Surviving In Crypto
Like most, I started trading in other instruments such as stocks and foreign exchange. Over time I got the hang of trading, and somewhat, was able to provide for myself. Now its been almost 3 years, I feel as if I have some experience in the trading world. Hence, I will try to carry an explanatory tone to pass on what I have learned in the past few years.
Stocks were fine, I had a medium-term horizon, ergo I could just buy and hold what was already discounted on the market. I did pretty well and even today I hold around 20 common stocks in my retirement portfolio. Albeit my interests have shifted to derivative instruments over the last year. Derivative instruments are those you might have heard of before. Futures and options. The spread betting scene can be considered a derivative market but its more or less gambling in my opinion. With derivatives, we get leverage. The most beautiful part of trading. Leverage allows us, traders, to access the financial markets with a small degree of initial capital. This sparked my interest when I was only trading stocks. In the futures market, the leverage allowed me to only be in the market for small percentage moves. Meaning that I could be in and out in about 15 minutes in the morning and head over to the kitchen to make some coffee.
Then I found out that you could utilize leverage on these coin exchanges; initially, I was not interested in crypto because there was no actual cash flow from the asset. Similar to currencies it was not paying me a dividend. This meant that it was going to make me money only if I speculated, so I did.
So I started crypto and this is where we are going to look at surviving in crypto. Firstly you have to forget about leverage at first. You cant trade something on leverage without trading it the underlying asset. Open up a wallet, allocate some funds and just hold some crypto for a bit. Watch the price movements and understand the patterns. Whether you use Elliot Wave Theory or just plain out moving averages: get a feel for the market.
Soon you will get familiar with the market, and start utilizing your personalized trading set up. You will get your technicals set as you wish, for me, I just add VWAP, Bollinger Bands, and the Vortex indicator, that’s it. Nothing more or less. Then, you have to find the ideal time frame that fits your trading strategy and habits. I trade on the 1 minute, 15 minutes, and hourly charts. This works out for me because my time frames are short and I am looking for small breakouts in the patterns. These breakout scenarios provide me with asymmetrical risk and reward profiles to take advantage of. More on the matter, try to focus on one coin at first, if you are a beginner, bitcoin is just fine. Sticking to one coin will be better because you won’t be distracted, and you will get the opportunity to focus on your technical setup.
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Next, we have position sizing. If I am from X country and I was able to raise 100 U.S Dollars in the last three months, I definitely need to manage my position sizes. Remember, a smart trader only risks about %1 to %2 of his or her total capital. This will also help with getting yourself into the routine of trading. It might get a little monotone here and there but the discipline to trade is the hardest to get a handle of.
Finally, I would like to touch upon one of the most important aspects of trading. Remember, your goal is to live to trade for another day; not to double your money in two hours. Use stop-losses in your trades, this will allow you to keep losses small and be able to trade in the future.
Believe it or not, %90 of traders lose %90 of their capital, in the first %90 days.
Another benefit of using stop-loss orders is that you get to learn a lot about price actions and these cost you a small percentage of your capital. You got to spend money to make money at the end of the day.
Hopefully, we covered the basics for today. See ya next time.
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