Stopping Your Loses in Trading… Why you Need a Trading Journal.

I have often seen people who wonder why they keep losing money in the forex market despite the huge effort they are doing, the ton of money the have spent in forex education and all the promises they were made once about how “profitable” trading the forex market is and how they could easily rip thousand and thousand of dollars from the market each day. The problem, as I have come to see it during the past year, seems to be related with the fact that there is lack of “effective learning” from people wanting to learn how to trade.

What do I mean by “effective learning” ? Well, you know what they say, to err is human. Nothing could be more truthful. Learning forex trading is nothing different than learning any other thing you would learn in life. At the beginning as we do with anything we learn, we are bound to make some mistakes. The problem with most new traders is that there seems to be a neglect to learn from the mistakes that are being made in the past.

I usually feel that new traders work in a “move on” fashion. It is something like “this does not work, now I am gonna try this”, when the next thing does not work, they move into the next thing, and so and so on until the trader is so tired and so disappointed with forex trading that he or she decides to give up trading after everything. What went wrong ? The problem is that the trader never “stopped” and learned from the mistakes learned in the past. Why ? I think that it is because stopping and looking at a wiped out 1000 USD account is not easy for anyone. It reminds you that you lost and you feel like a loser. The first step to stop your loses in the forex market is to understand why they have happened. Through making mistakes and learning why those mistakes were made we become better at anything, including trading.

How can be do this ? By starting a trading journal. What is a trading journal ? A trading journal is a document in which you write everything that relates to your forex trading. Your trading journal will work in a per trade basis and it will give you very important information about both yourself and your mistakes, both logical and emotional. A trading journal should always include the following information before the trade :

  • Time and date of the trade
  • Why you decided to take that trade, how much you decided to trade and why you wanted to trade that much.
  • When you are planning to exit the trade, what are the possible outcomes of the trade ?
  • Where do you expect price to go ? why ?
and after the trade :
  • Why did the trade fail/succeed ?
  • Was the outcome contemplated in the pretrade entry (losing or winning) ?
  • If the outcome was different ? Why was it different ? What did you forget on your analysis ?
After you do this analysis for a few hundred trades you will start to have a very good impression at why your analysis is right or wrong, where you are failing and where you can expect to improve. Does your support and resistance analysis fail ? are you using indicators incorrectly ? Do you neglect to take into account fundamental data ? All these questions can be easily answered by one easy tool, a trading journal.

Is it easy to have a trading journal ? No, it is not, it is not even easy to have a personal journal ! Having a journal requires you to spend the time and the dedication necessary to put your analysis into words and save it within a document. However you will see that the information contained in your journal is precious as it is in fact the best way in which you can learn from your mistakes . Are you too lazy to have a trading journal ? Well, then you should think that someone will not and that someone will have an edge on you and that is the last thing you want to happen in forex trading.

Finally if you are interested in trading and profiting from the forex market using long term stable profitable automated trading systems and you would like to design and build them yourself (or trade an already free available program) please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

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