Once you begin to delve deeper into the market, cryptocurrency trading can become very tempting. The high-risk high-reward method contrasts the rather popular and safer approach of “hodling” onto your bitcoin.

Trading requires a good amount of research, technical analysis mastery, and a sound trading strategy. And even so, most traders are bound to make mistakes in their journey. The trick of improvement, in this case, is to not repeat a mistake twice.

A great way to prevent trading mistakes from reoccurring is by keeping a crypto trading journal. This is also why we wrote this article. In the next few chapters, you will get an in-depth overview of the importance of holding a crypto trading journal and the main benefits of doing so.

Moreover, we show you how to create your own and offer useful templates to start right away. By the end of this post, you will know how to use a crypto trading journal in order to track the performance and reasoning behind all of your trades.

Crypto trading journal – What is it & why is it important?

A crypto trading journal is one of the most important trading tools that can improve the setup and profitability of your trades. In a nutshell, it consists of a detailed record that depicts each and every trade you engage in.

This document will usually encompass a wide range of pertinent data, including your entry point, exit point, analysis methods, your emotional state before, during, and after the trade, and much more.

The main goal of a crypto trading journal is to help the trader detect patterns in the market and accompanied trading behaviors. This way, you can highlight potential trading mistakes and avoid repeating them in the future.

Main benefits of holding a crypto trading journal

Whether you prefer to record your trades on paper, an excel sheet, or a dedicated software option, the benefits of a crypto trading journal are numerous:

  • Trading consistency – by detecting patterns, good or bad, you will be able to reenact winning scenarios and avoid the ones that cost you. As a result, your decision-making ability improves and the result of your trades are often more predictable.
  • Accountability – a crypto trading journal is a necessary reality check regarding your real performance as a trader. It will help you point out unrealistic expectations and unnecessary risk-taking.
  • Improved trading mindset – emotions play a big role in cryptocurrency trading. By documenting your strengths and weaknesses, a crypto trading journal will help you develop the emotional intelligence you need when making sound trading decisions.
  • Realistic risk assessment – taking note of the state of the market and your general attitude will allow you to develop an objective view on the position of capital you can afford risk on a single trade.
  • Spotting profit-making setups – keeping a record of both your technical analysis and general market sentiment helps you understand which trading indicators work in particular situations. With time, you identify these tendencies and adjust your trading strategy.

With that said, it is important to remain consistent if you want to benefit from the above. The more data your crypto journal holds, the more relevant your trading statistics become. Just remember that becoming a better trader requires effort, and in time, you will be rewarded for your perseverance.

How to establish the habit of using a crypto trading journal

Holding a crypto trading journal can be a bit intimidating at first, due to the level of commitment it requires. However, the amount of time and dedication involved will quickly be outweighed by the numerous benefits it provides.

Furthermore, there are a few simple steps that will allow you to make a seemingly tedious process into something fun and rewarding.

1. Keep it simple

There are many data points that you can include in your trading journal. However, overwhelming yourself with dozens of statistics when starting out can make you dread the entire process.

Make your journal as simple as possible, while simultaneously keeping the most relevant data to your trading activity present. This way, you will be more likely not to miss out on recording a trade.

As time goes by, the habit will come along. You will then be able to incorporate more data and expand on the complexity of the journal. Just remember to do it one step at a time, and to stay consistent with your entries.

2. Focus on building a routine

It might sound obvious, but if you want to add a good habit to your life, you must focus on doing it on a daily basis. To this end, you can create a simple rule, such as never entering a trade before completing a journal entry. Once you start doing this regularly, it will become part of your routine.

Sometimes, you will need to mold your existing routine to include this new habit. For example, if your trading pattern used to consist of checking closed positions and opening new ones, make sure you include journal entries in between.

3. Tie it into your long-term goals

Having a long-term plan is a crucial element of success when beginning your trading journey. Each one of us has a different ultimate goal like paying off debt, buying a new house, or being able to retire at 45.

Tying-in your trading journal will give you a benchmark showing if what you are doing is leading you to this goal. For instance, you can set yourself mid-term goals such as:

  • “At least 60% successful trades in 1 month” or 
  • “Make x% profit on my capital in 2021”. 

Your crypto trading journal will give you a way to objectively measure success, triggering the motivation to keep up with the habit.

4. Reward yourself

Another thing you can do when trying to develop a life-improving habit is to reward yourself. This way, you will create a positive psychological response to keeping your crypto trading journal.

This can be a small thing, like a well-deserved break or a cup of coffee, anything that makes you feel rewarded. This approach will ensure that keeping your journal becomes a positive experience that you are looking forward to each day.

