What is a Forex trading journal and how to create it?

Forex trading is a complex process. There are many variables to take into account when predicting a future price. And even if you manage to make a good prediction, managing trades to ensure profits is another challenge. There are so many trading styles and methods, yet very few can work for a certain individual. Every trader is unique and requires a trading method that fits his/her personality best. Traders go from error to error, blown account to blown account to finally find the methods that transition them into winning traders. Those who fail to improve, leave the business or keep wasting money.

Trading journal can drastically improve your trading performance, as it’s one of the best tools to learn from your own mistakes and grow. In this guide we’ll discuss the important steps you need to make to create a trading journal and we’ll show you the benefits of using it.

Keep in mind that every trader is unique and the trading journal should be created to satisfy the needs of different traders. The example we provide is general and will help most of the Forex traders to grasp the most important topics that need to be in their trading journal.

Benefits of keeping a fx trading journal

There are various benefits when using a journal to document your trades in Forex. The first and the most obvious one is that it helps you analyze your trading decisions and helps you improve your trading system.

The second benefit is that having a journal increases your accountability. For instance, let’s say you are going to make a trade and start writing down the reasons for entry in your journal, during the process, you realize that there are not many reasons to justify opening the position. Journal makes you more selective and your approach becomes more structured.

Trading journal helps you evaluate your trading strategies and show you which setups work and which ones fail over the long run.

A trading journal increases your understanding of certain trading instruments. For example, if you are trading EUR/USD, documenting your trades can make you more familiar with the pair’s movements.

Keeping a trade journal helps you manage your risks more effectively. When you know for certain that at the end of a trade you are going to make a report in your journal, you are more disciplined and follow your predetermined risk management rules.

Trading journal takes small amounts of time and gives back massive learning potential. Even if you do not see any uses of trading journals, you should give it a try. At least for a month to see the results yourself.

Trading journal can make you a more consistent trader. The more time you spend trading the more you will learn from your journal and get rid of bad habits such as overtrading, entering low-probability setups, and so on. Some mistakes are only visible after revision.

Trading journals remove pressure from the trader. Decision-making becomes more logical and robotic. When you document your trades and manage your risks properly, you improvise less and have less to worry about.

Creating a forex trading journal

Now let’s talk about how to create and use a trading journal in Forex trading. The journal should be simple to use, it shouldn’t be required to put too much data. There are numerous ways to set up a forex trading journal. The journal should be organized in a way to make analysis easier for you.

How do you feel?

The first topic the journal should cover is your emotions. Your feelings and state of being plays a large role in trading successfully. Let’f say you are not feeling well, feel tired or sick and decide to still trade, in case the results are losing money. And if you notice the pattern in your notebook, you will avoid trading during similar situations and save money. You might feel great or down after the previous trading day and these feelings can influence your results. By documenting and analyzing such data, you become better as a trader.

Trade performance

Trade performance information should show technical information such as: reasons for entering the trade, reasons for exit, stop loss and take profit targets. Risk to reward ratio. Risks in percentage points. And what the outcome was. In addition, you should also indicate time, date and trading session.

Market conditions

One more important information to save in your journal is data regarding the state of the market. Market conditions can be various. The price might be uptrending, downtrending or going sideways (ranging). What’s more, market reactions vary upon release of different market news. Documenting the state of the markets can reveal that you are trading trends well but fail to make money in a range, or vice versa. The data can also show you whether it’s profitable for you to trade during news announcements.

What did you do well and what mistakes did you make?

When trading, we all make mistakes and make good decisions. Documenting the strengths and weaknesses can help improve our results. For instance, let’s say you failed to enter a trade from a predetermined level and decided to join the trade from another level. Trade might result in profits but in your heart of hearts know that this was a mistake.

Sketch the pattern in your journal

This part might not be for everyone but for those who learn better from making sketches, this can be a perfect way to memorize patterns. Making a little sketch will take a small portion of your time. In return, you’ll be able to stop the similar trading opportunities better in the future.

Did you achieve your goals?

The final part is to measure our trading activity at the end of the day in relation to our goals. Every trader should have long term, medium term and short term goals. Of course it is impossible to have the desired outcome every day, but overall, our trading should be in line with our realistic goals. Short term goals should be to not lose money trading, and traders that are good at keeping their accounts from blowing up, make money overtime. The medium goal should be to increase your balance, the long term goal should be to stay in the business longer and increase your income by the power of compounding. Compounding is a way to make more money by reinvesting your profits.

