How to create and use a forex trading journal

What is a forex trading journal?

A forex trading journal is a detailed record of your trading activity. Any serious trader should keep a journal of their trades to help remove and manage their emotions and track the performance of technical setups.

Emotional trading is one of the biggest mistakes forex traders can make. Keeping a record of your trades, how they are influenced by your strategy, and your personal feelings at the time can help provide clarity to your trades and ultimately improve your methodology.

Your goal with a trading journal is to monitor the performance of your trading strategy and your ability to exercise that strategy successfully. Having a well-thought-out trading strategy is key to trading successfully, but that won’t matter if you are unable to follow it. A trading journal is intended to help you do just that.

Trading journals can take many shapes and can apply to any market. Whether you prefer an old-school notebook or an organized excel sheet, this article covers all the information you should record and how to reflect on that information to analyse your trading activity.

Trading journals take a lot of time and dedication but used right they can be your most valuable trading asset.

Why should you keep a trading journal?

Trading journals help you carry out your trading strategy as it should be implemented. Proper use of a journal can ensure you take stock of proper fundamental analysis, execute technical analysis as intended and manage your risk appropriately. These goals can be broken into four categories.

Historical record

No trader can remember the success and failure of all their past trades. Nor can they keep track of why those trades turned out the way they did. Keeping a record of your past trades and the information surrounding them will allow you to analyse past performance. The records kept will help you learn what currency pairs perform best with your strategies and whether your technical analysis accurately predicted performance.

Planning tool

You can employ a huge range of indicators and strategies in forex trading, which can make staying organized and keeping track of your intentions can be difficult. A trading journal allows you to clearly plan out trades before and during your orders, helping you adhere to your pre-planned strategies. Sticking to your plans and not trading on emotion is crucial to trading successfully.

Strategy alignment

Tracking your trading strategy and its success over time will allow you to refine your methods amidst changing market conditions. A comprehensive journal will retain all the details not just of your trade but the market conditions as well, allowing you to tweak your strategies as needed for different environments moving forward.

Habit correction

Internal biases and habits are one of the most powerful yet intangible effects on your trading. Trading based on emotion is a large hurdle for forex traders, and a trading journal helps approach your trades and your own impulses more objectively.

What should you write in a trading journal?

Your trading journal should document everything. The market conditions at the time of the trade, the strategy employed, and your confidence level are a few of the many variables you should seek to track.

These elements can be thought of in two parts. The first is the technical details of your trade: currency pair, size, direction, etc. It’s recommended to include printouts or screenshots of the actual chart depicting your trade. Many trading platforms already keep records of this data, but a journal’s strength is when it lines this data up next to your personal comments. These notes make up the second part and include your targets, mindset, rules, set up, etc. Basically, your entire methodology behind the trade.

Below is a checklist of items to include in every journal entry. As you become more experienced, you may not need to write as much about the currency pair or direction you chose. Instead, you may spend more time analysing the market and finetuning your strategies in response to past performance.

Information to record in your trading journal:

• The currency pair you traded
• The size of your trade
• The direction of your trade. Did you buy (go long) or sell (go short)?
• The timeframe your trade took place. When did you enter the trade and when did you close it?
• The strategy(s) you used. Is this trade based on big market news? What technical analysis did you read before opening the position?
• The level you entered in any working orders at. What price are your stop-loss and limit orders placed at?
• Your conviction before entering the trade. How confident are you about the opportunity?
• Total points your position moved. How many pips did your trade rise or fall?
• Whether it was successful or not. Did you gain or lose money from your trade?
• How you felt during the trade and after closing your position. Did you interpret signs the market would move against you and close out early? Or did you get greedy and waited too long to close, letting the price fall back and eat into your gains?
• Closing thoughts. Why do you think your trade was successful or not? How well did your strategy work and why?

What does a good trading journal look like?

Your trading journal can take many forms. What’s recorded in the journal is more important than how it is structured, as long as its layout is understandable to you. Many traders make their own trading journals in Excel or Google Sheets, which you can download premade templates for. Others use online project management software such as Trello or Asana. And if you’re old school, you can write out your trade entries in a notebook. There are many pre-printed notebooks and planners designed specifically as trading journals.

There is also software created specifically to function as integrated trading journals that are compatible with most major trading platforms. These will be the most expensive options and often have monthly fees in addition to a base payment. However, they are undoubtedly the easiest journals to set up.

Performance analytics software is offered for all FOREX.com accounts, which provides real-time statistics on your trades and compiles much of the info needed for a trading journal. Performance Analytics is a more statistical view of your trades, using charts and other visual aids to break down your current and past trades.

Performance Analytics offers multiple tools to monitor in-progress trades. PlayMaker for example monitors your trades in real-time to minimise risks, prevent emotional trading and track metrics on open trades. Learn more about Performance Analytics and PlayMaker here.

The medium you choose for your journal will depend on what you’re comfortable with. For example, Excel may be less attractive if you are inexperienced with spreadsheet modelling. Experiment with the different options and choose what feels right for you. What you’re including in your journal is most important, but an organized structure is also key to helping you understand and learn from your trading activity.

Trading journal example

Now that we’ve discussed the contents of trading journals and various templates, let’s look at an example. This example was created in Excel and includes all of the categories mentioned, but you should organize these in whichever way feels clearest for you.

Practise using a forex trading journal with City Index

You can practise tracking your trades with a journal like the one above with a City Index demo account. Trade the forex market with $50,000 of virtual funds within minutes of making your account.

Already an experienced forex trader? Log in to your City Index account here or create an account with us today.