Life trading in the forex market has many parallels to owning an operating a business. Just as in business, traders should expect streaks of profits and losses. The key to long term success however, ultimately will fall in the analysis of these cycles. This way a trader can maximize their successes while working to reducing their periods of balance draw downs. One of the easiest ways to track your trading is to keep a forex trading journal.
Just as a business owner tracks inventory, a trader should also keep up with their closed positions. While keeping a journal may be difficult at first, recording your trades can help answer some critical questions about your trading techniques. Keeping a trading journal is actually a crucial task in any performance or goal-oriented endeavor. The key is to have some way to measure, track, and stay focused on improving your performance.
Over a period of time, the journal will provide a historical perspective. Not only will it summarize all your trades, but it will provide, at a glance, the state of your trading account showing each individual trade and the accumulated effects of all your trades to date. In other words, it becomes your personal performance data base, which will provide you with the opportunity to go back in time and determine how often you traded, how successful each trade was, which currency pairs performed better for you and even what time frames gave up the best profit percentages.
Many aspiring traders get caught up on the results of each individual trade; however, the professional trader knows that their trading performance is measured over a long series of trades, not just one or two. So, it’s important to have a way to track your results so that you can see how you are doing over a series of trades, this allows you to not get caught up on any individual trade. Having this type of reminder is very important, especially early-on in your trading career, it helps keep you focused and it helps to remove any emotion you might attach to any one trade.
The trading industry is filled with losers, excuse makers, pretenders and people with unrealistic expectations of forex trading. These guys don’t take accountability seriously and will blame the market, or their broker when something goes wrong. Your forex trading journal is a superior way to reinforce accountability. If you step out of the confines of your trading plan, don’t use your better judgment, or just simply let emotions take over your actions. All of this needs to be recorded in your trading journal.