If you want to make money out of trading foreign currencies, then it is important for you to have all the tools necessary in order to achieve this goal. The things that you will need will depend on your trading style. Some traders will need several different types of tools, while there are those who will use just one or two. There is one important tool that you should always have and that is a forex trading journal. If you are really serious about becoming a profitable trader, then it is important that you set one up and then use it all the time when you trade.
What Is It?
A forex trading journal is a notebook, spreadsheet, or other record where you keep details about each trade that you make. These details should include the decision-making or strategy behind the trades. You will also want to note down every detail of the trade, including the date, what currency pair was involved, direction of proposed movement, entry price, planned exit price, the trade size, pips target, pips returned, profit or loss, and the relevant trading session. You can also put in a screen shot of the trade if you want to for future reference.
Why Keep This?
Maintaining a forex trading journal means that you aren't reliant on your memory to recall the trades that have worked for you and those that went the other way. Trading foreign exchange requires a commitment to on-going learning and you can learn as much from your own experiences as you can from any other source. You will give yourself the best chance to succeed by analyzing the various elements of your good and bad trade decisions. This will allow you to emulate profitable trades and, at the same time, avoid the trades that cost you money.
You will find that a forex trading journal provides benefits in many other ways including the way that it will make you think and analyze your activities. You might be the only one that ever reads it but it still will change the way that you approach future trade decisions. Seeing your trades in black and white can be a sobering experience and adds a dash of reality to what can just seem like paper transactions. You'll immediately find that it will make you think more professionally about what it really takes to make profits over a prolonged period. Keeping records should assist in restricting the temptation to take trades just for the sake of it or in the search for action.
Learn From Your Mistakes
When you are trading in the world of foreign currencies, making mistakes is unavoidable. Sooner or later, you will slip up. Do not be afraid of this as it can teach you a valuable lesson. In fact, most of the successful traders found their edge through trial and error. Profits won't come without making some genuine effort to educate yourself as much as possible. Eventually, you will have to learn from your mistakes. And what better way to do that than with a forex trading journal. There is a reason that most successful and respected traders have one and use it constantly. Big financial institutions, banks and companies trading in the market also do the same thing. This really should be the first tool that you think of.
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