There is one area of your Forex journal you need to pay attention to more than any other. And I’ll bet you don’t know what it is.
And as always, you can listen to the podcast episode here, or continue reading on:
This week’s question is from another Floridian!
“What makes a good trading journal?”
Rene from Miami, FL
When I answered Rene’s question, I did it based on the journal I had a long time ago. Looking back on it, I learned I need even less than I used before. And I’m a minimalist!
This is good news, because your own trading journal doesn’t need to be complicated or have a lot of columns.
There is one main reason why you, and everyone else out there should be journaling your trades:
To eliminate mistakes
If you’re doing it for any other reason, you’re wasting your time. Read this blog post to see what I mean.
The Bad Advice Department
Do you want to see a bad answer to this question? It’s from the very place I recommended you go learn Forex for the first time back in episode 2.
Current information on everything regarding Forex trading is so bad, even the places I recommend sometimes are so far from giving you anything remotely useful, I can barely stand it.
So real quick, just go here and scroll down to the bottom. It will take you 5 seconds.
It starts off with a bunch of useless theory, then finally gives you 5 things you need, and the first 4 you don’t even need at all.
Let’s do way better, shall we?
What You Know By Now
If you have been following the blog and the podcast, you are, in a very short amount of time, set up better and armed with better information that almost every Forex trader alive.
You have an entire risk structure you can use without having to even think about it. That’s a game-changer.
You know why price moves up and down and who is responsible for it. Very few traders understand this. I can’t imagine trying to succeed in a 4-5 trillion dollar a day market like Forex and not know this.
You’re in great shape. So your Forex journal doesn’t need to include a lot of superfluous nonsense in it.
Don’t Believe The Hype
Forex advice is usually full of useless high-theory. The article I linked in the beginning was full of it. Listen to what I say to do instead.
To clear up any confusion when I tell you what you DO need, as I often do, let me pick apart the article I linked above and go over all the things you really do NOT need.
By pointing these things out, you can more easily cut through the nonsense and keep only the important parts.
The top 4 things the babypips article recommended you have…
1 – Potential Trading Area
Who the hell cares? The whole purpose of having a journal is so you can look back and see how you could have done better. Examining the “potential trading area” does absolutely nothing for you in retrospect.
You put together a system with indicators, and you follow it. What the “potential trade area” looks like does not matter. It’s a vague term anyway, get it out.
2 – Entry Trigger
If you have a system in place, a good one, your entry trigger should be the same every time. We are NOT traders who enter due to a trend line here, or a Fibonacci level there.
A good, disciplined system has the same entry trigger every time. The above does not apply to you.
3 – Position Size
Again, does not matter because your position, at least as it relates to your risk, is percentage-wise going to be the same.
Don’t know what I mean? I gave you an entire risk structure to use. Go get it.
If done right, your position size will always be relative to your account size and how fast/slow the currency pair is moving.
Looking back on this information does nothing for you.
4 – Trade Management Rules
Again, already built into the risk structure I gave you.
And the video on taking profit is not far away, and will contain the rest of the rules.
Do people trade management rules really vary that much? They shouldn’t vary at all. This could explain a lot.
And number 5 on their list I actually agree with.
5 – Trade Retrospective
So a comments section, basically. And yes, you should have one.
Other Things To Ignore
The list goes on. I’m saving you so much time here.
The Time You Entered/Exited
If you really do trade the Daily Chart like I asked, this means nothing.
When I answered Rene, I included time frame, but I was looking at a very old journal back when I hadn’t figured out that the Daily time frame was superior to the rest.
Win or Loss
You can eliminate this column altogether, and you’ll understand why soon.
Let’s transition into what you DO need, and put this sucker together.
What You Need and How to Set It Up
You need a spreadsheet. Google Sheets is free, Microsoft Excel is good too if you have it, but no need to go get it if you don’t.
And set it up like this.
Column One – Currency Pair
Just for reference. Just don’t ever make the mistake of looking back and saying “Wow, I do really great/horrible at this currency pair”, because that’s not really a thing. I covered this in episode 4 of the podcast.
Column Two – Long or Short?
Just to make it easier on yourself when you look back.
Column Three – Pips Gained/Lost
This eliminates the need to have a separate column just to say “I made money here” or “I did not make money here”. This will be a plus number, a minus number, or a zero.
Again, do this in pips. Don’t put actual dollar amounts here, it tends to trigger emotion, and there’s no place for that in Forex trading.
And there is no need for a “Totals” row at the bottom so you can see how many pips you’ve accumulated. This is nothing but a vanity metric, and your own trading account will tell the real story when it’s all said and done.
Column Four – Screenshot
You may be wondering why I didn’t include a column for the date you entered/exited. The screenshot eliminates that, and eliminates you having to go back in time to a point on your charts.
Take a screenshot of your trade after it’s finished. Win or lose.
Set up an account on Imgur, or whatever photo capture site you like. Post your screenshot on a site like this so you can have a link to it. This can eliminate a trip back in time to your charts in a lot of cases.
Put the link in Column four, and be done with it. Now you have a visual right there in front of you, but only when you need it.
Column Five – Comments
Not for when you did something right. With a good system, the good trades are SUPPOSED to come. And if it loses, it loses. But if you did something out of character, if you deviated from the system, if you got emotional and took a trade off too soon — this is the column for that. Be brutally honest.
If things went as they were supposed to, do not put a comment. Leave it blank.
And that’s all you need. Nothing else.
Which Column Is Most Important?
Column 5, the comments section.
Again, you only put something here when you messed up. It has nothing to do with the trade winning or losing.
Obsess over these comments.
Make sure you do whatever you can to never make those mistakes ever again.
Failure is great here, because if you can somehow make sure you don’t make those mistakes anymore, you get exponentially stronger every time you eliminate one of them completely.
THIS IS HOW YOU GET BETTER.
Here’s a sample of what it should look like.
|GBP/USD||Long||+57||www.imgur/trade3||Exited too early, I didn’t want to lose profit, and I panicked. The trade went much higher.|
When done right, a Forex journal can be one of the main keys to turning you in to that killer trader you’ve always wanted to be.
How? By focusing on doing one thing — eliminating mistakes.
But most people’s journals are clogged up with things that don’t matter, and even if they tried to go back and learn from it, there would be no good way to do that.
Yours will be direct, to the point, and extremely useful, if you let it be.