BITCOIN
I Got Greedy Again, So I Closed All My Positions Before Bedtime
If you are mentally compromised or risking too much money, close everything and reassess the situation.
Trading is so much more than just placing trades and making money.
In fact, for most people, most of the time, it’s a psychological battle between forces of greed and fear. I had lost that battle in the last couple of weeks as I overstepped my risk limits by a factor of ten.
The thing is, it wasn’t the first time. My biggest and most costly mistakes started with being too greedy and optimistic. When you’re confident that you’re on the right side of the market, the devil comes out to whisper in your ear — “Bet more!” Sometimes that works out, but when it doesn’t, it can take everything!
I’ve lost more or less everything a few times now.
I have also accumulated at least fifty liquidation emails in my mailbox. Playing with leverage is fun, but it can also get dangerous. The problem with leveraged trading is that it opens the door for loading up on oversized positions.
A small swing in the market, and you’re in danger of getting liquidated. When using leverage, you can’t just wait out an extended down period in the market. Funding accumulates, and if you’re levered for something like 5x or more on your margin, even a mundane drop of 20% will wipe your whole account clean!
Before I went to bed yesterday, I was exposed to the overnight risk of complete annihilation of my trading account and some funds that served as collateral but weren’t meant for trading. I couldn’t fall asleep. Something kept me awake and told me I was an irresponsible idiot.
I was risking way too much money in a market full of turmoil and indecisiveness.
That indecisiveness is causing swings and stop hunts all over the place, so I can’t possibly tighten up the risk. Any reasonable distance away is a place to buy, not sell. I have to trade more or less naked without using stops. The only way to manage risk in such environments is to lower the size of open positions.
I have to give the market some room to breathe. Nothing would change even if it swung down to about 30,000 USD, which is a dump of 20%. I can see it easily, and we would still stay bullish. But that would have wiped my account clean if it had caught me with my pants down, unable to react. No matter how bullish I am, this is a risk I’m unwilling to accept.
I’ve been there and done that. Thank you, no thank you! It’s just not worth the risk.
I couldn’t sleep yesterday as a nagging thought kept creeping up: “You’re too exposed! Don’t be an idiot! Yes, you could wake up all miserable for missing a pump, but imagine waking up to a liquidation email! Don’t you dare be like the FTX guy who played with fire and got burned!”
Well, that woke me up, and I immediately closed all my positions!
I felt relief wash over me. I wasn’t thinking clearly. All of this bullishness has overridden my risk parameters. I was so bullish that I really wanted to load up large on this move. The market owed me (in my head), as it has been a while since I’ve made significant money trading. I kept adding and adding to my longs until I realized I was way overexposed.
I could be wrong and will hit myself on the head for closing my longs, but it had to be done. This wasn’t trading anymore. It was gambling with my whole trading account on a move that has been taking way too long in a market full of bad news.
When in doubt — get the hell out!
As I’ve mentioned, nothing has changed in the market. Not really. But it is taking too long. Still, if I were sitting comfortably in spot (without leverage), I would have simply kept the position open without worrying about it. Whether that’s a good idea or not is another topic. Since I’m managing risk by limiting my exposure to third-party risk (exchanges) with only about 10–20% of my entire budget, I must be more careful.
I’ve been indulging in naked trading for the last couple of weeks, as volatility makes using stops nearly impossible. I was willing to entertain more risk on this move, but not that much. My mind was not in the right place.
Closing these positions was the right move, regardless of where the market goes next.
It’s all part of trading, friends. We’re our own worst enemies sometimes. Most of the time, really.
Finding the right balance between acceptable risk and potential profits is tricky.
The right amount generally lets you sleep at night but also makes a difference if you win. When you have a lot of money, finding this balance is much easier. Having a small account will force you to overplay your hand and risk too much proportionately to your portfolio. It’s just the nature of the beast.
Now, we clear our heads and wait for another trade.
There is always another opportunity. I see no problem in reentering the same trade today but with a risk management strategy incorporated somehow. Buying nearer to thirty thousand dollars for Bitcoin would be my preference. A healthy pullback to clear out all the overleveraged apes, among whom I had counted myself mere hours ago.
Three things to take out of this episode:
- Always manage risk, and never leave yourself open to account liquidation! It’s just not worth it. Slim as the odds may be.
- Greed is a bitch! You and I are susceptible to oversizing and counting our profits before the market gives them.
- When your intuition is telling you something, listen to it. You’re trading with oversized positions if you can’t sleep at night. Close them and recess in the morning.
Good luck out there, and make sure you can’t lose it all, regardless of what happens in the market.
Thank you for reading. I like you. Subscribe, and I’ll deliver new stories to your mailbox free of charge. If you enjoyed this article, help spread the word and remember to like, share, comment, cross-post, and restack the post. Follow this LINK if you want to do more. You are appreciated. If you’re new to trading, start by learning about risk management.
