How A Forex Trading Journal Can Answer Every Trading Question You Have

How A Forex Trading Journal Can Answer Every Trading Question You Have

OK – maybe not every question.

For example –

If your question is: “what price is EURUSD going to be at noon on Monday?” – ok – you got me. A forex trading journal can’t answer a question like that.

But what about questions like:

  • What’s the best forex trading strategy I should use?
  • What timeframe should I trade?
  • How much money will I make next year?

Or what about the really awkward questions.

Questions like:

  • Is this forex trading lark even worth it?
  • Should I give up forex trading completely?

A journal can really help you see what’s going on beneath the surface of your trading.

Granted, it might not be able to provide the exact answers to these questions. But it will give you some damn good clues.

Let’s see how.

1. What’s the best forex trading strategy I should use?

Traders ask this question all the time, especially new ones.

First things first: here’s what you don’t do.

You don’t spend 6 months going around asking strangers on the internet what’s the best strategy to use.

That’ll get you nowhere.

Instead, spend those 6 months trading a few strategies you like the look of. Ones that fit in with your lifestyle. Ones that make sense to you.

And record everything about them in your trading diary.

After a few months, at least one strategy will jump out at you and show some promise. It might not be perfect, but it will provide a basis to build on.

If nothing jumps out at you – repeat the process until something does.

2. What Timeframe Should I Trade?

Same answer.

Some random dude on the internet doesn’t know what timeframe you should use.

There are people who make fortunes looking at nothing lower than a weekly chart.

And there are also scalping ninjas who are raking it in on tick charts.

Which one are you? Don’t ask me, I don’t know.

The only way to find out is to try a few different timeframes yourself.

Record your stats from the trades.

In a few months, you’ll be able to see the timeframes that work for you, and the timeframes you should steer clear of.

3. How Do I Develop An Edge In Trading?

An edge is everything in trading.

It’s so important that I made a video course about price action but ended up talking about edges and positive expectancy for most of it.

If you can acquire, maintain, and exploit your your edge, you’re sorted.

If you can’t develop that edge, it doesn’t what system or fancy indicator you’re using – you’re sunk.

An edge comes from the relationship between 3 metrics:

  • Average winner size
  • Average loser size
  • Strike rate

Now of course you could just try to keep a running count of these stats in your head (hint: it won’t happen).

You could just forget about these stats and hope they magically take care of themselves (hint: that won’t happen either).

Or you could just do the sensible thing – just record them in your forex trading diary.

WOWS FOREX TRADING JOURNAL-min4. How Do I Develop Confidence As A Trader?

No, you don’t do what Matthew McConaughey did in The Wolf Of Wall Street.

The answer is a lot more boring than that.

You develop confidence by just keeping your trading journal.

  • Trading confidence comes from knowing roughly what to expect.
  • Trading confidence comes from knowing your statistics inside out.
  • Trading confidence comes from knowing what the worst case scenario is likely to be.

And where do you get all that information from?

Yep – it should be all there in black and white.

In your forex trading journal.

5. How Much Money Will I Make Next Year From Forex Trading?

This is a tricky one.

The SEC has made it difficult to answer this.

Here’s the problem.

Financial regulators plaster everything nowadays with the disclaimer: past performance is not indicative of future results.

It’s a valid warning for many investors.

But when it comes to your own trading performance, it doesn’t really apply.

Put it this way:

You have a choice. You have to invest your life savings with one of two fund managers.

  • Fund Manager A has a good 3 year record, sensible drawdown, and has made decent returns.
  • Fund Manager B has never had a single profitable month. And he’s blown up three accounts in the last year.

Who do you put your money with?

Are we seriously suggesting that past performance has no bearing on future results?

I’m not saying Fund Manager A can’t blow up and Fund Manager B can’t turn it around.

I’m saying it’s more likely that Fund Manager A will stay sensible and Fund Manager B will keep trading like a idiot.

If your trading diary is showing a good year last year – next year is more likely to be good too.

If your trading diary shows bust accounts and crazy drawdowns – you’ve got some work to do.

6. Can I Get A Job As A Professional Forex Trader?

Two men walk into a financial institution.

Both want a job as a trader.

