By Nathan Ferguson
A trading journal is the track recorder of all the trading activity performed by a trader. A trading journal helps the trader in keeping a check on all the market activities, charting the rates and creating a fundamental analysis of market trends. Be it a professional trader or a beginner, a trading journal helps in maximizing the profit out of the investments made by tracking all the record of investments made and helping in correcting the flaws that led to loss in the past.
Here is a comprehensive guide that explains the purpose and usage of a trading journal in a better way to gain maximum profit in trading.
What is a Trading Journal?
A trading journal is used to keep the track record of all the trades carried out in the past. It contains the details of each and every trade one makes and the reason why he trades a particular entity. It also carries the detailed analysis of the market trends and the factors that affected the market value and the investment procedure.
The crypto investors can keep a check over the logic and performance of every trade. The trading journal could also be used for planning a trade and to jot down all essential requirements needed to proceed for it. Analyzing the market trends, one can calculate the potential requirement of a particular trade using a trading journal.
To create a trading journal, one does not need to spend a lot of amount. This could be done easily by using softwares such as Spreadsheet and Excel. One can draft the future strategies and plans using them and create a trading journal for future assistance.
The trading journal would help repeating the same mistakes in the future and also train the investors to respond differently to the same market situations. It would help them overcome the flaws to decrease the probability of potential loss.
Process of Creating a Trading Journal
Creating a trading journal is a simple process that could be done by using just the Microsoft Excel or Google Spreadsheets. One could also use the Microsoft Word or Google Documents to write down the details of the trade. To trade effectively, the beginners could also use the templates that are available on the official websites of trading platforms such as Binance or CoinBase to draft a trading plan to initiate trading.
One could follow the following steps to create a trading journal.
- Choose between a book or a spreadsheet to record
To create a journal, first of all choose between a book or a spreadsheet. A spreadsheet is however preferred for this purpose as it is feasible and easy to use. Also, the spreadsheet contains many built-in functions that could help the users in better analysis.
- Jot down the important factors to record
Then note down the important factors that are required for initiating the trade process. These are the factors that one should know and research about before initiating the trade. These factors may include the reason of trade, the conviction or the cost required for carrying out the trade.
- Record the happening at the spot
Write down everything immediately it happens in the journal in order to look over it in future. Also note down the stop loss and take profit value in the journal to remember it in future. Note down even the small and minor detail as soon as they happen before it skips from the mind.
- Review the data after a certain period
Then set a time period after which, compile the data noted in the journal properly and have a review of the trade that happened in that period to keep a check and balance of the profit and loss. This calculation can help one to improve the trading strategies in future and trade better.
Important Factors for Creating a Trading Journal
To create a trading plan that contains all the necessary particulars required for trade, one should make sure that the journal contains all the required columns that mention the necessary factors affecting the trading procedure. While creating a trading journal, one should make sure that all these factors are present in the document.
- Date and Time of Trade
To initiate a trade process, write down the time that would be most suitable for trading an entity. As in crypto market, every product is traded at a particular time that is specified by the owner or firm trading the instrument. Therefore, it is important to note when one could trade a particular entity. Midday is considered one of the most suitable times for trading.
- Instrument and Platform
It is very important to mention the instrument or tool that one aims to trade for. Moreover, one should also make a choice of the platform that he will choose to trade and mention it in the trading journal.
- Size of the Trade
Before starting the trade, one should know about the margin he has to spend over the trade and how much risk he could potentially afford before investing in a particular object, especially the beginners.
- Direction of Trade
One should also decide that whether he wants to trade for a long term or short term. This means that if he wants to invest for a long term, he will get more exposure in the financial market and come to know about the ups and downs of the crypto values. Similarly, the person can sell his assets when the value of that particular asset hikes and results in potential profit.
In case of short-term trade, the investor could sell or buy his products at any time according to current market rates.
- Entry and Exit Price
In a trading journal, one also has to keep a record of the entry and exit price associated with a particular trade. Entry price is the cost with which one initiates the trade procedure. And exit price is marked by the cost with which one ends the trade process.
The traders should set a stop loss value in the trading journal to remind them when the rate at which they aim to sell a product has reached. This will help them in avoiding any sort of loss in trading.
- Profit and Loss
To trade better every time, one should jot down the potential loss and gain value obtained in every trade to avoid the same mistakes in future. It helps one to learn from the past experiences and not to repeat them again.
- Other Notes
One should also write down any trade related queries and strategies in the trading journal to avoid any confusion in the future related to them.
Using a Trading Journal
To create an extraordinary journal without any flaws is practically not possible for anyone. One should only create the columns in the journal that are mandatory and should avoid writing down any extra information. Unnecessary information could make a journal complex and could make it impossible for the trader to compile the information at the end.
Make a habit of writing down the reason behind every decision and the factors that stimulated you to act in a particular way. This would avoid any confusion in the future. One should also consider that whether the information jotted down in the journal is authentic or contain some error. Try penning down the actual credential every time to calculate the exact profit or loss at the end.
In case of any query or confusion, one could easily get through it by looking for the issue after going through the trading journal once.
Organize the spreadsheets properly to keep a proper record of all the daily activities. Update the information every time when anything happens. This would help you to record trace the issue easily in case of any failure. Go through the details after a trade is over to note down any missing information too.
