How to Create a Forex Trading Journal to Reduce Losing Trades?

Introduction

A Forex trading journal is an essential tool that a trader cannot ignore in order to achieve sustainable growth in his trading system. If you want to be on the winning side, you should create and maintain a forex trading journal. How can you do this? Let’s find out!

Key Takeaways

  • Forex trading journal is a record of your trading activity.
  • The main aim of creating a trading journal is to monitor your trading activities and learn from mistakes.
  • If you forgot to input in your trading journals, you could consult your trading history performance.
  • You can create a detailed trading report from MT4 & MT5 history or MyFXbook.

Creating a forex trading journal is easy. You don’t need to have any complex spreadsheet knowledge. Traders often find it challenging to maintain journals regularly. If you are unaware of how to create and maintain a forex trading journal, the following section is for you. In the next section, we will detail the forex trading journal, including how it can boost your trading career.

What is Forex Trading Journal?

A forex trading journal is a record of your trading activity. When you enter a trade, you should note the entry, stop loss, and trading logic in the trading journal. Therefore, you can evaluate your trading performance after a while.

Moreover, you can alter your trading decision at any time, and you can write the logic behind the decision in the trading journal. Therefore, at the weekend, when the markets are closed, you would be able to see what your perfect trading was and what the mistakes were. Believe it or not, learning from mistakes is the most effective way to improve your trading psychology and build profitable Forex Trading Strategies.

The forex market is uncertain, and the only way to sustain here is to have strong trading psychology. Here, you have to identify your mistakes from trading journals and make sure that it does not happen again.

How keeping track of trades can help you improve your trading strategy?

We all know that the forex market is a place where people can buy and sell currencies. The most significant player in the forex market are central banks, financial institutes, insurance companies, hedge funds, and multinational companies. Moreover, retail traders can participate in this market through a forex broker. The most significant difference between retail traders and institutions is that in retail trading, the trading volume is very tiny compared to institutional trading.

Whether you are an institutional trader or a retail trader, you should focus on risk management. The forex market is the world’s biggest financial market, and if you invest millions of dollars, there is a risk of losing money.

Therefore, you should focus on improving your trades every day. And, if you don’t know what mistakes you made, you probably can’t do better next.

How to Create a Forex Trading Journal

A trading journal is an essential element that most successful traders follow. The creation and maintenance of a trading journal are straightforward. You can do it with a basic knowledge of Google Spreadsheets or Microsoft Excel.

Trading Journal Using Spreadsheet

You can easily create a spreadsheet using the Google Spreadsheet. If you have an account in Google, you should be able to access google drive. Later on from google drive, you can create a new sheet as shown in the image below:

As soon as you open the spreadsheet in your google drive, you would see a page with multiple boxes. It is very familiar with those who regularly use spreadsheets in their work, but it might be new for some people.

In the spreadsheet, you should use those blocks to input different information about your trading activity. Moreover, it is better if you write notes of your trading, including the logic and reason, so that you can see it at the weekend.

Among other information, you should include the entry type, currency pairs name, lot size, risk per trade, entry point, exit point, etc.

forex trading journal

In the above image, we can see how the trading journal looks like after implementing all information.

In the date section, you have to input the date when you have taken the trade so that after a week, you can determine the average holding time. However, the most crucial element is the risk per trade. When you open a trade, you should calculate the lot size based on your trading capital. For example, if your trading balance is $1000, and you found a trade setup with 20 pips stop loss, you can set the lot size at 0.10.

If you make a loss of 20 pips using 0.10 lot size, the loss amount would be 20$, 2% of your total balance of $1000. Risk management is the most critical element in forex trading, and if you ensure a better lot size implementation, you will be a successful trader even with a simple strategy.

What if you forgot to create a trading journal?

Don’t worry!

There are some ways to extract trading history so that you can input it into your trading journal.

Extract Trading Report from MT4

If you forgot to make a trading journal or want to backtest your performance, you could extract data from the MT4 and MT5. MT4 and MT5 are widely used trading platforms for retail traders. Therefore, it is the easiest way to get data and interpret performance.

In this section, we will see how to extract trading data from the MT4 platform. Therefore, you can see the trading terminal, and from the trading history:

  • Step 1- At first, Open your trading terminal and Press CTRL+T. Therefore, you can see the trading terminal from where you have to select the History Tab. You can see details of your trading history in the history tab, including the timing, lot size, trade types, and result.
  • Step 2- When you Right-click on your trading history tab, you can see some options for selecting the trading period. If you choose one month, you will have the trading history of the last one month. Moreover, you can manually select the timeframe using custom dates by inputting the starting and ending date.

In the below image, we can see how it looks like after right-clicking the trading history:

Trading Report from MT4

  • Step 3- After selecting the period, you should click on “save as detailed report.” Therefore, it will automatically create an HTML file that you can open with a web browser.

Trading Report from MT4

  • Step 4- Here, we can see the details of your trading report, including the maximum and absolute drawdown. Make sure that the lower drawdown and higher profitability is the ultimate target of a trader. Moreover, you can see the balance and profit graph, from where your balance’s performance is shown.

Although it is different from a traditional trading journal, you can use this method to see your trading performance. Remember that the only way to achieve the ultimate goal is to maintain consistency in forex trading.

Using Third-Party Tools to See Trading Performance

Suppose you want a more detailed report of your trading, including z-factor, probability, monthly gain, details drawdown report. In that case, you can use Myfxbook, where you have to open an account and connect your broker information.

In that case, you don’t have to include your trading password. You can do it by using the investor password only. After completing the process, you can see the interface like this:

In the image above, we can see your trades’ detailed performance, but we are not focusing on trading history more. Our main intention is to create a trading journal and see the performance.

So, how to utilize the Myfxbook with the trading journal?

When you create a portfolio with Myfxbook, you can see many reports from these; the following reports might be practical:

Risk Reward Ratio

In the risk-reward ratio, you can see how much risk you have taken for every reward. In every trading, if the risk is lower than the reward, your performance is good. But, if the reward is lower than the risk, you should modify your strategy:

Monthly Trading Performance

In the monthly performance, you can see how much gain you have achieved every month. Any achievement above 4% to 10% is good. However, excessive growth might indicate a risky strategy.

Average Holding Time

Average Holding Time shows how long you held a trade. If you are a day trader, all of your trading activity should be completed within the trading day. Therefore, it is often essential if you want to be a full-time trader.

Drawdown

Lastly, drawdown is the most important tool to justify a trading strategy. Alyas, make sure that your drawdown is below 10%. However, it might be different according to the strategy. But, understanding the drawdown and keeping it low is the ultimate target.

Final Thoughts

Before starting to trade, you should identify a trading strategy that matches your personality. Moreover, the strategy should be profitable with a strong history of providing good results.

If you are willing to trade as a career or you want to be a fund manager, you should keep your trading strategy perfect by using a trading journal. So the key take-outs from today’s lesson are-

  • Forex trading journal is a record of your trading activity.
  • The main aim of creating a trading journal is to monitor your trading activities and learn from mistakes.
  • If you forgot to input in your trading journals, you could see your trading history performance.
  • You can create a detailed trading report from MT4 history or myfxbook.
  • If you want to upgrade your trading to an institutional level, you should focus on achieving high profitability, drawdown, Risk: reward ratio, etc.

Overall, a good trading strategy and its implementation in the market are ideal for being a successful trader. So, always try to understand the market and improve your strategy by learning from mistakes.

 

Summary

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