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:
First is the actual trade analysis itself. While some traders prefer either pure technical or pure fundamental analysis, you can opt to include both in your trade plan and even combine market sentiment analysis. Covering all the bases could improve your probability of winning after all. This part should have an explanation on why you predict the currencies will rally or drop.
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.
The third part is all about the time frame. How long do you plan to hold on to your trade? This can depend on the type of trading style you have. If you're a day trader, you should specify until what trading session you plan to keep your trade open or if you will have any reason to close early. If you're a swing trader, you can determine how many days or weeks you plan to keep your trade open or if there are any market changes that could lead you to exit before that time frame.
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.
First is the actual trade analysis itself. While some traders prefer either pure technical or pure fundamental analysis, you can opt to include both in your trade plan and even combine market sentiment analysis. Covering all the bases could improve your probability of winning after all. This part should have an explanation on why you predict the currencies will rally or drop.
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.
The third part is all about the time frame. How long do you plan to hold on to your trade? This can depend on the type of trading style you have. If you're a day trader, you should specify until what trading session you plan to keep your trade open or if you will have any reason to close early. If you're a swing trader, you can determine how many days or weeks you plan to keep your trade open or if there are any market changes that could lead you to exit before that time frame.
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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