Many people in their first year or so of trading forex begin searching for tips, strategies, and advice to assist with their trading. Seeking tips and advice is good; however, I have found that the best advice comes from drawing your own conclusions from your own, well-documented forex trading journal. Yes, your insight into your own trading psychology is the best advice - and you can give it to yourself!
Does that answer surprise you? The greatest surprise will be seeing your improvement shortly after you begin keeping a journal. This is so important that if you are not keeping a journal, you should start immediately. If you are not getting the results you desire in your trading, then you should start writing down the details on every trade you take. Even if you are having success, keeping a journal over time will help you to uncover strategies to increase your gains and minimize your losses even further. The information you will gain will give you an education into YOURSELF and into your own trading style and psychology. You will quickly discover where you are making good decisons. And more importantly, you will begin to see a pattern in your mistakes. You will gain an understanding of what factors are driving you to make those same mistakes over and over again. Most importantly, once you uncover a pattern in your mistakes, you can plan a strategy to overcome those bad decisions. You WILL become a better trader when you keep a journal. Your journal is your BEST forex advice!
So how do you keep such a journal? What information should you write down and how do you draw conclusions from it? I will share with you what I wrote down in my journal. I can also share with you the questions I asked myself about each trade I took. This particular journal keeping and evaluation process resulted in a rapid improvement in my forex trading in a very short amount of time. In fact, I credit the journaling process with being the key factor in enabling me to develop my own personal effective trading strategy.
First, you will want to record all the the “basic details” of your trade. I also recommend that if you are just starting to keep a journal that for the first two weeks of trading and journaling, that you only trade on one currency pair. Choose the currency pair that you seem to prefer, and only trade that one for the two weeks. (If you can’t decide I recommend the good ‘ol EUR/USD as it is usually nicely predictable.) This will enable you to really gain some insight into how you trade specifically with that pair. You will begin to see a pattern of decisions that you make with respect to the movement of that pair.
Here are the basic details you will want to record in your journal:
1. The date and time
2. The currency pair you were trading
3. The price at which you entered the market
4. Whether you were buying or selling (went long or short)
5. What you decided your take profit and stop loss would be
6. Whether you were sitting at the computer watching the trade for the duration; or if you set your parameters and “let it run”
7. What price you closed the trade, the time you closed it, and the amount of pips you gained or lost.
Then after you record the basics, you will need to take down some personal insight notes after the trade has completed. Ask yourself these questions and jot down the answers.
1. Did you set up a plan for entry and exit in the market and did you stick with the plan?
2. If you did not follow your original plan - what did you do to modify it? For example, Did you change your take profit or stop loss during the trade? Did you close the trade early?
3. If you made modifications to your original plan for the trade - why do you think you made the changes?
4. If your trade was successful and you gained pips, then what are some factors that you think helped to contribute to that gain? For example, what factors did you consider when you set up the trade?
5. And if your trade was unsuccessful, do you see anything you could have done to have prevented the loss? (i.e. were you trading on emotion or a “hunch” instead of on a system? could you have added some pips to your original stop loss? should you have stayed with your original plan instead of closing early? were you over-trading? )
I know that in my own first journaling experience, I discovered that most of my errors were for two reasons: 1) Trading with a plan that was based on nothing more than a “hunch” -i.e. over-trading; and 2) Entering trades too late to take advantage of the larger moves.
It is my hope that when you keep a trading journal for two weeks, that you will also gain insight into your own trading style. If you do so, you will significantly improve your trading outcomes in short time. After all, it has been said that as a forex trader, you really aren’t trading the market - you are actually trading against yourself. Conclusions from your trading journal will help you make decisions that will put you on the winning side of your trades much more often than ever before.
-Ann PeveyGet info on Ann’s personally preferred Simple Forex Strategy -> Go Here
