Whether you are new to the world of trading or are already experienced in Forex investment, creating a trading journal can help you to improve your performance and make more money, more rapidly.
With a basic training in fundamental and technical analysis, it will become your best ally to help you make significant profits rapidly when trading in currencies or using CFDs for investing(or CFD trading) in other assets.
But how do you create and use a trading diary or journal?
A trading diary: What is it?
A trading diary is, as suggested by its name, a diary in which you note the details of your trading positions and their characteristics with the aim of analysing them and understanding which strategies function well and which are not worth pursuing.
You can create a trading diary using an Excel spreadsheet, or a Word document, or even a paper notepad.
The following elements should appear in your trading diary or journal, for every position:
- The date and time of the taking (and closing) of position
- The currency pair or asset concerned
- The amount or size of the asset
- The aim of the position, either buy or sell
- The orders placed (stop and/or limit)
- The time unit used on the charts
- The reasons you took this position
- The reason for closing the position
- The result of the transaction (profit or loss)
How to use a trading diary:
To correctly interpret your trading diary, the best way is to group together your profitable transactions and do the same for your loss making transactions, in this way you can determine the common points of each group.
For example, if you notice that the use of a technical indicator is often found in the loss making transactions this undoubtedly means that it is not pertinent, and the contrary for an indicator that you tend to find in your profitable transactions. You may also notice that certain assets are more profitable than others or that certain times are more auspicious than others for profitable trades.
Once you have established the connections between your strategies and the results obtained, you can direct your future trades more knowledgably to optimise your chances of making profits. By testing different combinations using the factors identified above you can gradually perfect your positions and maximise your profits by easily implementing winning strategies.
Finally, keeping a trading journal will assist you to become a high performance trader more rapidly than any other type of training although it is necessary to master the elements of fundamental and technical analysis.
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