80% Win Rate but Still Lost Half My Portfolio

I’ve been on quite the trading journey, and I’ve got some stories and lessons to share.

Crypto trading is fun, they say — until you start losing.

How on earth did that happen? Let me take you on a journey through my trading escapades, where I learned some tough lessons the hard way.

Out of every 40 trades I make, 32 are winners. Sounds pretty fantastic, right? But here’s the kicker: despite all those wins, I still managed to lose half of my trading portfolio.

This trading portfolio was from March 2023 to date. During this time, while I was racking up all those wins, I also had a few trades that went south — big time. And when I say big, I mean BIG. These losses weren’t just little bumps in the road; they were giant potholes that swallowed up my profits and initial capital. It’s like winning ten bucks on a scratch card and then dropping a hundred-dollar bill down a storm drain.

Take a look at my Cumulative Profit Over Time chart to see how those big losses impacted my overall performance. After the massive liquidation in March 2024, I took a break from this trading portfolio until recently. Hence, there were no trading activities during this period until a few weeks ago.

Here’s where I went wrong: SHORTING THE MARKET!

Despite using very low leverage and having proper portfolio allocation in place with no risk of liquidation, the ultimate problem was my decision to short the market.

These short positions started off small, but the position got added as the market went vertical. What began as minor trades gradually increased in size, turning into significant positions. This only magnified my exposure and, ultimately, my losses.

I gave up defending these positions, and the market, in its irrational way. Despite knowing that I shouldn’t be emotional, but picture Solana going from 15 to 210 — it went six times against my initial entry price. It was too draining, especially not knowing when and how it would end.

The famous saying, “The market can remain irrational longer than you can remain solvent,” couldn’t be more true in my case.

Just three losing short trades wiped out half of my portfolio. They were SOL, AVAX, and INJ.

Even though there were significant losses, thankfully, I have a HODL portfolio, and the gains from these medium- to long-term holdings helped cover the trading losses. This experience underscored the importance of having long-term holdings and multiple portfolios with different goals to avoid missing out when the market rises.

The biggest lesson? Never short the market again. The risk and the potential for losses are just too high, no matter how confident you feel.

Shorting the market can seem like a tempting strategy, especially when the market over heats. However, unlike going long where your potential loss is limited to 100% of your investment, shorting carries the risk of unlimited losses.

When you short, you profit if the price drops, but if the market moves against you, there’s theoretically no limit to how high the price can go, and thus no cap on your potential losses. This asymmetry makes shorting incredibly risky.

Even with proper risk management and minimal leverage, the relentless upward march of the market decimated my short positions and taught me a harsh lesson about the dangers of betting against the market.

There’s something uniquely exhilarating about shorting the market. It makes you feel like a villain in a high-stakes drama, going against the grain and betting on a downturn. There’s a rush that comes with the audacity of it, a sense of being smarter than the crowd as you anticipate a fall that others don’t see coming. The thrill is electrifying, it’s a seductive feeling, combining the allure of danger with the satisfaction of feeling like you’re outsmarting the market. But as I learned the hard way, this excitement can quickly turn into a perilous game with high stakes.

My journey taught me that trading isn’t just about winning; it’s about winning smart.

Thanks for reading, please follow me if you enjoy the way I write and stay tuned for more crypto & DeFi content!