Right direction, wrong tradeScore the read apart from the result.
A win or loss column hides a lot. Record whether your direction and your target were right, and your journal shows whether to work on your analysis, your entries or your targets.
The columns every trade starts with
This module goes through the journal column by column, so that every trade you log can teach you something. It starts with a few simple columns.
The trade number counts your trades 1, 2, 3 and so on, so you, or anyone reviewing your journal, always know which trade is meant. The pair is what you traded: a currency pair such as USD/JPY or AUD/USD, or another market such as gold or the S&P 500. The date is the day of your analysis, when you added the trade idea.
Then come the direction, long if you bought and short if you sold, and the status: open, closed, pending or missed. A win or loss column says whether the trade ended in profit, at a loss or at breakeven, with no profit and no loss. Most journals stop there, and that hides a lot.
| Column | What you enter |
|---|---|
| Trade number | 1, 2, 3 and so on |
| Pair | USD/JPY, AUD/USD, gold, S&P 500 |
| Date | The day of your analysis |
| Direction | Long or short |
| Direction correct? | Yes or no, whatever the result |
| Target correct? | Yes or no |
| Status | Open, closed, pending or missed |
| Win or loss | Win, loss or breakeven |
Was the direction correct?
The execution lessons made the point that a right direction can still lose. This column is how you check that on your own trades. It sits next to the direction and asks a single question: did you read where the market was going? Profit doesn’t come into it.
Say your trade runs 100 pips into profit, then reverses and closes at a loss: your direction was still correct. Or you call the move perfectly but never get in, so the trade is marked as missed: direction still correct. Or you get stopped out, and then price moves exactly the way you said: correct again.
In all 3 cases your bias, your view on direction, was fine. What went wrong sat elsewhere: in the entry, the stop placement or the handling of the trade.
Was the target correct?
Then there is the take profit column, where you note whether your target was right. If it got hit, it was right. But if price ran 150 pips your way and turned around before your target at 200, the target was wrong.
A single wrong target is noise. A run of them tells you the way you set targets needs work. The lesson on MFE later in this module shows how to measure how far your trades really go.
Read the columns together
Put these columns together and you know where to look. If the direction is often wrong, work on your analysis. If the direction is right but trades still lose, look at your entries and your stops. If targets keep getting missed, rethink how you set them.
And keep the status honest. Missed trades count too, because they show what your read was worth even when you never got in. A journal that lists only the trades you took shows half the picture.
Filling in the 2 columns
Wait until the move has played out before you fill in the direction column. A stop-out followed by the move you expected still counts as correct.
Log it anyway, with the direction you expected and the status missed. Once the move has played out, it shows what your read was worth.
Mistakes to avoid
- Marking the direction by the result. A trade that ran 100 pips your way and then closed at a loss still had the right direction.
- Working on your analysis when the problem is your entries, stops or targets. The 2 extra columns tell you which one it is.
In short
- Next to long or short, record whether the direction was correct: a trade that ran 100 pips your way and then lost, a missed move and a stop-out before the move all had the right direction.
- Record whether the target was right: if price ran 150 pips your way and turned before a 200-pip target, the way you set targets needs work.
- Read the columns together: direction often wrong means analysis, right direction with losses means entries and stops, missed targets mean target setting.
Key terms
- Long and short
- Long means you buy and profit if price rises. Short means you sell and profit if price falls.
- Pip
- The smallest standard price step in a currency pair. For most pairs it is the fourth decimal (0.0001), for yen pairs the second (0.01).
- Bias
- Your expected direction for a market over a time frame: bullish, bearish or neutral. A bias is a starting point, not an entry signal.
- Take-profit
- An order that closes your trade at a set price to lock in the gain.
- Stop-loss
- An order that closes your trade at a set price to limit the loss. It belongs where your idea is proven wrong, not at a random distance.