Tracking price movements using charts is one way to monitor market trends. However, technical or fundamental analysis and following other market metrics are not the only way to become a successful trader. For example, a disciplined approach that includes keeping a trading journal would protect you from making emotional decisions regarding your financial investments.
In this article, we will discuss the benefits of a business journal and how to create and use it.
What is a business journal?
A trade log records your trades and their results and provides an overview of your trading experience. However, it is not a brokerage account statement where you can find the reasons behind choosing or avoiding a trading strategy.
All trades executed in sequence are structured using strategies, and a trade journal can be a record of the success of each trading strategy. Regardless of how the market is doing, you can adequately assess the potential of a particular trade by using a trading diary.
Moreover, you don’t need to spend a lot to create a business journal. Spreadsheets or Excel would suffice, and it would help you become disciplined and follow consistent business practices. You should record trading entries in your journal if you cannot always stick to your trading strategy. You can figure out how to avoid reacting to similar situations in the same way in future transactions by noticing when things go wrong and why they did. Why is it important to keep a business journal? Keep reading to find out!
What are the benefits of a business journal?
Keeping a trading journal provides many benefits, including helping you assess the strengths and weaknesses of your trading strategy. It helps you make unbiased decisions. For example, one can decide if crypto derivatives are the best fit for their portfolio or if you should start reinvesting crypto profits. The final decision is free from errors of judgment and any irrational beliefs, helping to protect you from unconsciously influencing your investment goals.
Keeping a trade log helps you stay on track with your trading strategy, whether you’re a day trader or a swing trader. Getting distracted by winnings while trading for real money happens easily. After a run of profitable trades, you can start using sloppy entry points or acquire more cryptocurrency than usual. A trading plan helps you stay on target and reduces your tendency to make rash, potentially risky trades.
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One can start a business in the manufacturing area if they manage their business plans and develop confidence in their skills. Consulting a trading journal can be a huge motivator for traders to reflect on how well they’ve done, and having a successful track record is always a great confidence booster. On the other hand, unsuccessful traders can learn from their mistakes and transform unproductive trading strategies into profitable ones.
Furthermore, one can also tap into what is effective and focus their attention on current performance by using their journal to track and implement repeatable patterns. This allows traders to generate consistent profits and prevents them from wasting time and resources on failed ideas, ultimately helping them become profitable traders.
How to create a business diary?
Any spreadsheet program like Microsoft Excel or Google Sheets where you record your actual transactions and a written document like Microsoft Word or Google Docs to add your thoughts can be used to create a business journal. You can also start using free trading diary templates like the one provided by Binance to distinguish between avoidable and profitable trading strategies.
Regardless of which template you use, make sure you have all the necessary columns related to each transaction. In addition, you can take screenshots of the transaction tables you have followed and link them to the relevant transactions on the paper to make the diary more efficient.
Let’s understand which columns you should add to a spreadsheet when creating a business journal:
Add the financial instrument you have traded, including the chosen platform; for example, Bitcoin (BTC) on Coinbase.
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Date and time
Add any time and date specific element that allows you to engage in a specific transaction. For example, I bought Cardano (ADA), worth $1,000, during a mid-day trading dip when ADA was available at a lower price at 1:00 PM. During the lull, crypto values often drop because most of the high-profile news has already been announced by noon.
Business strategy (long/short)
Record your short or long positions to re-evaluate your trading strategy. By taking long positions, an investor gains exposure to cryptocurrencies in the hope that prices will rise in the future, allowing them to be sold at a profit.
On the other hand, when investors sell cryptocurrency “short”, they borrow it and sell it at the prevailing market rate. When the value of the asset falls, the investor buys it at a discount, pays back the cryptocurrency he borrowed and keeps the difference as profit.
Entry price, exit price and stop loss
The entry price is the price at which you are starting a trade. The exit price is the value at which you exit this trade. Investors can set a stop-trade order to automatically place a sell order when and if the lowest price at which they are willing to sell an asset is reached. Record all these measurements in your trading journal.
Size of transaction
To understand how much risk you are taking on a particular trade, please record your ‘trade amount’ in the journal. For example, you risk 70% of your tradable amount in one trade if your tradable amount is $200 and you swing trade on ADA with $170.
Profit and loss
It’s important to record the results of your trades, either profit or loss, to understand what works best for you and what doesn’t.
As mentioned, add your thoughts/comments in Microsoft Word or Google Docs to reflect why you chose a particular trade size or strategy. Remember that qualitative factors are just as important as quantitative ones.
How to use a business journal
A flawless business journal template is a myth. Every trader should review the appropriate metrics they need or should avoid using while adding trades in their personal trading journals. A trade journal needs to be customized in light of this.
Use your written document to add reasons behind taking specific positions. It is also necessary to write down the indicators you see on the market watch to avoid having a negative effect on your trading. You will also argue whether or not the particular business concept you implemented is solid in your written document. Turning your business proposals inside out will help you see the pros and cons of each.
Then turn to your spreadsheet, where you need to record your daily trading activities. Remember to keep it updated and organized to accurately measure your success or failure. Finally, try to record transaction details after the transaction is completed to avoid missing important descriptions.
Furthermore, it is a good practice to review your trade journal chart daily to estimate your current level of exposure and the potential to grow your trade portfolio. But how to revise your trading journal? Carefully read through the documents on the written document and the entries in your spreadsheet while evaluating your current business.
As a result, traders can have their techniques performance driven rather than influenced by their emotions or behavior by looking back at a trading record and spotting trends they should avoid. Because keeping a trading journal allows you to evaluate your trades, spot areas for improvement and generally become a better trader.
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