How to keep a crypto trading journal

In Trading

Trading crypto can be overwhelming when you’re getting started, but you learn through experience. Making mistakes while trading can be costly. That’s why you need to be able to learn effectively. One way to do this is to keep a crypto trading journal.

A trading journal isn’t popular or glamorous, but it’s an important tool to help you progress. Without it, you’ll be guessing.

If you keep a trading journal, you’ll have a detailed record of where you entered a trade and why you did it. Your journal should be set out exactly how you think is best. Most importantly, just be consistent with your format.

In this article, we look at some of the information you could include in your trading journal.

Time and date

Include the time when you entered a trade, the length of time you expect it to stay open and, once closed, the time of closure.

Setup screenshot

Trading platforms like Liquid provide a lot of information that will useful for record-keeping in a trading journal, such as time and date, R, entry, trend and so on.

Direction

It's commonly agreed that trading trends offer one of the fastest opportunities to make money. Identify the longer term trend when you enter your trade, jot it down.

Setup/reason for entry

This can be anything from chart patterns to a change in fundamentals. This will help you understand when you go over your journal and it also makes you really think your trades through when you enter them.

Risk factors

Risk is a whole topic on its own and arguably the most important. Good risk management goes a long way. Lots of variables affect your risk, so keep track of them all. Here are some examples:

Size

Keep tabs on your position size. It’s a huge part of your risk strategy.

According to popular trader Cryptocred, size must be determined in advance by risk per trade and distance to stop loss from entry. Here’s an equation for you:

Position size = (total equity x risk) / distance to stop loss from entry

Risk vs reward

This is the amount of risk you are exposed to, compared to what you stand to gain. A simple example: if your stop loss is 30 USD below entry price, whereas your price target is 150 USD above entry, then your risk reward ratio is 150/30 = 5R

Risk:reward is commonly referred to as R in short form and closely tied to win rate. Win rate is the expression of a trader’s winning trades over time in percentage form. For instance, if you've made 15 trades in a week and nine are winning trades then your win rate is 9/15 x 100 = 60%

If you have a higher R, then you can be in profit with a lower win rate.

Entry price

Used to calculate your risk and reward.

Stop loss price

A stop loss an order used to limit losses on a trade. You must keep track of where you put it. If you change it, make a note of why.

Take profit price

Just like a stop loss, take profit is a key level that you must track.

Entry method

Keep a record of how you entered the trade. Did you use a limit order or a market order, for example?

Did you ladder orders or enter all in one go?

Did I stick to my strategy?

Different trading strategies work best for different people. It's important to learn them and find which works best for you, then stick to that. This means having the patience to sit out until you find setups that fit into your criteria.

Trade management notes

One cannot be a complete trader without proper trade management. In fact, to be more profitable over the longer term, a trader should focus at least as much or more on trade management as they do on interpreting charts.

Trade management covers maintenance of the trade depending on how price action develops. Traders cannot be too biased. Instead, they have to respond to market action. Keep track of how you manage your trade as the market develops in this section.

Results: (equity % and R)

Equity refers to the total size of your account whereas R is the risk/reward ratio that has been covered above.

You have to record your performance after each trading day. Are there any patterns in your winning or losing trades?

Emotions

One of the biggest lessons to learn in trading is trading psychology. Make a note of your emotional disposition while conducting a trade.

Feedback/notes

Can be anything from "a good trading day" to how you managed your emotions despite loss. In the case of a loss, what could have been the reason? This helps you avoid repeating the mistake.

Takeaway

A trading journal will massively help your trading skills. Over time, you can review your performance to see what worked, what didn’t and how you could improve.

The more thorough you are in going back to first principles, the easier it is to record and view your track record. As with most things, the challenge is in the discipline of sticking to a tried-and-tested system.

Good luck, trader.

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This content is not financial advice and should not form the basis of any financial investment decisions nor be seen as a recommendation to buy or sell any good or product. Trading cryptocurrency is complex and comes with a high risk of losing money, particularly if you trade on leverage. You should carefully consider whether trading cryptocurrencies is right for you and take the time to learn how trading works and decide how much money you are prepared to lose.

WRITTEN BY

Liquid

Providing liquidity for the crypto economy.