By Akram Mondal
When you’re trading forex regularly, things can often seem hectic. From ensuring that you don’t pass up a golden opportunity to take advantage of the market to keeping on top of the various broker-related administration obligations, your day as a trader is sure to be packed.
That means the idea of keeping a trading journal can feel like a drag. On the face of it, it may seem like you have no time for such an exercise and that it can detract from the “real” work of the forex trader’s day.
But this is far from the case: in fact, a trading journal can enhance your trading experience rather than detract from it, and it’s best understood as an investment in the way you do business. This blog post will explain why – and share some tips on how you can go about keeping a top-quality trading journal.
Tracking your progress
As a trader of foreign currencies, it’s unlikely that you’ll have any sort of supervisory figure in your work life. On the contrary, forex trading as an individual can be quite a solitary existence – with many forex traders finding that they are sitting in front of a computer screen (or screens) all day working on their trades, with minimal human contact.
A trading journal can rectify this to a certain extent. If a trader doesn’t have interpersonal contact with a boss or manager, they won’t get any ongoing assessment of their progress from an external source. But a trading journal can give them the material they need to look back over what they’ve done so far and how far they’ve come. It can give them the confidence to see that their skills are developing.
Monitoring external events
As reputable sites like AskTraders might encourage when sharing trading tips, a trading journal is also wise as a way of looking ahead to what’s coming up. It’s important, for example, for foreign exchange traders to be aware of the dates and times when reserve banks around the world intend to announce changes to their monetary policies, such as a rise or fall in interest rates.
Even with the best of intentions, some traders end up missing these key milestone events because they don’t correctly plan their trading schedule. By looking at an economic calendar and jotting down the upcoming monetary policy events relevant to you, it’s possible to reduce the risk that you’ll be caught out and blindsided by a significant policy move.
What should a journal look like?
When filling out your journal, it’s essential to make sure that you prioritize the right things. The journal should contain some basic outlines of what trading decisions you make each day and why: you should record what trade you placed and why you placed it.
So, for example, this could be the purchase of US dollars in response to an announcement by the Federal Reserve. It’s also important to be sure that the journal is results-focused: this means recording what happened when you placed each trade, such as whether the outcome was profitable or not.
It’s not necessarily the case that the journal has to be handwritten. Some traders choose to handwrite as a break from the large amount of screen time they have to experience, while others find it more convenient to have it on their computers. It’s entirely up to you as to what you prefer.
Finally, an unorthodox but potentially helpful approach to keeping a foreign exchange trading journal might lie in recording your feelings and emotions around the trading process. You may, for example, find that certain abrupt and unexpected market movements might lead you to make impulsive decisions like closing your positions. If you jot down when this happens, you may be able to spot a pattern and replace it with a loss management strategy in the future.
In short, a trading journal is an excellent idea for foreign exchange traders – for several reasons. It gives traders a chance to track their progress in the absence of a boss or manager, for example. It also allows them to monitor the many different news and economic calendar developments going on around the world.
By ensuring that this journal is maintained correctly with a focus on what matters, traders can give trading their best shot and maximize their chances of having a profitable experience.
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