Stoics journal thoughts and emotions to monitor their mental well-being. Spiritual free souls journal dreams to upgrade their visualization skills or to practice lucid dreaming, astral projection, and other wacky stuff somehow weirder than crypto. But us digital asset investors? We journal trades to get better at making money.
Journaling is useful no matter where and why you use it. For trading purposes, journaling is useful because it keeps you in check. Made a bad trade? You’ll remember making a mistake and losing money, but trust me, you’ll forget the mistake itself. In a week you’ll open a position and repeat the same old mistakes.
Unless you journal, you might repeat the mistake until you lose thousands of dollars. And you better have enough money to support your lavish lifestyle. Hate losing? I’ll show you why keeping a trading journal is important and how to use it.
I open the Bitcoin chart, draw a few lines here and there and spot a hidden divergence on the RSI indicator. Wow, I’ve never seen a setup this clean. I decide where to enter, where to take profit, and where to exit the position if something goes wrong. I write all this data down in my journal.
“RSI hit a low at 30%. A diagonal line indicates strong support in the lower $30k area. Long at $36,000, take profits at $40,000, and exit with a stop loss at $34,000.”
A few days later, I wake up to an alarm from my Bybit mobile app. Whomp whomp, Bitcoin’s price fell by 10% and hit my stop loss. I lost 5% of my capital. The price reached $38,000 overnight only to violently crash below my entry and into the stop loss I’ve placed. Even though my trading hypothesis should have worked in theory, the market decided to go against my wishes. I should forget about this and move on, right? Wrong.
The market might behave irrationally at times, but it never does so without a reason – no matter how insignificant. I come back to the chart and take a deep look at Bitcoin. Did I miss something important? Was there an indicator, trend line, or a tool that could have shown why Bitcoin wouldn’t go higher than $38,000?
I pull out the Fibonacci tool and connect the low with the high of the previous price rally. Lo’ and behold there’s a 0.236 fib line resistance level just at $38,000. It seems like I should have taken at least 50% of my order in profit at this level. Because I haven’t seen this, not only did I not make any money, but I also lost some.
I open my journal again and write:
“RSI and trend lines were not enough. Try checking resistance levels by drawing Fibonacci lines for overextension levels next time.”
A week later, another opportunity to long arises and I open my journal. This time I won't repeat the same mistake because my journal told me to keep watch on fib lines! I would have forgotten this if it wasn’t for my precious journal.
The management and monitoring of wins and losses is another use case that trading journals provide. I keep note of the number of trades I make, percentages, and win/loss rate on a monthly basis. The journal tells me how much I’m up or down.
This information also indicates how well I’m performing and whether I need to adjust my trading strategy. Maybe my strategy is fine, but I’m in the wrong headspace. Sometimes you’re on a losing streak and your brain screams at you to make it all back in one trade. Sometimes you’re frustrated over a personal situation that you can’t correct, so you take your frustration out on the market. And guess what? You’ll lose. Being emotional doesn’t improve your trading skills.
If you’re anywhere from 10-30% down, you have probably traded in the midst of a crash or parabolic run. Losing tons of money suddenly is not a surprise in the crypto market. Why should it be? If you can score a 100-200% win overnight, the chance to lose half of your portfolio is equally high.
What you should worry about is slowly and consistently losing money. A 10% loss on a weekly basis compounds as fast as a 10% yield farming field. If you lose capital for longer than a few trades – unless practicing high-frequency trading strategies such as scalping – you’re bound to be doing something wrong. Again, is it the trading or is it you? Should you blame the setups you plan or the way you execute a trade?
Last but not least, tracking capital is great for monitoring how far you’ve progressed. Maybe your plan isn’t to day trade for all eternity. Maybe you’re trading until you reach a six or seven figure portfolio and you’re out of this hellish nightmare.
Always hold yourself accountable. Despite receiving plenty of help while learning technical analysis, fundamental analysis, or even how the crypto market works, you’ll receive no help while trading. This is the charm behind speculating assets. You’re the only person to blame for your failures – unless an exchange forces a liquidation cascade.
This is why writing down every trade matters. Why noting the reason you entered a trade, the stop loss you’ve placed, and the position size matter. But more than all else, holding yourself accountable is important because you need to memorize why you’re good or bad.
You probably can’t wait to finish this article and start a journal of your own. But wait. How should you format your journal? What sort of data should you write down? This step of the process is up to you. You can put as much or as little data as you want. But whatever you do, make sure to write these fundamentally important pieces of information down:
So what are you waiting for? Go ahead and write your latest trades or fill your notebook with new setups.
If you want to learn more about trading cryptocurrencies well, I recommend checking out the following resources:
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