Okay, enough with the doom and gloom. Let’s just say that most expert traders keep a trading journal and review their trades consistently.
And you know what most expert forex traders are? Even though some won’t admit it…
They are BALLERS! They got the money. They got the cars. They got the clothes. They got the ice.
We might be exaggerating, but only by a little bit.
Besides helping you in your journey to baller status, there are other personal benefits to journaling…
- Defining yourself and your situation in life
- Keeping progress of your goals you’ve set in your Trading Plan
- Clarifying your weaknesses and strengths in your ability to perform and handle the pressure
- Providing a way to self-coach and improve on your own
That last bullet point is probably the most crucial as most every new visitor that comes through BabyPips.com doesn’t walk down the path of your average Wall Street trader.
Not everyone gets their Master’s degree or Ph.D. in mathematics, computer science, financial engineering, or whatever, then moves on to a big financial institution or a proprietary trading firm.
We’re all “average Joes” learning from home or where ever we can find an internet connection. This means we learn how to trade ALL from scratch and develop our own methods.
Thankfully, because of the internet and forex trading forums, we can learn and connect with other like-minded individuals, both new and experienced, to shorten that learning curve.
Even so, most of us lack access to that crucial asset to learning any task or skill quickly and efficiently: a coach or mentor.
A coach or mentor is there to guide you every step of the way, pointing out your mistakes, recognizing the things that went well, and keeping you disciplined and accountable for your performance.
A mentor of any caliber is hard to come by for most new traders, so we have to the next best thing: mentoring yourself with a trading journal.
A well-kept, detailed forex trading journal can be almost as good as having a coach watching you over your shoulder and helping you learn those lessons.
A trading journal isn’t just about writing in the prices of your entry and exit and the time you executed the trade.
The trading journal is also about refining your methods and mastering your own psychology.
To be even more specific, it is about your individual emotional psychology before, during, and after the trade.
For example, your trading method says to buy USD/JPY.
But your gut feeling tells you that the trade is NOT going to work…
So you remind yourself, “I don’t think this trade is going to work. BUT I have to follow my trading plan so I’ll take it.”
During the middle of your trade, the price comes 3 pips away from your stop loss and you’re thinking, “OMG. This trade isn’t looking so good.
I knew it! Why didn’t I listen to myself? I’m such an idiot! I’m about to lose here! I’ll just exit now.”
You then decide to close your trade.
A few moments later the price shoots to your original profit target. Had you stayed in the trade you would have made a gazillion pips!
This is why you should write a trading journal. This is a classic case that probably happens to too many traders.
We fail to stay in the trade, we fail to trade the plan, and most importantly, we fail to distance our emotions from our trading!
If you keep trading like that and you don’t keep a trading journal, the balance on your trading account will become a big fat ZERO before you realize what you’re doing wrong.
Heck, keeping a journal may seem boring and time-consuming, but a forex trader can often learn more from reviewing their own trades, than from reading a book or even attending a seminar.
Over time, your journal will grow with you and, if you keep detailed records on everything about your forex trading (from psychological issues, the market environment, system tweaks, etc), it will help you recognize important lessons like:
- What news event should be avoided?
- How much more or less you need to risk per trade?
- When you should start trading and stop watching “Keeping Up with the Kardashians”?
Also, how disciplined you are with your trading journal will be a great predictor of your overall forex trading success down the road.
