The forex market is very potential for retail traders to make money online, but it is associated with a lot of risks. As a result, most of the retail traders make a consistent loss due to not having a reliable trade management system. However, you can create a Forex trading journal to eliminate most of the risks. Do you want to know how? Let’s have a look!
17 September 2020 | AtoZ Markets – The forex market is a unique place to buy and sell currency pairs. Although most of the participants in the forex market are big financial giants, it is an excellent source of earning money for retail traders. Another benefit of the forex market is that it is open 24/5. Therefore, it is convenient for traders to trade from anywhere and anytime. It makes forex trading very exciting among retail traders. Many successful retail traders only do only forex trading for their living. However, most of the retail traders lose money in the forex market. The main reason for losing their money is not having an appropriate system.
The movement of price in the forex market is unpredictable. No one can tell where the price of the EURUSD would move in the next coming days. Therefore, the market is associated with a risk that is very difficult to eliminate. Consequently, traders must minimize the risk as low as possible. There are many techniques to reduce the risk but to remain profitable and consistent, and it is obvious to have a forex trading journal.
What is the Trading Journal?
A trading journal is a tracking record of a trader’s trading activity. It is vital because traders should know how accurately they are implementing the trading strategy. As we saw earlier, the forex market is associated with a lot of risks and uncertainty. Therefore, there is a fear that a trader would lose his money. On the other hand, traders become greedy when they make a lot of money within a short period.
Fear and greed are a pervasive element in a forex market that influences traders to take wrong trading decisions. The trading journal keeps the tracks of previous trading activities so that readers can see how they have made trading decisions.
Now let’s see how you can make a trading journal.
How to Create a Forex Trading Journal
A trading journal is an essential element in forex trading that most of the professional traders follow. Hence, creating a trading journal does not need much qualification. You can make it using Microsoft Excel or google sheet.
Trading Journal Using Spreadsheet
To create a trading journal using a spreadsheet, you should have a little knowledge about the worksheet. Therefore, you need to use the blocks of a worksheet for different information relating to the trading activity. For example, the forex spreadsheet trading journal should include the date of taking a trade, the lot size of a trade, the entry and exit point, and the result. The whole process might be annoying to you, but it is imperative if you want to judge yourself.
Look at the image above; the date would represent that time of year trading entry. The date is significant as it is essential to justify your performance later on. In the next station, you can write the currency pair name and your position, whether it is a buy or sell. The following section is significant as it is an element of risk management. It would help if you did not take more than 2% risk per trade, and you need to mention how much percentage of risk you have received on your trade. In the next section, you can write your entry and exit with the result when the trade completes. In the end, you can write the monetary value of your trading result, whether it is a profit or loss.
After completing a week or a month, you need to review your trading activity. Therefore, you can measure how you are improving in your trading by watching your spreadsheet trading journal. Moreover, if you are making a loss, you can determine what the reason behind the loss was. If you find the reason, you can work with it to ensure that it will not happen again.
Extract Trading Report from MT4
If you don’t want to take the hassle of the spreadsheet, you can use the MT4 trading report directly from your trading platform. As we know, MT4 is widely used trading for the platform in the world most of the traders use this platform, and they are familiar with it. Therefore, identifying your trading activity from the MT4 or MT5 trading platform is straightforward. In that case, you have to follow some simple step:
- Step 1- Open a trading terminal and press CTRL+T to open the trading terminal. It will appear just below the trading chart. Therefore, move to the ‘history’ tab to see your previous trading history.
- Step 2- Right-click on your trading history tab and select the timeframe you are looking for to see the activity. You can use all history, the last three months, the last month, or a custom period.
- Step 3- After selecting the period, click to the “save as detailed report”. Therefore, it will automatically create an HTML file that you can open with a web browser.
- Step 4- In the last part of your MT4 trading report, you can see a detailed statistic about your trading performance. It includes the drawdown, number of trades, % of winning trade, % of loss trades.
You can use this MT4 report to evaluate your trading performance. In that case, you can save your trading report every week to see how you are improving every week.
As a forex trader, you need to establish a trading system that matches with your personality. Moreover, it would help if you practiced a lot to get familiar with the system. Every trading system has some weaknesses, and you have to identify it to mitigate the overall loss.
Therefore, before choosing a trading strategy, you need to perform proper backtesting your system before implementing it in your chart. Later on, when you trade with real money, you would face fear and greed that does not happen with the demo account. To know how much psychological pressure you are facing, you need to see your trading result. In this way, the forex trading journal becomes very important to a forex trader.
If you want to build your trading career in forex trading or you want to manage other people’s funds, you need to mitigate your stress and psychological pressures. The forex trading journal is the best way to evaluate yourself. Therefore, besides having a profitable trading strategy and a reliable money management system, the forex trading journal is essential.
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