One should go through the trade log everyday to create an analysis of the current exposure in the financial market and to draft improved strategies. This could also help in making one’s trading profile better and create better opportunities in future.
Give a thorough reading to the details while going through the trading journal to avoid any mistake in calculations. This would help the traders to trade logically and technically keeping in view the market trends and fluctuations. It helps the investors improve with time and create a better trading portfolio by drafting smart strategies every time.
Advantages of Using a Trade Journal
Setting up a trade journal proves to be a lot fruitful for the traders to trade in an unbiased and true essence. Recording all the pros and cons of trading process and the necessary requirements help the trader to keep an eye over the real flaws and strengths in trade ever time. It helps one to take a decision truly based on logics instead of being emotionally biased by anyone.
There are many benefits of organizing a trading journal, some of which are mentioned below.
- Determines the Required Trading Path
Going through the trading journal determines the trading potential of the trader and if he can carry out a particular trade for a longer time. Some traders find short-term trade beneficial as they can immediately get the results and are safe from long term investments.
However, some traders find it comfortable to trade in long term as they could get ample time to analyze the changing trends and act accordingly.
- Recognizes One’s Strengths and Weaknesses
Adding up information in the journal on regular basis would result in creating certain patterns in the trading journals. This would help the trader to identify his strength and weak points and take and action according to it.
- Authentic Source of Information
Trading experience adds to the exposure of the trader and makes him learn a certain new thing every time. As the markets evolve continuously, new and better strategies are drafted by the traders to tackle the market conditions and maximize profit.
A trader needs to record all this information in the journal and keep on educating himself about it. This is one of the ways to earn sound profit in the financial market.
- Record Of Exact Calculations
As a trading journal is organized to keep a track of the activities and statistics for personal benefits, the journal helps in recording the exact and authentic calculations at the end of trade. It gives you an exact lay out if one should proceed with the trade or not.
As the journal is created for one’s own self, there is no particular described way of maintaining it. One could do that as he feels like. However, maintaining a journal demands dedication and time.
- Teaches Discipline
As mentioned earlier, setting up a journal is easier but keeping it maintained is a demanding process. One should be consistent in updating the information in the journal. It makes one dedicated and disciplined.
- Improves Risk Management Skills
Trading anything anywhere in the world involves risk. Keeping the record of all the activities in the trade journal, improves one’s risk management skills. It helps one to look upon the factor that could lead to potential loss in the trade and control them by taking required steps. In this way, one can improve the profit and capital earned through trade.
- Saves Time
Keeping an exact record of everything in the trade journal helps in saving one’s time too. In case of any confusion, one can track out the issue just by going through the details in the journal. It also helps in solving the issues related to expenditure if one finds any problem while dealing.
- Trains to Overcome Emotions
Trading Psychology suggests that one cannot detach emotions from the trading process completely. However, stating the facts and figures in the trading journal surely helps one to carry out trade based on facts rather than being biased with emotions and surroundings. This could refrain a trader from making false decisions by looking upon the mistakes in the past.
Disadvantages of Using a Trade Journal
- Might Be Costly
Maintaining a trade journal properly might prove to be expensive for some traders especially the beginners. Many of the effective trade journals ask for money to utilize their platform.
- Inability to Analyze It
Recording all the information in the trade journal is of no use if one does not know how to properly analyze it. If the information updated in the journal does not facilitate one is making the correct trading decisions in the future, then there is no purpose of creating a trade journal and spending energy and time over it.
Some Leading Trading Journal Templates
Being a beginner if one is facing the difficulty in deciding from where to start for creating a trade journal, one can look upon at any of the following platforms mentioned below.
- Microsoft Excel
The most authentic and trustworthy tool for creating a trading journal is Microsoft Excel. It has in-built functions that help the traders jot down all the important information over the spreadsheet provided. The users can also download any spreadsheet template from the internet too.
Excel is a user-friendly platform that could easily be understood by the beginners and all its financial tools and function facilitate the users to calculate and note down information properly.
- Trading Journal Spreadsheet
Similar to the Microsoft Excel, it also offers specific columns and rows for the users to record the data. It provides the options of results, identifiers and tracking codes that help to analyze and determine the market trends and conditions. This trading journal is not available free of cost, and one has to pay around $150 to buy it initially.
- TradeVue
It is among one of the oldest known trading journal platforms in the financial market. TradeVeu offers multiple techniques and tools for its users that would help them analyze the market rates properly. Though the platform has not updated its features since long time but still, it offers charting techniques, risk management and detailed notes along with privacy features to the users.
- Coin Market Manager
It is also of the most commonly used platform because of the advanced features and active access to the financial markets. It provides the opportunity to track the market statistics, therefore the customers could easily have an idea about the market rates and values and trade the cryptocurrencies accordingly.
- Trademetria
It is also a convenient software available to create a trading journal. This software contains all the basic functions and tools required for calculations and charting down the data. It offers many features such as multiple metrics, backtesting and connecting to a number of platforms and brokers.
Conclusion
A trading journal is a thoughtful method to keep a record of all the ups and downs occurring in a trade. It proves useful for all types of traders, especially facilitating the beginners by making them keep a track of every step taken and to learn continuously from the experiences. It helps the traders draft advanced strategies and techniques that would consequently help them earn maximum capital.