Forex trading journal in excel and in a notebook

Trading journal can be made in a notebook and you can handwrite the information. Or you can save the information in your computer. Excel enables traders to better analyze technical data such as winning traders, losing trades, risks to reward ratios, etc. On the other hand, a notebook is best for making notes about how you felt before entering a trade, what mistakes you made in the process and what you did correctly.

Forex trading journal example

Date: 9.16.2022

I feel great, especially after the previous successful trading day. I had a good sleep and I’m feeling energetic.

Trading session: London/New York

Currency pair: EUR/USD

Market conditions:

Daily: range

Hourly: uptrend

Entered long from: 0.99605

Stop loss at: 0.99444

Take profit target: 0.99990

Risk to reward ratio: 1:2

Trading size: 100.000 EUR/1 lot

Reasons for entering the trade:

• The European Central Bank raised interest rates by 75 basis points the previous week to tackle soaring inflation. Recent inflation numbers show even higher inflation than it was expected and it’s expected ECB to raise the rates even more.
• The pair is traded at the resistance line and offers a good risk to reward ratio.

What did I do well and what mistakes did I make?

As I realized that I made a mistake, I decided to exit the trade.	I failed to enter a trade from the resistance level.
The price was already going in the desired direction. Therefore I used a trailing stop.	I’ve noticed that there were upcoming economic news events that could influence the price.
I didn’t take into account US inflation numbers.

Exit price: 0.99674

Did I achieve my goals?

Despite closing the trade in profit, I failed to achieve my goal by entering a poorly analyzed trade.

As you can see from this example of a forex trading journal, the trader realized own mistake and didn’t hesitate to close the trade even though it was going in the predicted direction. As paradoxical as it might sound, traders’ goal should not be to make money. A Trader’s goal should be to trade the right way and the money will follow. Trading the right way might be boring for some as it makes traders more selective. Trading opportunities are not always present and most of the time position traders spend on waiting. There are rare cases when all the evidence suggests that you should open a trade. Generally one indicator tells you to sell, another one tells you to buy, fundamental reasons, technicals, multiple time frames, etc. add to the complexity of trading. It’s the trader ‘s job to take into account all of the available information to make an informed decision.

The main takeaways

Trading journal is highly beneficial for traders of all shapes and sizes. Trading journals makes it much easier to learn from your mistakes. Traders learn about their strengths and weaknesses after analyzing a trading journal. Trading journals makes traders more disciplined, the level of accountability increases, risk management becomes better and decision making becomes much easier. You can use a notebook or excel in order to create a trading journal. The journal should include the date, trading session, trading pair, emotional state of a trader, trading conditions, the reasons for entering, the reasons for exit, what did a trader do well and what mistakes were made during the process, a sketch of the trade, and whether the long term goal was achieved or not.

It’s best if a trader regularly reviews own performance and re-evaluates what needs to be changed and what needs to be improved.

FAQs on Forex trading journal

What should be included in a Forex Trading journal?

Forex trading journal should include the information regarding your mental state prior to trading activity, technical information such as date and trading session, reasons for entering the trade, reasons for exit, stop loss and take profit targets, trading setup, outcome, risk to reward ratio, risk amount nominated in percentage points, market conditions, mistakes you made during the process, thinks you did the right way and whether you achieved your trading goals that day.

How do you create a trading journal and find your edge in the market?

Trading systems give you a trading edge. Journals help to effectively utilize that edge by learning from your own mistakes. You can maximize your trading edge by regularly analyzing your trading performance.

Do you need a trading journal?

In case you are planning to trade professionally and remain in the business long term, you definitely need a trading journal. A trading journal can help you learn from your mistakes. It can reveal your strengths and weaknesses. By analyzing your trading data, you can find trading conditions, instruments and setups that work best for you.

Do all traders need the same trading journal?

Trading journal is highly beneficial when it comes to learning from your own mistakes. However, not all of the traders are the same. For some, the journal might not be bringing any benefits but you never know unless you try. What’s more, every trader has a different style and there can be many different variations of trading journals. For instance, high frequency traders that conduct 100+ trades daily will not be able to write down data on each trade they make.