How to Create a Forex Trading Journal

The post How to Create a Forex Trading Journal by Aditit Ganguly appeared first on Benzinga. Visit Benzinga to get more great content like this.

Keeping a track of all your forex trades will allow you to manage your investments prudently and help evaluate your trade history at a later date. Traders look back at the forex trading strategies they implemented to analyze their profit-generating capacity or losses incurred. This practice helps them understand the profit-boosting capabilities of previously executed trades or cut back on loss-making trades. 

You can create a forex trading journal using online software or on Excel spreadsheets. Beginners without access to these tools can all their forex trades in a notebook to create a personalized trading ledger. 

What is a Forex Trading Journal?

A forex trading journal lets traders can record all their currency trading activities. Traders jot down the currency pair traded, the lot size, the buy/sell price and the date and time of execution. This activity allows you to create a comprehensive trading record and track your net profit margins and/or losses to help you improve your trading plan moving forward. 

Why Are Trading Journals Useful?

Creating a forex trading ledger has multiple benefits. Apart from keeping track of your total forex investments, a trading journal can be used to identify uneconomical trades. While beginner forex traders often feel they might remember their trading mistakes, having a record can help pinpoint the errors accurately. 

For instance, forex traders might notice a pattern of recurring losses on certain currency pair trades made outside the peak market trading hours by going through their previous trades. They can rectify the errors by trading at a different time or using a different lot size after analyzing market patterns. 

Traders can deduce typical profit margins generated by various forex trading strategies by going through their prior trading records and identifying ways to improve. 

In addition, maintaining a forex trading journal has been known to improve a trader’s confidence and boost their patience level. Chalking profitable trades to beginner’s luck is a common trait among new traders. Also, given the substantial leverage rate and market volatility in currency trades, beginner forex traders often abandon their positions at the slightest fluctuation, causing them to rake in losses. With a more confident approach, forex traders learn to trust their gut and maintain their position over specific time periods to tune out the market noise. 

5 Steps for Creating a Forex Trading Journal

Forex trading journals can be created at absolutely no cost. Follow these five steps to begin building your trading ledger today. 

Step 1: Choose a Book or Spreadsheet

Though you can choose to maintain a physical copy of your trading records by noting them down in a notebook, using trading journal software or spreadsheets can be more efficient. This option makes your forex journal more convenient and easy to use, as Excel or Google spreadsheets allow you to filter trades and show the total profits or loss margins without manual calculations. 

Step 2: Pinpoint the Information You Want to Record

Record basic trade information such as the date and time of a transaction, currency pairs, lot size and entry/exit points. Experts also recommend noting limit orders or stop-loss levels placed as well as expected profitability. Information like this can help you distinguish the actual profit margin from the expected levels, creating a realistic trading mindset. 

Step 3: Add in Additional Trade Information

Other important information that can be recorded in a forex journal includes reasons for the trade, market sentiment and trading strategies followed. Such additional information can be used to gauge the profitability of trade and discern the reasons behind exchange rate fluctuations. 

Step 4: Record Every Trade

Recording every forex trade execution is pertinent when creating a trading journal. Many forex traders underestimate the importance of all-inclusive ledgers and only jot down the loss-making trades. While this is helpful to a certain extent, a comprehensive trading journal can boost your trading habits and knowledge significantly.

Step 5: Gather Data and Study Your Trades

Reviewing the information collected is the key to becoming a better forex trader. You can do this every month or every quarter, depending on your forex trading frequency. For instance, you can easily pinpoint the number of trades that were profitable using a filter on your forex trading journal software or spreadsheet, as well as calculate the profit expectancy. Also, you can look at the different trading strategies used and profits yielded through them from a better vantage point, helping you eliminate the loss-making strategies. 

Tips for Making the Best Use Out of a Forex Trading Journal

Traders might disregard their reasons behind executing a particular trade while keeping a forex journal. But looking at data without additional information might be futile. Keeping your emotions in check is crucial, as forex trading requires being levelheaded. Frequent spikes in exchange rates might create panic among new forex traders who have yet to learn how to distinguish the impact of major news from market noise. A journal with time and date recorded allows traders to determine the reason behind price spikes in most cases, helping them make better trading decisions. 

Create and Begin Using a Forex Trading Journal Today

Start using a trading journal today, even if you have been trading forex for a while. Though it might seem cumbersome, taking a few minutes after executing a trade to record the details in a journal can help you become a better and more successful forex trader over time. 

You will develop better a trading technique while improving risk management skills and an understanding of market conditions.

Frequently Asked Questions

Disclosure: Benzinga was commissioned for this article and is not affiliated with LonghornFX. Any comments or opinions provided herein are Benzinga’s. LonghornFX does not endorse or promote any trading strategies that may be discussed or promoted herein. The broker makes no representation or warranty as to the article’s adequacy, completeness, accuracy or timeliness for any particular purpose of the above content.

This presentation discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve. This article is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. Investing involves risk regardless of the strategy selected and past trading performance does not indicate or guarantee future results. Trading leveraged products such as Forex and Cryptos may not be suitable for all investors as they carry a degree of risk to your capital.

The post How to Create a Forex Trading Journal by Aditit Ganguly appeared first on Benzinga. Visit Benzinga to get more great content like this.