losing trades can be more easily avoided.
Trade Journal Suggestions
As far as what would be the best specific trading experience elements to include in the journal, your overall trading strategy outline would be a good place to start.
After describing your strategy, a list of the rules you plan to keep, as well as the technical considerations in the trading plan should be outlined in detail.
Nevertheless, a key element to keep track of in developing trading skills using a journal consists of keeping track of your emotional state when trading.
Typical Trade Journal Guidelines
While trading journals can vary as much as trading styles, certain general guidelines for trading journals exist regardless of what market or type of trading you might be engaged in.
For example, a typical trading journal for a short-term forex trader might contain the following specific types of information:
- Goals - define your goals in both initiating positions and your financial objective for the trading day.
A journal with a longer-term outlook might include a strategy outline and business plan that would be more suitable for a longer term trading plan. Nevertheless, the basic intention of a business plan, whether long or short-term, is to repeat the experience of taking winning trades and avoid losers.
- Daily Strategy - write down the strategy you will employ and how you plan to implement it in order to attain your goals.
- Trading Reactions - Document the emotional reactions you had towards each trade taken during the day. For example, if you were elated after taking on a winning trade, or the sinking feeling after a trade went against you. What were your reactions? What steps did you take?
- News Recap - Go over the fundamental economic news items that might affect the market, and be aware of what important economic numbers are scheduled to be released.
- Market Outlook - Give an opinion of the market at the time and the reasons you think the market will rise or fall.
- Goal Review - Were your goals for the day met? If not, why not?
- Next-Day Objectives - Write down what your objectives are for the next trading day.