All in all, the key to turning journal-keeping into a habit is to make it an enjoyable and rewarding event into your routine.

How to create your crypto trading journal

Each trader has their own preferences regarding the information that should be included in a crypto trading journal. However, every journal should encompass some essential data points.

Basic elements of a crypto trading journal

  • Entry and Exit Dates – the date you entered and exited your trade. 
  • Time frame – due to the 24/7 nature of crypto markets, the time of day when entering and exiting trades can be a very important metric. It can offer additional insight for your trading strategies depending on different time zone actors becoming active in the market.
  • Trading pair – the pair of crypto or FIAT currencies you will be trading, e.g. BTC/ETH. 
  • Screenshot – an additional piece of information you can add in case you are using a digital crypto trading journal. It can add some visual insight into the setup of your trade.
  • Entry price – the price at which you will be entering the market.
  • Target Price – the price at which you will exit the market.
  • Long/Short – the direction of your trade.
  • Stop Loss  – the price at which you are willing to exit your position if the market goes the opposite way of your prediction. We advise to always set up stop-loss orders to minimize the risks of trading.
  • Capital risk percentage – how much of your capital you are willing to risk on this trade. Worth noting is that professional traders never go above 2% of capital per trade, with most of them limiting this number to 1.5%.
  • Position size – which will be the amount of capital you should be investing in this trade. Below is a universal formula to calculate this number.
How to create your crypto trading journal

For instance, let’s say your account is worth 1 BTC. Considering a risk ratio of 2% and a stop loss of 5%, here’s how to calculate the position size:

Position Size = 1X2/5 = 0.4BTC

So, by investing 0.4BTC and setting a stop loss of 5%, you will effectively be risking only 2% of your capital in case the price goes the opposite way of your trade.

You can also use this handy position calculator to make things easier.

  • Profit & loss (P&L) – expressed in your account base currency, it shows the performance of that individual trade.
  • P&L% – expressed in percent, it shows the impact of that trade on your entire capital.

Advanced elements of a crypto trading journal

With that said, relying strictly on these numbers will only get you so far. Trading involves additional data that will provide crucial information on your trading behavior. These can include:

  • Technical/fundamental reasoning – the reason why you are entering the market at this point. This can be a piece of relevant news, a technical analysis indicator trigger or pattern, or a combination of both.
  • Your mental state – the emotional state you were in when you entered a trade, e.g. confident, fearful, uncertain, etc. This might help you detect patterns where you have doubts about certain strategies or market conditions so you can avoid them in the future.
  • Market conditions – the general state of the market. Is it bullish or bearish? Is it oversold or overbought? What is the general sentiment and how does this correlate on the charts? This will help you highlight trading patterns that are inconsistent with market conditions.

To make things easier for our readers, we created a crypto trading journal excel template that includes all of these metrics. For those that prefer a traditional pen and paper approach, you can download a printable .pdf version of the journal depicted in the mages below.

crypto trading journal

How to use your crypto trading journal

Keeping records of your trades is just a small part of using your crypto trading journal. Once you’ve filled a dozen entries, you can finally begin to analyze and adapt your trades accordingly.

Here are some of the best crypto journal practices that will ultimately make you a better trader over time:

  • Review your journal regularly – at the end of each day, week and month, go back to your journal and see what you did. Try to notice common problems, and spot patterns. Giving your journal a periodic review will also allow you to assess how much of your trading capital is locked in active trades.
  • Eliminate losing setups – Find out which strategies cause you problems and stop trading those setups. These can be a wide variety of things, such as certain indicators, economic events, or certain times of the day where you need to step back and simply not trade.
  • Maximize your gains – try to find the connection between your successful trades and focus on developing these strategies even further. You can, for instance, set trailing stops on these strategies, maximizing your returns in the process.

Conclusion

In this article, we went over the importance of consistency in trading cryptocurrencies and how a crypto trading journal can help you achieve this. To summarize, we talked about:

  • What a crypto trading journal is and why it is important to hold one. 
  • The main benefits of a crypto trading journal. 
  • How to establish a habit of holding a crypto trading journal. 
  • The main elements you can use to create your own and what each entry signifies. 
  • How to use the data in your crypto trading journal to improve your trading. 

We also included a crypto trading journal excel and pdf templates for you to use freely and get started immediately.

All in all, it doesn’t matter whether you are a swing trader or a day trader. In either case, a crypto trading journal will be an invaluable tool that will hold you to account for the errors you make.