Key Questions Answered
When learning anything new, a great way to track your progress is to keep a journal. This way you can see what you have learnt and how your skills have evolved. Additionally, and perhaps more importantly, you can remind yourself of your failures and learn from your mistakes. This concept applies not only to life and learning new skills, but also to business and trading. That is why every good trader keeps a trading journal.
What Is a Trading Journal?
A trading journal is a diary where a trader will note down their trading decisions and trades. This will be accompanied by their analysis, additional information (such as graphs and current trends), and what led them to make their final investment. Another aspect will be how much the trader decides to invest or sell, and why. This kind of information, and the outcomes of the trades, are key to helping traders grow and learn from their successes and mistakes.
How To Keep a Trading Journal
Journaling can be complex and messy, with many people starting and stopping often, or repeatedly restarting new journals because they feel their first one is becoming too confusing. It is important to recognize that committing to journaling, and writing in it often, will lead to the journaling process becoming easier and more structured over time. Keeping one consistent journal will record a linear transformation of your trading journey, and so be of more use to you than many half-started journals.
With that in mind, there are various steps that can be taken to create structure and an easy-to-follow narrative in your trading journal. This is particularly helpful when trading in such a complex field as crypto.
Trading journals can help improve your crypto trading skills in the following ways:
- Learn how to analyze and upgrade the trading strategies you use: It would be foolish to use the same trading strategy for every trade as market conditions and trade situations are variable. For this reason, it’s important to have and understand a variety of trading strategies. Keeping these written down in a trading journal will not only be a good reminder of what worked or didn’t work in similar trading situations, but it will also show the trader their progression. Forgetting the outcomes of your trades and the reasons for those outcomes means that you miss out on great learning opportunities. As you develop as a trader, you’ll ultimately invest more, but if you missed those learning opportunities, then you’ll be running unnecessary and bigger risks.
- Avoid overtrading: Having too many positions open at one time can mean that you lose focus on the individual trades and lose money as a consequence. By keeping note of how many trades you are doing a day, you can ensure that you are staying focused and not overtrading. This will also help you better analyze the market as you will have a smaller number of things to focus on.
- Learn how to analyze your trading and account history: By tracking what you traded, what the market was doing at the time, what size your trade was, and what time you bought and sold, among other things, you can learn about yourself as a trader. Seeing the information on your most successful trades will help you determine factors such as what times your best trades usually happen and if you work better with a calm or volatile market. By tracking this information, you will begin to see patterns emerging which you can utilize and learn from. Not only that, but this will also save you time and money, as you will not be chasing trades that don’t work for you.
- Keep additional trading notes to give you an edge over other traders: Every trader develops their own style and knows which factors do or don’t work for them. By noting down additional information, such as the reasons that you took or didn’t take a trading decision, you will grow as a trader. It may be that you noted down a factor for a similar past situation that you hadn’t considered this time, or you may revisit it and decide to challenge your previous thought process. In any given circumstance, having access to your previous way of dealing with a similar situation is beneficial. Moreover, by consistently reviewing these scenarios, you will become more familiar with many different cases and thus become better at thinking on your feet in a trading environment.
How To Write a Trading Journal
Trading journals can be kept as physical copies, in a book or diary, or online, as an excel spreadsheet or document for example. Depending on the information noted down, remember that you may want to keep the information confidential and in a safe place.
The key components to include in a crypto trading journal are as follows:
- Date and time
- Buy and sell times
- Trading pairs (for example bitcoin (BTC) and Ethereum (ETH))
- Entry price
- Stop loss price
- Take profit price
- Closing price
- Position size
- Strategy used
- Trade type
- Profit or loss, and how much
- Additional notes
Crypto Traders Spreadsheets — What Do They Look Like?
In addition to a trading journal, many crypto and day traders will use a spreadsheet to track their trades, make analyses for their strategies, and maintain their portfolios. These spreadsheets will not include so much written information as financial information, including what the prices are doing, how much they have invested, and what their gains or losses are. A huge amount of information will go into these spreadsheets and so organization is paramount. A typical crypto trader spreadsheet might be laid out as follows:
- Portfolio tab: Here, the trader can keep track of exactly what assets they have.
- The first things to list are the fiat currency that you are operating in, and how many coins or tokens you have listed — whether invested in or simply watching.
- These coins will then be listed down the sheet, with their BTC equivalent value, rank, circulating supply, volume over a 24 h period, market cap, market dominance, and price fluctuation over certain periods (1h, 24 h, 7 days, for example). This information can all be automatically updated using excel formulas that link it to sites such as com or coinmarketcap.com.
- Below this, a trader should list the crypto wallets they are using, the amount of each coin they have and their values, which can be calculated and refreshed with a formula. The advantage of using an excel spreadsheet is that both this and the above list of coins can go in one grid, thereby keeping it tidy, and can be continuously refreshed using excel formulas.
- Charts and graphs can also be listed in the portfolio tab, thereby showing a neat representation of current holdings, portfolio history, and overall trading gains and losses. These can be shown in a variety of ways and can include percentages or figures.
- Purchase history tab: This is a fairly self-explanatory tab that helps the trader see the bigger picture. It can include:
- How long you have been trading for — show the date of your first crypto purchase.
- What coins you have bought and sold, when and how much.
- The cumulative value of your purchases.
- The price increases or drops over time.
- Charts showing your purchase history — this will show you when you were spending the mostor the least, which can help you analyze your past performance and profits.
- It can be helpful to include some price history graphs of some of the major coins. If there are too many, it can be particularly useful to include BTC’s price history, as the most stable coin, so as to compare your other purchases against BTC’s value at the time.
- Log sheet: This is a more detailed version of your portfolio and is kept on a separate tab so as to not overload your portfolio tab, which will make it overwhelming and confusing. Here, a trader will include the likes of:
- Total holdings
- Purchase amount (coins)
- Gain (value)
- Gain (%)
- Trading gain/loss
- Exchange rates: This is particularly valuable for currency traders but can also be helpful for crypto traders who trade with multiple fiat currencies or simply trade with a stable fiat currency that is not their own (the USD for example).
In addition to this rundown, trading spreadsheets can include anything that the trader deems relevant. A tab on BTC for example, including everything that they might need to know to try and predict other crypto patterns, as all cryptocurrencies tend to follow BTC. These spreadsheets are designed to save time, and help the trader keep track of their assets and make informed predictions and trades. They work extremely well in conjunction with a trading journal, keeping key information tidy and providing the knowledge that will lead to better trading maturity.
As with anything, be it your business, life, or trading, tracking and analyzing your progress can help you develop your skills and avoid high-risk situations. After all, nobody can excel without first being equipped with the right skills and information. Crypto trading journals allow for crypto traders to note down their trades in a detailed way that then allows them to reflect on the Dos and Don’ts. They can refine their skillset, learn new strategies, analyze the market and what to do to take advantage of what is happening, and become better traders as a result. Not only that, but by doing this consistently, they can identify the patterns of their success, which will save them money and time as they will know what and when works best for them. Finally, trading journals will also equip each trader with the knowledge to find their own style of trading as they note down the additional things that they have found helpful during their journey.
Crypto trading spreadsheets are a key partner to the trading journal. By employing these constantly updated and very detailed graphs, lists, and grids, the trader can access the information they need to make informed decisions as quickly as possible, which is very important in a volatile market such as cryptocurrency. Moreover, they allow the trader to keep track of their portfolio and keep the journal from becoming too cluttered.
A lacking or poorly kept trading spreadsheet or journal can lead to confusion and subsequently poor trading decisions. For this reason, it is important to keep both of them up to date in order to evolve and mature as a cryptocurrency trader.