One technique to keep abreast of market trends is to monitor price fluctuations using crypto charts. But there are other ways to become a great trader besides following technical or fundamental studies and other market indicators. You would be prevented from making irrational choices regarding your financial investments, for instance, by following a disciplined method that includes keeping a trading journal.
What Is A Trading Journal?
A trading journal provides an overview of your trading experience, which also records your trades and their results. It enables the trader to find the rationale for choosing or avoiding a trading strategy. Therefore, it is not a brokerage account statement.
A trading journal helps keep track of how each trading strategy has performed. Here, the trader prepares every successive trade with a systematic approach. No matter how the market behaves, having a trading log will enable you to evaluate the potential of a specific business accurately.
In addition, starting a trading journal won’t cost you much money. Excel or spreadsheets would work just fine, and it would help you develop discipline and stick to a set of trading techniques. If you can’t always adhere to your trading technique, you should log trade entries in your journal. Noticing when things go wrong and why they did so can help you determine how to avoid reacting similarly to comparable scenarios in future trades.
Benefits Of A Trading Journal
One of the numerous advantages of keeping a trading journal is that it enables you to assess the advantages and disadvantages of your trading approach. You become more objective when you do so.
One can choose, for instance, whether to start reinvesting cryptocurrency profit or whether cryptocurrency derivatives are the most excellent fit for their portfolio. The final decision is free of any mistakes in judgment and incredible views, which helps shield you from an unintentional influence on your investing goals.
Whether a day trader or a swing trader, keeping a trading record will help you stay on top of your trading plan; thereby, trading with real money is simple to get sidetracked by gains. Following a string of successful transactions, you may begin to employ shoddy entry points or buy more cryptocurrency than average. A trading strategy keeps you focused and lessens your propensity to make hasty, possibly hazardous trades.
Furthermore, one can capitalise on what works and move their focus to a current performance by keeping a log and tracking and implementing reproducible patterns. It allows traders to make a consistent profit while also preventing them from wasting time and resources on failed ideas, thus assisting them in becoming lucrative traders.
If a trader monitors their trading strategies and builds confidence in their abilities, they can begin trading in the productive zone. Using a trading journal to reflect on performance can be a massive incentive for traders, and a successful track record is always a great confidence builder. Successful traders, on the other hand, can learn from their errors and turn unsuccessful trading tactics into successful ones.
How To Create A Trading Journal
You can create a trading journal using any spreadsheet application, such as Microsoft Excel or Google Sheets, to record your actual trades and a written document, such as Microsoft Word or Google Docs, to add your comments.
The following are the columns you must add to your spreadsheet when creating a trading journal:
Add the financial item you have traded, along with your preferred platform; for instance, sell Bitcoin (BTC) on Prestmit.
2. Date and Time
Include any time- and date-specific elements that enable you to execute a specific trade. For instance, at 4:00 pm, when Bitcoin (BTC) was available at a lower price, I bought $5,000 worth of BTC during a midday trading pause.
3. Trade Direction (Long/Short)
To reevaluate your trading approach, keep track of your short or long holdings. An investor who holds long positions gains exposure to cryptocurrencies with the anticipation that their prices will rise in the future, enabling the investor to sell the crypto for a profit later.
In contrast, investors who sell cryptocurrency “short” borrow it and then sell it at the current market rate. The investor buys the asset when its value drops, returns the borrowed cryptocurrency, and retains the difference as profit.
4. Entry Price, Exit Price, And Price Loss
The price at which you start the trade is known as the entry price. The price at which you exit a business is known as the exit price. To automatically submit a sell order, when and if the lowest price at which the investor is willing to sell an asset is achieved, investors can set up a stop-loss order in trading. In your trading journal, note all of these metrics.
5. Trade Size
Kindly note your “tradable amount” in the notebook so you may understand how much risk you incur concerning a given trade. For instance, if your tradable amount is $20,000 and you swing trade on BTC with $17,000, your risk per trade is 70% of your tradable amount.
6. Profit And Loss
It is essential to keep the outcome of your transaction, either profit or loss, to understand what best works for you and its opposite.
To reflect on the reasons behind your decision to use a specific trading size or technique, add your ideas and notes in Microsoft Word or Google Docs. Always remember that qualitative aspects are just as crucial as quantitative ones.
How To Use A Trading Journal
Use your written paper to include the justifications for adopting particular viewpoints. To prevent having a negative effect on your trading success, it is also crucial to note the indicators you notice while keeping watch on the market. You’ll also debate the validity of a particular trade notion you used in your written piece. You can better understand each trade proposal’s benefits and drawbacks by turning it inside out and backwards.
Then go to your spreadsheet and start recording your daily trading actions there. To effectively gauge your success or failure, keep everything current and organised. Finally, make an effort to document trade information upon the completion of the trade to prevent missing any critical descriptions.
Additionally, it is a wise habit to review your transaction log spreadsheet each day to gauge your present exposure level and potential trading portfolio expansion. How, though, should you examine your trade log spreadsheet? While evaluating your current deals, carefully review the written document’s documents and the data in your spreadsheet.
Looking back at a trading history and identifying avoiding themes might help traders make their approaches performance-driven rather than affected by their emotions or behaviour. As a trader, you maintain a trading journal when you can assess your trades, identify areas for development, and generally improve as a trader by keeping a trading log.