Successful traders will agree that keeping a trading journal is one of the crucial factors in achieving forex trading success. Not only does a good trading journal contain the trade plan or profit and loss components, it should be complete with risk management plans and psychological details. Here are the four important parts of a complete trade journal:
The first part is all about analysis. Some traders rely on technical analysis while others prefer fundamental analysis. A good number also make use of both, along with sentiment analysis. This part should contain your bias for the currencies and why, as well as the reasons for your entry and exit points. It should have a clear explanation as to why you predict the pair will behave a certain way.
The second major component focuses on risk management. This aspect is important since you might encounter losses if your trade idea is incorrect. After listing down the reasons why a currency pair will rally or sell off, you should also be ready to limit your losses in case it behaves differently. This component should also have the reasons for you to exit the trade early or cut losses. It should mention the technical levels at which your trade thesis is proven wrong and how much of your account are you willing to risk on the idea.
After this, you should discuss the time frame of your trade. This part will specify how many minutes, hours, or days you will be keeping your trade open or orders in. Of course this depends on what trading style you practice. Day traders typically mention until which trading session they will hold on to their trade while swing traders specify how many days or weeks they will keep it open and which market factors could lead to an early exit.
Lastly, you should include some trading psychology updates that can help you manage your emotions while your trade is open. Feel free to note if you are feeling confident or nervous about your trade setup, and if you feel angry or regretful if you didn't make the correct trading decision.
The first part is all about analysis. Some traders rely on technical analysis while others prefer fundamental analysis. A good number also make use of both, along with sentiment analysis. This part should contain your bias for the currencies and why, as well as the reasons for your entry and exit points. It should have a clear explanation as to why you predict the pair will behave a certain way.
The second major component focuses on risk management. This aspect is important since you might encounter losses if your trade idea is incorrect. After listing down the reasons why a currency pair will rally or sell off, you should also be ready to limit your losses in case it behaves differently. This component should also have the reasons for you to exit the trade early or cut losses. It should mention the technical levels at which your trade thesis is proven wrong and how much of your account are you willing to risk on the idea.
After this, you should discuss the time frame of your trade. This part will specify how many minutes, hours, or days you will be keeping your trade open or orders in. Of course this depends on what trading style you practice. Day traders typically mention until which trading session they will hold on to their trade while swing traders specify how many days or weeks they will keep it open and which market factors could lead to an early exit.
Lastly, you should include some trading psychology updates that can help you manage your emotions while your trade is open. Feel free to note if you are feeling confident or nervous about your trade setup, and if you feel angry or regretful if you didn't make the correct trading decision.
About the Author:
Learn more about forex trading. Stop by Airin Haynes' site where you can find out all about forex strategy and what it can do for you.
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