In order to learn from past mistakes and to ensure that you consistently execute your trades based on analysis rather than intuition and emotion you need to journal your trades and regularly study your own track record. A trading journal is an invaluable tool for traders to track their progress and insure that they are truly following the trading plan. By documenting every trade, a trader also has the data necessary to evaluate if a trading strategy is the problem or whether emotional/human elements are interfering with the strategy.
Many traders either do not keep a separate trading journal, or they fail to use it correctly and consistently. These traders can miss the important insights and major benefits that keeping a trading journal can bring to their trading business. One of the major benefits of keeping a trading journal consists of being able to determine your trading performance, review your analytical process, and keep track of your psychological reactions to profits and losses. One of the simplest and best ways to become successful at trading is to focus more on what works, and less on what doesn’t.
Without a forex trading journal, it is incredibly difficult to do this. The human mind and memory are imperfect, so if you fail to capture data on the trade you just placed, then you may to struggle to remember what you did well, or to spot trends in your performance that you can exploit. Keeping a trading journal requires discipline and hard work. Make a commitment to yourself that you will no longer trade without recording your results. This will allow you to build a store of knowledge about what works for you and what doesn’t, and it will provide you with the stepping-stones to trading success.
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. The main goal of keeping a detailed trading journal is to prevent you from taking impulsive actions, which will ultimately result in saving you money. This is why you must write down as much sorted data as you can, including trade entries and exits. It is also useful to record your thoughts and visualize everything by capturing your trading session with screenshots on your platform.
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. Logging your trading results is an essential part to becoming a successful and seasoned forex trader. As your trading journal entries progresses trade after trade, you will start to see the significance of it in more perspective. The power of risk reward and money management will become very clear to you as you look back over your past trades after a few months went of logging your trades.