Why You Need a Foreign Exchange Rates Trading Journal
When you trade forex you need to keep a trading journal. There are a number of reasons why having a foreign exchange rates trading journal is important. Of course, when you are keeping your journal you need to understand the importance of being as detailed as possible. You will not get all the benefits of the journal if you do not keep accurate and detailed records of everything you do on the market.
Having an Historical Record of Foreign Exchange Rates Trades
Once you have been trading for a while you may need to get an overall perspective of how you trade. This is something that a trading journal can offer because it is a historical record of every trade you have ever made and why you made them. Many traders believe that the reports you can get from a trading platform suffice for this. However, the reports you are getting do not have your motivations for the trade.
When you keep your trading journal you need to keep record of all parts of your trade from the first idea. This means that you have to print off images of the charts that you used to analyse the market and state what indicators you used to find the entry and exit points.
Before you enter a trade on your trading platform you have to plan it. If you do not plan the trade then you are diverting from the basics of trading forex and you could be completing an emotional trade. By gathering all the information you need to put into your journal you are checking that the trade will actually work. You can also see whether the trade you are thinking about diverts from your trading plan and strategy.
Verification of Methodology
When you have a trading plan you need to review it regularly to see if it is still working for your trading style. Your trading journal lets you see whether all your trades have been in line with your trading plan. If they have not you need to see if there is a common area if diversion through the entries in the journal. If there is one point where you constantly change methodologies you need to consider why and whether you need to change your trading plan. You can also see if your method is the reason why you are not making large profits. Perhaps the take profit orders you set out in the plan are too close to your entry point. If you are completing long-term trades then you should also look at the stop loss points.
When you detail all aspects of your trades you can see if you have any bad habits that need to be changed. These bad habits could come from when you trade on a demo account or they could form over time as you trade live. Identifying these habits is important because they often lead traders to lose money on the market even when they have a strategy that would win.
Gathering statistics from your journal is the best way to check what you trading habits are. You will be able to see how often you use on currency pair, how often you trade on a single trend or range type and the indicators you commonly use.