For example, if you risked all of your money on "black" at the roulette table and doubled your money, All of a sudden this isn't a very attractive investment at all. If it goes wrong once, you're bust As a trader , your aim is to make a lot more money in return than you put on the table in the first place. This gives you a nice cushion to soften the fall each time you're wrong.
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If you can prove to others that you're taking a small risk, and generating a steady return It compounds itself, whether or not you seek additional investment. And yes, the only way to do this is with a well-kept journal that tracks the right information. Any trading journal that is just a log of your trades, and how you were 'feeling' at the time when entering is not going to do you any justice in the long-run.
Before writing this article I did a bit of research for myself what was out there already with regards, and I was not impressed. In fact, It's what actually drove me to create the content you're reading right now. I've broken this down into 3 red-flags Generally speaking, if the trading journal is focusing too much on "non-measurable" things, it's not going to be any use to you in the future. Also, if it's measuring the wrong things it's also going to be useless.
The "time-frame" you're trading useless measurement. When you enter a trade, the time-frame you looked at doesn't impact the trades performance in the slightest.
Time will always be time, you should be looking at the assets change in price over time. If you narrow yourself to only look at a few time-frames, your trading approach is heavily flawed. The "setup" with "screenshots of the trading chart" waste of time. Your strategy shouldn't change trade-by-trade, so this doesn't need to be tracked if you know what you're doing.
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In fact, if you're tracking this on a trade-by-trade basis, you're probably already losing money as you don't have a proven edge! Your stop-loss is already measured using your volatility measurements. Tracking this number doesn't really have any future value, as your stop-loss will change based upon volatility as time goes on. The Entry Price and Exit Price of trades already tracked in your brokerage.
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Tracking irrelevant details, like entry price and exit price, is of no use to you to determine where to improve. If you find yourself journaling in this way, let me show you what you really need to be doing if you're looking to scale your skills as a trader A good trading trading journal will have everything you need as a trader all in one place.
This must include the following:. A watchlist - to build up a wide selection of trades before you actually trade them. Trade log - to log all of the returns on each trade you've actually entered to determine the Kelly criterion we'll discuss more later why this is important! Performance - a complete deconstruction of your portfolio performance, from alpha right the way to success rates But Marcus, how do I build all of these sheets?
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The answer: Microsoft excel, or google sheets. I've already built the ideal trading journal , and I'll show you exactly how to use it step-by-step below You'll be happy to know I've done all the hard work for you and uploaded the exact forex trading journal template file I use every week. You can download it right here. This spreadsheet is something I couldn't live without and is everything you will ever need to manage your trades and portfolio.
Let's break down the trading journal spreadsheet, step-by-step so you know exactly how it works. We'll start with the watchlist dashboard The very first spreadsheet in the trading journal excel file is the watchlist sheet.
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This is where you can store all of your trade ideas whilst they're cooking up ready for lift off! A forex watchlist is a place where you list all of your trade ideas before you actually enter them. This list is something you're always adding to as market conditions change and new information comes available. Generally this should updated at least once per week.
Populating your watchlist is not as easy as "randomly" looking at currencies online, and picking the ones you think look cool The real way is to actually look at what's going on in the economy, and calculating which currencies actually have a sensible reason to trade. By sensible, I'm referring to the idea: is there any valid reason to think we should buy this particular currency based on real economic report data?! Simply put, you need to work out whether currency is 'strong' or 'weak' based upon how well it's economy is performing.
And guess what, you don't need to be an 'economist' or have a PHD in econometrics to get this done properly! The watchlist spreadsheet is split into 2 main sections:. Let's start of with understanding what to include in your Economic Analysis. There are 5 key things you need to consider in this section to get a full understanding of what is driving currency value and price:. Date - Input the date you add your economic analysis to the spreadsheet. This is important so you know exactly when your analysis is valid.
Without a date we can't tell if that analysis has expired. This will help keep it nice and organised so its easy to find ideal currencies to trade quickly. Macro Currency Strength - Input the macro currency score on each economy. You can either create these scores yourself by analysing each individual economic report, and combining them to determine if each currency is weak or strong This will tell you straight away which currency you want to buy, and which you want to sell based on fundamentals.
This will tell you exactly what hedge funds are buying and selling and therefore if there is enough 'fuel' for the price of the currency to actually trend in the direction you want it to. Examples may include trade wars, or even global pandemics! This will tell you if global politics supports your analysis. When you put it all together, it will look something like this:. Straight away, from the above example we can quickly see:.
For the United States:. This translates as, we want to buy the U. For Europe:. This translates as, we want to sell the Euro, and the interest rate reduction supports this idea. This allows you to get an accurate reading of the currency strength, based upon economic data Once you've updated this section, you know which currencies you want to 'combine' together and trade.
As mentioned before we want to:. This is where we start to add to our "watchlist" section Remember, your watchlist is a list all of your trade ideas before you actually enter them. These are trades in a 'rough' format and are nothing more than ideas at this point. No money is at risk.
This list is generated by combining strong currencies with weak ones, which your economic analysis should answer. Think of your watchlist as the result after filtering which currencies you want to trade You may notice in the above diagram a cool looking traffic light. This is the final stage between your "ideas" and a "live trade".
It looks like this on your trading journal excel file:. Forex Pair - This is combination of 1 strong currency, and 1 weak currency creating a currency pairing. Relative Score - This is derived from comparing the interest rate differentials, GDP gross domestic product differentials, imports and exports analysis and stock market returns.
This is something that you can learn how to create in the currency trading masterclass. If it agrees with the economic analysis, i. TA 1,2,3 etc Generally these can be technical analysis features you consider 'useful' to supplement your trading decision. The way these traffic lights work is as follows:.