Trading Journal: Uses and Format

Introduction

When we learn from our mistakes, we become better versions of ourselves for the future. We cannot learn unless we remember our mistakes, and we cannot remember unless we keep a record of our activities. In trading, keeping a well-maintained document of our ventures keeps us from repeating our mistakes.

What is a Trading Journal?

A trading journal is a systematic, chronological record of every trade executed by a trader or investor. In other words, it is a diary focused exclusively on trades rather than general observations, incidents and experiences of life. In the crypto market, high volatility and comparatively high unpredictability make it all the more necessary. Although a trading journal is in the form of an excel spreadsheet, traders generally add text record either in the form of comments with the relevant cells or attach an optional MS Word or Google Doc file.

Why to Keep a Trading Journal

A trading journal can add quality to your trading career. You can easily decide which of your strategies proved profitable and which one flopped. The entry and exit points, when documented along with the analysis on the basis of which you opened the position, reveal substantially helpful information about your trades.

To Know Your Strengths and Weaknesses

You have some strengths as well as weaknesses. Your weaknesses can be found out not only from your failed trades but also from the trades in which you made emotional decisions. Keep in mind that successful professional traders do not classify their trades as successful and unsuccessful by looking at the profit and loss. They are of the view that their best trades are those in which they stuck to their planning and strategy till the very end of the trade.

To Become Well-Disciplined

If you want to remain disciplined and consistent, you must write a trading journal. An undisciplined trader opens a position whimsically. A failed trade can drive you to open a revenge trade in which you lose more money. Professional traders analyze the market for days and only then decide to trade. Swing and Trend traders usually take no more than 5 to 6 trades per year. The slogan of TradingView platform is very suggestive in this regard, Look First / Then Leap.

To Become Self-Accountable

Self-accountability is yet another benefit to be derived from keeping a trading journal. Although the point seems repetitive after we have discussed that a trading journal can help you spot your profitable trades and follow them, self-accountability is different because it helps you remain careful during a trade. You tend not to repeat the errors you made in your failed trades. The very idea of documenting your trade keeps you alert.

To Become Emotionally Mature

Finally, being disciplined, consistent and self-accountable, you tend to trade only when you are dead sure about the validity of your analysis. FOMO cannot take over you. You do not over trade. You do not make emotional decisions. You are not carried away by the words moon boys are doom callers on social media.

After learning all about the advantages of keeping a trading journal, let’s dive into the process of how to design one for yourself.

How to Create a Trading Journal

There are many ready-to-use formats available online, but you must know what constitutes a trading journal and how it can be designed. You need to make a new MS Excel sheet or a Google Sheet to enter the numerical data. But you also need to record the text to accompany the data. For this purpose, you have two options. You can right click on the cell for which you want to record your thoughts and then click comments. A small pop-up window lets you add text for the respective cell. The second option is to make a separate file on MS Word or Google Docs.

The following format can be taken as a point of reference if you don’t feel like designing a journal on your own.

The entries can be columns as well as rows.

Trade Metadata

• Trade ID: The ticker of the token you trade ($BTC, $ETH, $XRP, etc.)
• Date/Time (Entry).
• Date/Time (Exit)
• Exchange/Platform
• Trade Type (dropdown): Spot, Margin, Futures, Options, etc.
• Strategy/Trade Style (dropdown/text): Day, Swing, Scalping, Position (or custom strategy name). For example, indicate if it was a scalp or swing trade.
• Timeframe (text/dropdown): Chart timeframe or period of analysis (e.g. 5min, 1H, 4H, Daily).
• Account/Portfolio: The size of the account and the size of the position.

Entry and Exit Details

• Direction (dropdown): Long or Short.
• Entry Price (number): Price at which position was opened.
• Crypto Size (number)
• Entry Value (number): Total USD value of the entry
• Initial Stop-Loss (Price) (number): Stop-loss price placed at trade entry.
• Initial Stop-Loss (%) (number): Stop-loss as % of entry price
• Initial Take-Profit (Price) (number): Target price set at entry.
• Initial Take-Profit (%) (number): Take-profit as % of entry price.
• Exit Price (number)
• Fees/Commissions (number): Total fees paid (USD or native coin).
• Net P/L (USD) (number): Profit or loss in USD after fees.
• Risk-Reward Ratio (Planned) (number): Ratio of target profit to initial risk (entered vs stop).
• Risk-Reward Ratio (Actual) (number): Actual ratio achieved (profit vs stop distance).

Risk Management

• Position Size (% of Wallet) (number): Size of trade as % of total trading capital.
• Max Loss Allowed (%) (number): Maximum % of account risked if stop is hit.
• Leverage (number/text): Leverage used (if margin/futures).
• Risk per Trade (%) (number): Actual risk (stop-loss distance) as % of account.
• Position Outcome (dropdown): Hit TP / Hit SL / Manual Exit.

Of course, many additional columns can be added but it’s better to keep things simple so that you may easily revisit your trades and learn from them.

The text portion should contain the technical or fundamental analysis you performed before starting the trade. It is also advisable to record your emotional ups and downs throughout the trade.

Conclusion:

A trading journal is a useful record of your trades. It keeps you focused, disciplined, sensible and helps you become a professional trader. You can make a journal on your own or follow a ready-to-use format. The text portion of the trade is as important as the data, so do not forget to record your thoughts and emotions before, during and after the trade.