How to Keep a Forex Trading Journal

Why You Should Keep a Trading Journal

The reason why I chose the name disciplined FX is because this is the trading skill that leads all other trading skills. If you can’t follow your strategy’s rules, it doesn’t matter if it’s a winning strategy. If you change your mind a lot about what you see or what you’re going to do when you perform technical analysis, it doesn’t matter if you know how to use every single indicator or naked candle set up.

You only have a strategy and a system if you can perform it day in and day out in front of the charts.

So when we talk about discipline, we’re not referring to some kind of mean mindset where you have to mentally force yourself to act rigidly and never enjoy life. Instead we’re talking about discipline as the ability to understand the outcomes of your actions and be willing to stick with the behaviors that lead to long-term rewards instead of short-term ones that prioritize comfort or let your emotions run the show.

In this way, discipline is a habit we develop – a habit anyone can develop if you can stick with new behaviors long enough to rewire your brain and break that point at which you no longer need to force yourself to perform the behavior.

Instead, this behavior now happens almost automatically.

So to summarize, discipline is about knowing the long-term outcomes of certain behaviors and then choosing to stick with the positive behaviors long enough to let them become habits.

Now one of the most important habits you can do to develop yourself as a trader and improve your ability to follow your trading rules is to keep a trading journal.

Most people think of a trading journal as merely recording the data about your trades, such as what was the price of entry, what was the price of exit, how much you made or lost, and other statistics.

While this information is important and highly beneficial for tracking, your trading journal needs to be more than that in order to get the most out of the habit.

Most brokerage firms provide these stats for you, but the art of tracking our progress isn’t about just collecting our numbers. We need to know what we were thinking about during the trade. If we make mistakes, we need to know what happened in order to avoid making the same mistake again. Thus, when you keep a trading journal that not only covers the stats of the trade but also includes information about what you were feeling and whether you followed your rules or not, you create a resource you can come back to and reflect upon, so that you can turn your experience into articulated lessons.

Today, I’m going to show you how to make a forex trading journal that does precisely that.

Forex Trading Journal Basics

Okay, here are a few things you need to include at a minimum in order to create a journal that’s capable of turning you into a better trader.

1. Include basic stats about your trade. This is like the trade’s ID card.

You’ll want to include the date, day of the week, price of entry, price of exit, time of entering and exiting the trade, as well as how many pips were captured or loss, and your overall profit and loss in your currency.

I also personally like to include the percentage gained or lost and what the risk-reward ratio of the trade was.

This basic information helps you understand the parameters and outcome of the trade.

2. Include a section dedicated to recording your emotions

This is perhaps one of the most important elements of your journal that turns it into something more than just a logbook, is a section dedicated to recording your emotions and actions that you took during the trade.

I like to remind students in the Disciplined FX Scalping Strategy Course that when you record your emotions, you actually need to make sure you’re naming emotions and not just logging what happened play by play.

If you were to write in your forex trading journal that you cut your profit earlier than your planned target, that’s not naming an emotion.

You want to know whether you got out early because you were feeling anxious about the target being too close to a resistance level or because you were afraid this trade was going to turn around and plummet because that’s what happened to you last week.

I’m underscoring the importance of recording your emotions because ultimately the number one thing that’s going to make you break your trading rules is an emotion getting inside your head and tricking you into thinking it’s logic.

If you don’t know what they are or what they feel like, you’re going to get tricked every time.

So your goal is to start recognizing what you’re feeling while you’re feeling it and writing it down in your journal even before it happens.

You could write down the time and say something like “price is moving towards my stop loss and I’m afraid I’m going to miss out before price turns around”. By writing this down, you can stop yourself in the moment and choose to follow your rules instead. In this way, your journal is a tool to help you stick to your discipline.

When you go back later to review your trades for the day or for the week, you can easily reflect on what your biggest emotions you need to watch out for going over the trades you made mistakes and noticing which emotion seems to appear the most.

Can you imagine just how powerful this habit is?

3. Include visual documentation

If you decide to use a free digital journal such as a google doc or even a Trello board, you can take screenshots of a marked up chart, showing where you entered and exited, as well as any other drawings from your trade, which can give you a much clearer idea of what you were looking at when you made your trading decisions.

This step is a must-do if you are a trader who uses candlestick patterns to perform your strategy.

Another visual tool you can use is to create journal sheets with your strategy’s rules already written on them with checkboxes so that you are certain to follow each step of your trade.

This is a particularly useful thing to include if you are like me and you use purely mechanical rules to perform your strategy.

Here’s an example from the free Disciplined FX 5m scalping strategy. (You can download your own free copy of the pdf by following the link)

There are definitely other things you can add to your journal depending on your personality as a trader and the strategies you use.

However, please remember that your journal is only as effective as you are willing to make it a habit in your trading routine.

It’s also important to make time to regularly review your journal, such as every night or on a Saturday evening before your next trading week, so that you can turn your experience into lessons that help you put a stop to bad behavior or make better decisions as you trade.

I hope you found this information helpful, be sure to sign up for the Disciplined FX Newsletter to receive more tips and notifications. I wish you all the best of strength and luck, and I’ll see you in the markets. Take care!