Tier 5 · Professional · Module 5.1
Record-keeping, tax basics, performance reporting
Run your trading like a business — the records to keep, general tax principles to discuss with a professional, and a monthly performance report that measures returns correctly, even with deposits and withdrawals.
Lesson 1 of 2 · 5 min read
At some point, trading stops being a hobby and becomes a small business — with income, costs, records, and possibly tax obligations. The traders who make that transition well treat their records the way a business treats its accounts: complete, organised, and reviewed regularly. It protects you at tax time, and it gives you honest numbers about whether your trading is actually working.
What you'll learn
- The records every serious trader should keep
- General tax principles for trading — and why professional advice matters
- How to calculate returns correctly when you deposit or withdraw money
- A monthly performance report template
- How to treat trading costs as business expenses
1. Records to keep
| Record | Why |
|---|---|
| Broker statements (monthly and annual) | The official record of trades, fees, swaps, and balances |
| Your trade journal | Setups, reasoning, R-multiples, rule adherence (see Behavioral journaling) |
| Deposits and withdrawals | Needed to calculate true returns and for tax |
| Costs | Platform, data, software, VPS, education, prop-firm evaluation fees |
| Prop-firm and payout records | Fees paid, payouts received, and the agreements |
| Currency conversion records | If your account currency differs from your home currency |
Store everything digitally with backups, organised by year. Many tax authorities require records to be kept for several years — check how long applies where you live.
2. Tax basics — general principles
Common considerations:
- Trading gains are often taxable. Depending on the country and your circumstances, they may be treated as capital gains, as ordinary or business income, or under special rules for particular products.
- Losses may be usable to offset gains in some systems — often only if properly recorded.
- Crypto swaps can be taxable events, even without converting to cash (see Tokenomics and regulation).
- Prop-firm payouts are frequently treated differently from gains in your own account — often as service or business income. Confirm how they're treated where you live.
- Frequency matters. In some countries, very active trading can change how gains are classified.
- Business expenses may be deductible in some cases, which is another reason to keep records of costs.
Bring your complete records to a tax professional before the end of the tax year, not after — some decisions can only be made in advance.
3. Measuring returns correctly
Deposits and withdrawals distort simple return calculations.
Worked example
(Illustrative.) Start of month: $10,000. You deposit $2,000 mid-month. End of month: $12,600.
- Wrong: ($12,600 − $10,000) ÷ $10,000 = 26% — this counts your deposit as profit.
- Trading profit: $12,600 − $10,000 − $2,000 = $600
- A fairer return: divide by the average capital employed. The $2,000 was in the account for about half the month, so average capital ≈ $10,000 + ($2,000 × 0.5) = $11,000 → $600 ÷ $11,000 ≈ 5.5%
For your own reporting, tracking results in R and the trading profit in money avoids most of these distortions. Performance reports from platforms often do this adjustment for you — check how yours calculates returns.
4. A monthly performance report
Produce this every month, on the same day:
| Section | Contents |
|---|---|
| Summary | Trading profit (money), return (%), total R |
| Risk | Maximum drawdown in the month, current drawdown from peak, largest single loss (R) |
| Statistics | Number of trades, win rate, average win and loss (R), expectancy, profit factor |
| Discipline | Rule adherence %, cost of mistakes by tag (see Behavioral journaling) |
| Costs | Spreads/commissions, swaps, subscriptions, fees |
| Notes | What worked, what didn't, one change for next month |
5. Costs are part of performance
A business measures net profit. So should you:
(Illustrative month.)
| Item | Amount |
|---|---|
| Gross trading profit | $900 |
| Commissions and swaps | −$140 |
| Data and software subscriptions | −$60 |
| VPS | −$25 |
| Net result | $675 |
Costs that seem small can take a large share of profit for smaller accounts. Review every subscription at least quarterly — does it pay for itself?
Common beginner mistakes
- Relying on memory instead of records.
- Counting deposits as returns.
- Ignoring costs that don't appear in the trade history.
- Assuming trading gains aren't taxable — or that another country's rules apply to you.
- Seeking tax advice only after the tax year ends.
Key terms
| Term | Meaning |
|---|---|
| Broker statement | The broker's official record of account activity |
| Trading profit | Change in equity minus net deposits |
| Average capital employed | The average amount in the account over a period |
| Net result | Trading profit after all business costs |
| Performance report | A regular, standardised summary of results, risk, and discipline |
Practice
- Create a folder structure for the current year: statements, journal exports, deposits and withdrawals, costs, and prop-firm records.
- Recalculate last month's return correctly, adjusting for any deposits or withdrawals.
- Build your monthly performance report template and complete it for last month.
- Book a conversation with a qualified tax professional in your country, and bring your records.
Quick recap
- Keep complete records: statements, journal, cash flows, costs, and prop-firm documents.
- Tax rules vary widely — understand the general principles and get professional advice.
- Adjust returns for deposits and withdrawals; track results in R too.
- Produce a monthly performance report covering results, risk, discipline, and costs.
- Measure net results — costs are part of performance.
Educational content only — not financial advice. Trading involves substantial risk of loss. Practise on a demo account before risking real money.