  • Man A has heard that traders make lots of money. He has a maths degree and has watched Wolf of Wall Street 6 times (the original, thank you very much, not that Matthew McConaughey rubbish).
  • Man B has a three 3 year trading record. Two of the years he has made a profit, and in Year 3 he’s made a small loss. He is disciplined and has a good Sharpe ratio. He has studied his results from Year 3 and thinks he knows what went wrong. He has a plan to get back on track in Year 4.

Who’s more plausible?

The difference is in the journal.

7. Is This Trading Lark Even Worth It?

Ok – now we’re getting into the serious stuff.

I think most sensible traders know that it’s going to take a while to get the hang of trading.

You’re not going to crack open MT4 for the first time and start banging out $1,000 days consistently.

Most accept that it’s going to take time to learn the ropes. There are going to be sunk costs in terms of time and trading capital. But you are learning a skill. A skill that will help you recoup that investment and make a return over time.

The problem is that you’re not making any $$$$, right? If you counted up the hours invested, you’d have made more by working in McDonalds.

So what’s the key thing to measure?

It’s not money.

It’s progress.

As long as you are making progress, as long as you are improving – it’s worth it.

And progress is not just about profit and loss. It’ a lot more nuanced than that. You need to break that down further. Really analyse your trading.

  • When you do that, you can see what your strengths are and what your weaknesses are.
  • You can figure out what needs to be worked on.
  • You can do less of what doesn’t work and more of what does.

And here’s the crucial thing: you can map out what your performance will look like in the future, if those changes are made. That’s what will keep you going.

You can’t do any of that properly unless – you guessed it – you keep your trading journal.

8. Should I Give Up Forex Trading?

Here’s the deal.

Trading isn’t for everyone.

Some people would be happier if they just gave it up, there’s no doubt about that.

If you don’t enjoy your trading on the whole, you shouldn’t be spending hours, days and weeks of your limited time on it.

People rarely become really good at something they don’t enjoy doing.

There are also other people who love trading, but aren’t seeing the results they want. They have considered giving up, but are afraid they haven’t given it a real honest try. They might be close to a break-through, and giving up now would mean throwing all those hours spent already down the toilet.

Here’s what to do.

Commit to diligently completing a trading journal for the next 6 months. Track everything.

If, at the end of 6 months, you can’t see any green shoots, any sign of progress, any promise – you can leave trading knowing that you gave it a good shot.

Some people don’t have the discipline to keep a diary for 6 months. If you are one of those people, I’m sorry to be blunt, but you have to question whether you have the discipline to succeed in the trading world.


So Which Trading Journal Should You Use?

First things first – you don’t need to do this by hand anymore.

The wonders of modern technology means you can have software do all of the recording for you.

All you have to do is interpret the results.

If you fancy taking this trading journal thing seriously, there are a few options you can consider:

  • Excel – it’s free of course, which is always a bonus. But unless you’re a real whizz at it, you will have to enter your trades manually. And to get the most out of data analysis and modelling functionality, you have to be really, really good at it. The short answer is – if you are an Excel expert already, go knock yourself out. If you’re not an Excel expert, there are other options that will suit you better.
  • Myfxbook – This is another popular one. It links up to your broker and pulls all your data automatically for you, so you don’t need to upload your trades manually. It’s free too (well, “supported by advertising” – who knows what that means these days). Myfxbook used to be the real leader in this space. Their analytical tools were really good when they came out – but it’s feels a little dated now, compared to other rivals.
  • The best option out there now – That we know of anyway, is Edgewonk. Until recently, you had to manually enter your trades into Edgewonk. But since they made it easy to upload your statements from MT4, it’s been the forex trading journal to go for. Granted, it’s not free. But the modelling is world-class and it’s literally designed to help you develop your edge – hence the name.

Believe it or not – this is a first.

Before now, at Forex Useful we’ve never encouraged readers to buy a product that wasn’t our own.

So before you ask – yes – we do get a small commission from the guys at Edgewonk if you buy through our link.

But we really believe in the benefits of the product and think it can make a real difference to people’s trading.

And that’s what we’re here to do.

You can take it for a free trial first anyway – so if you don’t like it, you’ll have lost nothing.

Start 2017 with a proper approach to your journal!


This update is based on my analysis on my charting package. It may differ to yours as it can be affected by time, market movements, charting packages and broker prices. I accept no liability for loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on any information in this report or analysis.