Forex Trading Journal, How To Create
This lesson will show any trader how to create a forex trading journal. We will explain what is a trading journal and why you would create a forex journal to track your progress on demo and microlot trades.
What Is A Forex Trading Journal
A forex trading journal is a written document and it also includes screenshot images and descriptions of your trade entries, including the final outcome of the trade. This includes profit, loss, and market conditions on entry. A forex journal will document your demo trades and micro lot trades so you can monitor your progress towards mini lot and full scale lot trading. These journaling principles work when applied to any forex trading system.
What Should Be In A Forex Trading Journal
Traders should create a forex journal by opening a forex demo account to track their trades, trading accuracy, and monitor the account history. A written journal should accompany the demo account with written notes and journal entries for each trade. Screenshots of charts and indicators at the time of the trade entry, execution price and stop order price, plus final outcome of trade would finish the journal. More details about how to set these things up are below.
The first step to start documenting and journaling your trades is to set up a forex demo account. For this discussion we will use the Metatrader platform, which is used by a large number of forex traders. In the Metatrader platform, go to the menu tabs on the bottom task bar and click on “account history”. This is wht it looks like:
The far right column details the profit and loss history for all of your demo trades. It also shows your initial deposit and total profit or loss. The highlighted column on the left shows the date and time of each trade. Having all of this on one screen is the important first step to creating your forex trading journal. As an example, if you start with an initial deposit of $5,000 in your demo account and after a month you have a balance of $6,000, you are progressing well and might be ready to start trading micro lots. The account history table in Meta Trader will automatically record the pair traded, the direction (buy or sell), and time and date of the trade in GMT. This information forms part of your trading journal.
At some point after you become consistent with your forex demo account trading, you might be ready to move to trading small amounts of real money like micro lots. We suggest using 2, 4, or 6 micro lots to start. By using even amounts of micro lots you can scale out half of your lots when you are in any profitable entry and start to learn real risk management and money management techniques. All of this will once again be reflected in your account history, balances, and open positions.
The account history window contains a lot of valuable information for your journal, but many times it does not tell the whole story. Each trade in your account history should be supplemented by a written journal, either hand written in a notebook or using a word processor. Here are some examples:
Example Journal Entry - Your account history might show that you were stopped out on a recent buy trade, but after the stop out the pair continued moving much higher. Your journal should reflect this. The stop out is reflected in the account history, but the trade itself was actually highly successful. Because the Forexearlywarning system is a trend based system, this can happen a lot when you trade in the direction of the trend on the higher time frames. The reason for the stop must also be noted: For example, the stop order was set too close to the market. This can be corrected with more demo trades and by modifying your stop placement.
Another Journal Entry - You recently sold a particular pair. When you reached 40 pips of profit you closed out the trade completely. The pair continued moving down for several days, so you lost a lot of potential profit. This should also be noted in your trading journal notes. This is why we recommend scaling out lots on any profitable trade when trading with the larger trends. An exception can be made if the market was choppy and you exited the trade for that reason. You can also note this in the trading journal.
Taking profits or getting stopped out is completely understandable, and must be put into perspective. A trader might be doing a lot of things right but this does not show up in the account history, so supplementing the account history with written notes will complete your trading journal.
One thing that may never show up in your forex trading journal is a trade that you decide not to take that would have been profitable. This will happen from time to time. You may decide not to trade that day, to take the day off, and that particular day would have been a very profitable day for you to trade. Keep this in mind and write in your notes, it will never show up in your account history.
When building your forex trading journal, you should also take screenshots of the market condition on entry. After you enter a trade, demo or live, it only takes 2-3 minutes to take screenshots. Desktop and laptop computers and most cell phones have screen grab capabilities. Traders can use inexpensive downloadable programs like Snagit or web based screen grab websites like Awesomescreenshot to easily capture images. Taking screenshots of the heatmap signals and trend indicators along with noting the pair traded and time of trade in the account history will provide traders will a full and complete journal.
Find An Effective Trading System
Before you start demo trading and journaling your trades, you must find an effective trading system. This might be a difficult task because we have seen few, if any, complete trading systems for forex traders to use. Forex traders seem limited to scalping and using ineffective technical indicators. We believe the Forexearlywarning trading system is one of the best systems, if not the best system, available for making pips.
Look at the example trade signals and price movement for the CHF pairs below. The Forexearlywarning trading system can provide clear trading signals like these across 8 currencies and 28 pairs every day. So please consider our strong trading system for making pips. Regardless of what trading system you choose, you must set up a forex trading journal to document your demo trading and micro lot trading to monitor your progress to full scale trading.
Why Do You Need A Forex Trading Journal
Measuring your progress and journaling your trades is pretty easy. Your trading platform history does part of the work for you. All you have to do is make written notes and take some screen shots to supplement this. Journaling allows you to stay focused on your goals by assessing what works and what does not work.
Journaling allows you to go back and review what you were thinking and why you entered the trade in the first place. Then you can fine tune your approach to raise your win loss ratio. Journaling is a continuation of the trading plan process and a very effective way to monitor and assess your progress toward long term success. Post trade journaling assessment will help make your trade planning stronger.
Asking For Help
If your forex trading journal and account history tell you that you are not progressing in building profits, it might be time to stop and ask for help. At Forexearlywarning it has been our experience that not enough traders ask for help when things are going the wrong way with their demo trades. There are several possible reasons: 1) they are not following our system or are selectively following certain parts of the system, 2) they are mixing in outside indicators with our system, using "mixed systems". It has also been our experience that most issues are fairly easy to fix. To make a successful trade with the Forexearlywarning trading system you do not have to get 100 things right or 10 things right. You have to get 4 or 5 things right, consistently.
When entering trades with the Forexearlywarning system, we always check things like this: Are we trading in the main session? Are the heatmap signals consistent? Is there any support nearby on sells or any resistance nearby on buys? Are we at the beginning of a movement? Is the pair trending and on what time frame? Is the pair ranging? Any of these items can be put into your journal notes. Having your journal handy will help to facilitate asking us for help. We will be able to easily evaluate your trades for you. If you provide us with information like the pair traded, the direction (buy or sell), time of the trade in GMT, and screenshots we can evaluate your trades very quickly. Then you can contact Forexearlywarning by email, and attach your notes and images. Without the trading journal we cannot help anybody. Nobody can.
Progressing To Live Trades
If your forex trading journal indicates good progress at building your demo account, it is time to start trading with small amounts of real money in the form of micro lots. Then, as you progress, you can move to mini lot trading, then full scale lot trading.
An accurate forex trading journal allows traders to quickly unravel why they made pips or why they got stopped out. When you combine the account history with your screenshots and notes, you have effectively created a complete trading journal. Measuring your winning percentage will help you to know when to make the progression from demo trades to micro lots, then mini lots, as you move forward. If you know that you're documenting the trade, you think twice before entering that trade!
Conclusions about forex trading journals: As a trader following a system, you should be able to document your trades and the logic behind each trade entry and exit. This way you can pinpoint any issues with your trade entries or stop order procedures. Making positive pips in a demo account will send you on your way to successful live trading.