A trader’s education never ceases. Once you know the mechanics of trading, the rest is up to the trader. The main priority in Forex should not be to make huge profits. Rather the focus should be on plugging every leak in the strategy that causes the trader to lose money. Many times a trader might make the same mistake over and again and never realize it, thus the importance of maintaining a trade journal. Writing your thoughts out help a trader put things into perspective. It also gives a trader an opportunity to re-think through their decisions. If you find that what you have been working on has stopped working, you have an opportunity to look back at the journal to see if it was the market that changed or the trader.

Allow me to give you an example of  journal entries.

August 13, 2007

SELL GBP/USD @2.2000

Thank God the weekend if over. The kids had me running around from place to place and my two days off didn’t feel much like days off at all. Steve called and said that he is closing on his house. Great news. Might have a new spot for the weekly poker game with the boys.

Anywho…

I had a look at the charts today and what did I see? A nice huge bearish pattern was looking dead at me. Price broke the bottom of the Bollinger Band and the very next candle kept on rolling down. After price bumped off the 21 MA like it did, I had a suspicion it was going to keep going down. I put in my market order just as price was crossing 2.2000. Time to make some sweet profits.

August 14, 2007

Dammit! Price bounced back up. I sat there at the computer for hours waiting for it to come back down. But it never did. I should have pulled profit when I had the chance. I could be celebrating with a 100-pip victory now. I knew I should have placed a stop loss and profit target. Sometimes I get overconfident in a trade. I see a pattern develop and just think it will keep going my way.

I read on the forum today that you should always move your stop to break even when you have a sufficient chance. Makes enough sense. The trade is still a bit in the positive so I suppose I have nothing to lose by moving the stop to even. I’m going to go ahead and put in a 20 pip trailing stop loss as well. That way if it does head back down I’ll catch a piece of something in the end.

August 15, 2007

Well, I got stopped out. Managed to yank 28 pips out of the market as price moved back to my trailed stop. Looking back, I’m going to make sure I always have a stoploss. That kinda freaked me out yesterday watching price move against my profits like it did. Same with take profit. Had I just set a respectable profit target, I would not have to concern myself with the stresses I put myself through.

Can you see the value in keeping a trading journal? Our fictional trader here was able to assess his emotions better by realizing what had went wrong. By writing it out he was able to focus. Do you see in the beginning of the week how his mind was on everything else other than trading? It’s good write outside influences as well as that can play a part of one’s trading psychology. Perhaps that losing streak is indirectly being caused by problems at work. Or you tend to have better successes after you had some good downtime.

The FX Trading Network has provided an area in the Forum for traders to keep an active journal. Keeping a public journal can also give traders an opportunity to hear from experienced traders. Odds are what you are going through, someone else has been and they know how to remedy it.

No related posts.