Maintaining a log of your trades on a regular basis is a quintessential habit of all successful traders. A trading journal or logbook records your trading performance, psychology and habits for future analysis. It enables you to track your performance, rate yourself as a trader and identify the areas where you need improvement. Let's make a note of few key performance metrics that can help you to enhance your trades. After all your journal is only as good as what you write in it:
- Trade Management: You need to have a plan ready on how you will manage your trade if it goes in your favour or works against you. You need to be focussed not just on your entries but also be clear-headed about the right time to make an exit. Thus, you should have your game-plan in place before you initiate your positions in order to avoid impulsive decisions and not risk wiping out your account. In that way you already know where your stop loss points, your profit targets, your exit points etc are.
- Holding Time: Knowing the duration for which you hold your trades will help you to ascertain the trading aspects and techniques that you are most comfortable with, whether you are a scalper, short-term or long-term investor. Knowing your approach enables you to tweak your habits and methodologies and maximises your rewards. Again, knowing the holding time of your wins and losses makes you take stock of whether you ended a trade before time or did not cut your losses quickly enough.
- Trading Errors and Misses: Committing trading errors and missing timely opportunities can prove to be an impediment as when the market goes against you. Making premature exits, not taking the correct position size, not taking valid setups etc are crucial points that you should make a note of so that you avoid repeating them in the future.
- Wins vs Losses: Tracking your winning and losing trades in different market sessions, trading environments and for varying lots are vital metrics to assess your performance. For instance, you might be residing in the Middle East but you find that you are performing better in the US sessions. Again, you may find out that you are more comfortable trading in a range bound market than in a market breakout situation and switch your strategies accordingly. Also position sizes matter as they tell you whether you have been able to make the most out of a favourable setup by increasing your lot size or curbed your losses by reducing your lots.
- Potential Trading Area: FX trading is not a gamble or happens by fluke. You need a good enough reason to enter a trading setup. You need to be confident that you will have a trading edge and risk/reward ratio is in your favour with huge chances of success. Always keep screenshots of your charts so that you can later on review whether your potential trading area was a golden opportunity or just a misleading signal. This will motivate you to always trade with a plan and be a stickler for discipline.
- Concluding Remarks: All said and done, it's ultimately you who is going to gain from your trading journal. So, you can customise it in a way that is most beneficial for you. The more detailed it is, the better. After all what distinguishes an average trader from an exceptional one is going that extra mile and doing whatever it takes to keep going.