What a Forex Trading Journal is…
This is a log book either written in a book or plotted on a spreadsheet, which details: every trade you make, the metrics to show how your portfolio is doing and your trading levels with reasons why you entered and exited a trade.
What you’ll need in your forex trading journal
With every trading journal you’ll need to record the following items…
1. The date you entered your trade.
2. The market you traded (Currency, stock or index).
3. The type of trade (Buy (long) or Short (sell).
4. The reason why you entered your trade.
5. The gearing level of each market you trade.
6. Your margin per spread trade.
7. Your entry level.
8. Your stop loss level.
9. Your take profit level.
10. The amount of money you deposited in your trade.
11. The gain potential if your trade hit your take profit.
12. The loss potential if your trade hit your stop loss.
13. The risk to reward for each trade.
14. The current portfolio value.
15. The date you exited the trade.
16. The reason why you exited your trade.
17. The amount of money you would have made or lost in the trade.
When you record these details, you’ll be able to identify whether the system you have is a profitable and a sustainable one to follow in the future.
The question however that we’ll need to ask is…How much data is enough?
The market moves in different environments. Sometimes you’ll see different markets moving through strong up or down trends and other months you’ll see markets moving in consolidated sideways trends.
This is why you’ll need to have jotted down as many trades as you can to see if you have a profitable system or not.
My general rule when it comes to testing the markets involves three sets of 20 trades.
Set #1: Make sure you back test 20 trades you would have taken in the past.
Set #2: Make sure you forward test 20 trades which would test in the future.
Set #3: Make sure you real-test 20 trades to see how your portfolio would have performed with trading using actual funds.
A final point on your forex trading journal is to have an actual journal, write about how you felt when executing the trade, the emotions you felt during and after the trade. A strong aspect of trading is managing your emotions and when you can do this you would have truly mastered trading.
How do you manage your emotions? You do this by having confidence and to get the confidence you need to be educated, so the more you learn the more you grow not just as a trader but also as a person.