Maintaining good records is very important when planning to start a new business. Without solid and comprehensive records of all your expenses and revenue, you could end up paying more tax than necessary. Similarly, you should maintain written records for easy reference later for certain types of trading. Here we will provide some advice about how to create a trading journal when copy trading.
Let’s first consider what a trading journal is. It’s a record of various trades (buying and selling stocks) that the trader makes over time.
The individual trade entries
- The date of the trade
- The amount paid or received by your brokerage for this trade
- A short description of why you made that trade
- The P&L (profit and loss) on the trade
Let’s look at an example of a typical trading journal entry. If you are copying trades for someone else, you might be required to create a detailed trading journal to keep track of all your trades.
You set up a copying order for Michal Poliak by logging into your brokerage account and setting up the copy order through their system.
It’s your first-day doing Poliak’s 5-day EURUSD forecast challenge. You will be tracking his results for the next few days to see how accurate he is before going forward with an ongoing plan. You are copying his trades because you believe he has an excellent trading strategy, and you want to learn how to be an independent trader.
Amount: AUD 100
It is the amount that would appear in your account if you made this trade. You can also see any actual P&L you made on the trade by looking at the figures after “Realized P&L”.
Let look at an example of a completed journal entry:
Poliak predicted that EURUSD would rise for our time horizon, so you ordered your broker to copy his buy market order. Description: After watching Poliak’s webinar yesterday, it seemed like a good idea to implement today’s prediction. His prediction was correct.
-AUD 400 (You started with AUD 600 and lost all of it)
It’s just a brief overview of how you can keep track of your trades. If you do not intend to copy someone else’s trades, then the amount and realized/unrealized P&L would differ for each trade.
You should also note that these figures will not appear in your brokerage account since they are only used as an example here. The main thing to consider is recording the date, description and details about the trade so that you can refer back to them later on or share them with someone if necessary.
Ideally, it would help create a trading journal for each day’s trades. Remember that you can always go back and edit your trading journal entries to add more information or details if required. By doing this, you will be able to track your overall performance daily instead of scrambling to find the information after a few months of inactivity.
Your accounting software (e.g., QuickBooks) may have a valuable feature for creating a daily summary of all your online brokerage transactions without having to create separate records for each trade. If you’re not using any such software, use Microsoft Word or some other tool that allows you to store data in tables with different columns and rows to enter the relevant information.
- Decide whether you want to create a trading journal for all your trades or just for certain types of trades, such as copy trading.
- Select the brokerage account, which will contain all your records and make entries there every time you carry out a transaction.
- Maintain separate columns (Date, Action, Description etc.) and populate them with relevant information about the trade-in question. You can also keep track of P&L by creating an additional column.
That’s it – now you have created a trading journal without investing much time. Take a look at some other ways to become a master trader.