Why Is Keeping a Forex Trading Journal Important for Successful and Failed Trades?

Given that almost every broker offers real-time access to your trade history, you might question why you need to keep a separate trading journal. It may be argued that the broker's records also maintain track of available buying power, margin utilization, and profits and losses from each trade. However, here are some reasons why maintaining a distinct forex trading diary can be helpful. Join multibank group trading bonus program.

 

Archival Evidence

 

The journal, as time goes on, will offer a look back at events. In addition to detailing every deal you've made; it also shows you exactly where your trading account stands briefly. In other words, it becomes your very own performance database, allowing you to look back in time and analyse things like your trading frequency, the success of individual trades, the relative performance of different currency pairs, and the optimal trading time frame for maximizing your profits.

 

instrument for planning

 

A good forex trading journal should not only include information about the mechanics of each deal, but it should also include information about your objectives and tactics for completing those trades. You can plan out your trades in advance with the help of this feature. You may choose where to join the trade, how much risk you are ready to accept, where you will put your profit objective, and how you will manage the trade as it develops.

 

With the help of a notepad, you may transform abstract ideas into concrete objectives that you can work toward. It is the basis for a strategy, which begins with the formulation of a plan and then moves on to the actual implementation of that plan.

 

Examining the Authenticity of Methods

 

Keeping a forex trading notebook also has the added benefit of confirming your strategy over time, which is crucial. The effectiveness of your system under varying market conditions may then be evaluated. It will shed light on issues like, "How did my system perform in a trending market, a range-bound market, different time periods, and the impact of your trading actions like placing stop-loss orders, too tight or lose?" The trading journal needs to be exhaustive if the trader is to preserve all the intricacies of the reasoning behind a certain approach.

 

Transforming Thought Forms

 

The genuine assistance that your journal gives you in forcing you to change negative habits to positive ones will be one of the most beneficial features of your notebook. As you get experience trading with your technique, you will have an increased sense of confidence. Your successful trades will feel less random if you have a plan, and your losses will be less of a psychological blow because you will have expected them. This is because you will have planned for them.

 

In the world of finance and business, your level of self-assurance is an essential psychological and mental advantage to have. The cure for the vicious cycle of fear and greed that many forex traders will enter is to have confidence in one's trading abilities. The emotions of fear and greed are reflexive and programmed responses for a lot of people. When you are winning, you want to keep winning. When you are losing, however, you may experience stress or even fear as your balance dips below zero. When you are ahead, you want to keep winning.

 

Maintaining a record of your trading activities will assist you in developing a strategy by outlining the steps you'll need to take to achieve your goals, evaluating the success of your trades, and most importantly, learning from your mistakes. Keeping a record of your forex trading activities will also assist you in learning from your mistakes. As you progress as a trader, you will gradually grow to regard your journal as a reliable source of information.

 

 

Journal Parts One and Two

 

It is suggested to establish a trade journal to achieve these goals.

 

The best way to keep track of your progress is using a detailed spreadsheet that displays your trades in a columnar format and allows you to add them up over time. To do this effectively, you must write all the relevant information in the appropriate columns by hand. Keeping tabs is as easy as opening an Excel spreadsheet, which can perform basic calculations for you and eliminate human error. This is dependent on how proficient you are with spreadsheet modelling.

 

You should have a printout of the actual chart you used to evaluate the trade, with unambiguous markings at the entry level, the stop-loss level, and the potential profit level. Write down why you decided to make the swap.

 

Finally, you should maintain a diary for each forex trading strategy you apply. Do not combine systems; doing so will lead to inconclusive trading results as too many factors will be considered. Because of this, it is recommended that traders who employ multiple trading systems or methodologies maintain separate journals for each.

 

If you stick to a single system for all your recorded trades, you'll be able to determine the system's expected return on investment (ROI) after only 20 trades.

 

The probability formula is as follows:

 

Expectancy = Average Winning Trade/Average Losing Trade/Win Ratio (in Percentage)/Loss Ratio (in Percentage)/Start Aligned = Left 1 + Fraction of W/L/Win Ratio (in Percentage)/Right 1/End Aligned

​

 

​Expectancy = [1+LW​] ×P−1

where:

W = Average Winning Trade

L= Average Losing Trade

P = Percentage Win Ratio​

 

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Say you made 10 trades and 6 of them were winners while the other 4 were losers; your win ratio would be 60% (6/10) or 6 out of 10. The average profit would be $400 if you made $2,400 from six trades. If you had four losses totalling $1,200, the average of those losses would be $300. When these numbers are plugged into the equation, we get:

 

P= [1+300400​] ×.6−1=.4

 

or 40%. If your method has a 40% positive expectation, it will make you money over the long term.

 

 

The Crux of the Matter

 

You will be able to act with confidence once you have determined the expectation of your system. Execution relies heavily on one's level of self-assurance. If you lack confidence, you will not be able to execute your trades in accordance with your plans. 

 

Instead, you will either question your own decisions or become immobilized from overanalysing the data that is coming in from the forex market times. Neither of these outcomes is desirable. Create a habit of keeping a trading log as your initial trading routine. It will become indispensable to you in the future for all the profitable deals you make.