What is a Trade Blotter and How is it Used

A trade blotter is a record of each trade that transacted for a given period of time, normally one day. 

A blotter would include the time of the trade, the ECN or dark pool market the trade occurred over, the quantity, the exact price, and if it was marked as a buy, sell, or short order.  Sometimes a blotter will include orders that were entered but were cancelled before they transacted as well.

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A trader will use a blotter as a way to review his trading day.  The blotter allows the trader to see exactly what happened over the course of a day.  It is a good idea for day traders to review their blotters at the end of every trading day, and record their observations in a trading journal.

A trader will look for places where he could have had better timing with entries or exits, or could have entered orders more efficiently, for instance by using an ECN that has a lower cost or rebate.

How Else Is It Used?

In addition to using a blotter for review purposes, some traders also use it for compliance purposes. Brokerage firms are required by regulatory bodies to maintain trade blotters as part of their compliance and auditing process. Trade blotters can be used to demonstrate compliance with regulatory requirements, and to provide an audit trail for trading activity.

Trade blotters can also be used for risk management purposes. By reviewing the blotter, traders can identify areas where they may be taking on too much risk, and adjust their trading strategies accordingly. They can also use the blotter to track their progress over time, and to identify patterns in their trading activity.

Finally, it is important to note that while trade blotters are a useful tool for traders, they should not be relied on exclusively. Traders should also use other tools and resources, such as market research, technical analysis, and fundamental analysis, to inform their trading decisions.

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A trade blotter is a valuable tool for a trader when he reviews it daily to improve his trading technique.

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