Keeping a Simple Trading Journal

Keeping a Simple Trading Journal for Beginners

Starting your journey in crypto trading involves managing your Spot market holdings while perhaps exploring the use of Futures contracts for hedging or speculation. A trading journal is not just a record; it is your most critical tool for learning and improvement. For beginners, the goal of a journal is simplicity: documenting the 'why' behind every trade, whether it involves holding spot assets or opening a leveraged position. The key takeaway is consistency—documenting small trades correctly is better than ignoring large ones. This practice helps you move from guesswork to methodical decision-making.

Balancing Spot Holdings with Simple Futures Hedges

Many beginners hold spot assets intending to keep them long-term but worry about short-term price drops. Futures contracts offer a way to manage this risk without selling your underlying spot assets. This concept is often called partial hedging.

Steps for a Simple Partial Hedge:

1. Determine your spot holdings. For example, you hold 1.0 Bitcoin (BTC) in your Spot market. 2. Assess your risk tolerance. You are concerned about a potential 10% drop over the next week but still believe in the long-term value. 3. Calculate the hedge size. Instead of hedging the full 1.0 BTC, you might decide to hedge 30% of that value. This is a partial hedge. 4. Open a short Futures contract. If BTC drops 10%, the loss on your spot position is partially offset by the gain on your short futures position. 5. Document the rationale. In your journal, note why you chose 30% (e.g., "Hedging 30% to protect against volatility while maintaining majority spot exposure"). This links directly to Balancing Spot Assets with Simple Hedges.

Important Risk Notes:

• **Fees and Funding:** Futures trading involves transaction fees and Funding Rates Impact on Futures Trades. These costs reduce net profitability, especially on short-term hedges. Document these in your journal.
• **Liquidation Risk:** Even when hedging, using leverage on the futures side introduces Understanding Liquidation Risk in Futures. Always use conservative leverage, perhaps setting Setting Strict Leverage Caps for Safety at 3x or 5x initially. Never use high leverage when hedging spot assets unless you fully understand the mechanics and have a robust exit plan based on Setting Realistic Risk Limits Daily.

Using Technical Indicators for Entry and Exit Timing

Indicators help provide structure to your decisions, but they are tools, not crystal balls. They should always be used in Confluence in Technical Analysis, meaning you look for multiple signals to agree before acting.

RSI

The RSI (Relative Strength Index) measures the speed and change of price movements, oscillating between 0 and 100.

• **Entry Consideration:** A reading below 30 suggests an asset might be oversold. However, in a strong uptrend, the RSI can stay overbought for a long time.
• **Exit Consideration:** A reading above 70 suggests overbought conditions, which can signal a potential pullback. Look for RSI Failure Swings Explained for stronger reversal signals.
• **Caveat:** Relying solely on RSI can lead to being whipsawed in sideways markets. Some traders use automated systems like an RSI Trading Bot for monitoring, but manual review is essential.

MACD

The MACD (Moving Average Convergence Divergence) shows the relationship between two moving averages of an asset’s price.

• **Signal:** Look for the MACD line crossing above the signal line (bullish crossover) or below (bearish crossover).
• **Momentum:** The histogram shows momentum; expanding bars suggest increasing momentum in that direction.
• **Caveat:** The MACD is a lagging indicator. Crossovers often occur after a significant portion of the move has already happened. Always check the overall trend structure documented in your journal review.

Bollinger Bands

Bollinger Bands consist of a middle band (usually a 20-period simple moving average) and two outer bands representing volatility.

• **Volatility:** When bands contract, volatility is low, potentially preceding a large move.
• **Reversion:** Prices touching the upper or lower band can suggest temporary extremes, but this is not an automatic buy/sell signal. Look for price action confirming the reversal.

When using these indicators for your Spot Entry Timing Using Price Action or futures entries, always note *which* indicator gave the primary signal and what the secondary confirmation was in your journal entry, referencing Documenting Trade Rationale Clearly.

Practical Journal Entries: Sizing and Risk Management

Your journal must track position sizing relative to your total capital to ensure you are Sizing a Position with Fixed Risk. A common mistake is using excessive leverage or risking too much capital on a single trade.

Example Scenario: Hedging 1 BTC Spot Holding

Suppose you have $50,000 USD equity in your account. You own 1 BTC (currently valued at $60,000). You decide to open a short futures position to hedge 0.5 BTC of that holding.

You set your Setting an Initial Stop Loss Distance at 3% below your entry price for the futures contract. You decide to risk only 1% of your total account equity ($500) on this hedge trade.

The calculation for your futures contract size follows the principles detailed in Calculating Position Size for Futures.

Metric	Value ($)
Total Account Equity	50,000
Max Risk (1% of Equity)	500
Stop Loss Distance (3% of Entry Price)	Varies by Price
Hedge Target Size (0.5 BTC equivalent)	Approx. $30,000 Notional Value

If the hedge trade moves against you and hits your stop loss, you record the exact loss ($500) and compare it to the loss experienced on the 0.5 BTC spot position. If the hedge trade was successful, you document the profit and note the process for Closing Part of a Futures Position. Remember to check if the hedge duration was appropriate for the market conditions noted in your journal entries, perhaps referencing insights from Analyse du trading de contrats à terme BTC/USDT - 06 04 2025.

Trading Psychology Pitfalls to Document

The biggest hurdle for most traders is psychology. Your journal is where you hold yourself accountable for emotional decisions. Common pitfalls include:

• **FOMO (Fear of Missing Out):** Entering a trade late because the price moved quickly without you. If you feel FOMO, write down: "Entered trade due to FOMO, ignoring initial setup criteria." This forces you to check if your entry met the criteria defined by your chosen indicators or strategy.
• **Revenge Trading:** Taking a small loss and immediately entering a larger, poorly planned trade to try and win back the money quickly. This is often associated with overleveraging.
• **Overleverage:** Using too much margin on a Futures contract. This drastically increases Understanding Liquidation Risk in Futures and magnifies psychological stress. Always refer back to your defined maximum leverage settings.

When you review your history, look for patterns. Do most of your losses occur on Tuesdays? Do you frequently violate your stop loss rules when you feel stressed? Reviewing Trade History Regularly helps expose these biases. Ensure you have Setting Up Two Factor Authentication everywhere to protect the capital you are managing carefully.

Exiting Trades and Final Review

Whether you are Exiting Spot Trades Profitably or closing a futures hedge, the exit logic must be as clear as the entry logic. Did the trade meet its target? Did the market structure change? Did an indicator signal exhaustion (e.g., an extreme RSI reading)?

A good journal entry concludes by answering: "What did I learn?" and "How will I adjust my plan for the next trade?" This continuous feedback loop is how beginners transition into competent traders. Compare your expected risk/reward ratio against the actual outcome. If your plan was to risk 1 unit to make 3 units (1:3 R:R), document if you achieved that or if you closed early due to fear.

Key Differences Between Futures and Spot Trading highlight that the mechanics of exiting are different, so ensure your journal distinguishes between closing a spot position and settling a futures position, especially considering Understanding Contract Expiration if you are not using perpetual contracts.

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