It’s been a long time since last post and indeed it is time for some reflection. Do you remember the bear market of 2014/2015? I entered crypto right in early 2014 after the bubble had popped, although luckily I did not buy in yet as I intended to do proper research before. I did not have much money and could not afford to just buy for the sake of being positioned, instead I knew i need to sniper and basically go all-in to have any significant reward whatsoever.
Although I was trading for some two years already I had not mastered the Art of Technical Analysis in any way. I was both obsessed and passionate about charts (which has never changed), but needed to learn more before being able to trade profitable in a constant manner. I understood that entering a trend very early when it develops and sell at the very top is the very key to success in longterm investing. Duration of investment might be somewhere between 2-10 years or even longer, but there is a reason Warren Buffet is among the richest people in the world. However Forex was not the place to be if you are looking to plant early seeds in innovative projects — and luckily at that same time the whole world of crypto opened up to me.
In the bearmarket of 14/15 I taught myself exclusive how to buy bottoms. It was the thing I needed most at that time. I had no work, and no responsibility in the first place. I was ready, willing and able to jump into trading and investing full time without any restrictions except of monetary nature. For years I slept 4-5 hours per night on average.
I certainly had all the time in the world and literally nothing to lose, but all ressources at my disposal.
It took me months of observation, a dozen reads of the same three books and endless practical (and often painful) experiences to get anywhere to deeper understanding. I was getting better day by day, as per compounding of lessons learned aka learning how to connect the dots and gain deeper knowledge. The learning process has never really stopped, however it enabled me to buy the altcoin bottom in March 2017 which was the beginning of it all.
The reason I am articulating this article right now is of different nature. It all started when I realized that in order to become a complete trader it is not enough to simply buy bottoms and sell tops. It is about the ability to read, understand and react properly to the market constantly with only a small range of error. Trading is about mental control and emotional discipline, about constantly learning and progression no matter what.
It’s no secret that the primary reason for people getting rekt is that they are either trading with too much risk, using capital they cannot afford to lose, or basing trades on emotions, or having no clue at all. Alternatively, a combination of those.
So I figured the very most effective way to master emotional discipline and better understanding movements in the market in volatile conditions is to enter the area of shortterm trading, something that i naturally never did before. The point that stopped me from venturing in this area earlier was the thought: “Why would I risk a % of my entire investment in the biggest innovation of the century just in order to scalp some dollars more out of the market?”
WRONG. Gotta admit when you have erred or have come to a conclusion that better fits what really is, right?. I still do not understand those folks who have 100% of their investment in crypto in some margin positions, may you rest in peace. I do understand however the school of thought to trade shortterm with a small fraction of the entire capital, presuming you know what you are doing of course.
I therefore have created for myself a challenge, a bootcamp scenario, in which I am able to learn lessons without risking much capital at the same time. I will outline the whole process below just in case shortterm mastery is something you deem valuable to pursue.
Learning always comes at a cost. No matter what you intend to learn, you always have a price to pay. It might be monetary, energetically or time-wise, but you will inevitably invest so you can reap the lessons you seek to learn. No different here. Knowing that, it makes sense to start learning lessons with as less monetary investment as possible, but with a greater share of energetic and time investment. You will not master trading through making huge profits, but by time spent on the screen, actually observing the movements of the market, understanding the emotions of market participants and in turn, the eximation of their reaction to changing market conditions. It is said that it takes about 10,000 hours of serious work in an area to become an expert. Nowadays due to easier accessibility and more effectiveness in general this number is estimated to have raised to 12,000. Anyway, I am losing the red thread, let’s go with the Challenge, here is what I did:
I transferred 0.03 BTC to a new wallet. From there I sent 0.01 BTC to my newly created Bitmex Account I setup specificially for this scenario. I would not say I am a particular fan of Bitmex, its a graveyard of ignorant traders who underestimate the market. Many have been REKT at this place, so great care we must take. But undeniable, money is to be made there. This is the school of thought behind that move:
Three shots a 0.01 BTC. Why?
We will use 0.01 BTC for the first account, with the following initial conditions:
The venture is considered a success if trading balance on has increased to 1 BTC.
The venture is considered a fail if the trading balance is REKT, below 0.0001 BTC.
If you have REKT your first account – which is likely – reflect on what you have learned. You can do so mentally or in written form for yourself, but without reflection no learning. Pause for a day, then proceed with the 2nd account, refilling the account with 0.01 again.
However there are further conditions to be applied to these accounts:
1) Must not trade with leverage above x25. The reason is it is not about the money in the first place, and using lower leverage increases the likelihood of you experiencing more trades, thus you have more points where you could potentially learn something valuable, that in turn, can be used in the future to extract more profit from the market. The lower the leverage the more patterns you will be able to observe, thus the more you will learn.
2) Always use a Stoploss. Sometimes, when you have reacted too late (which naturally happens from time to time), you will be tempted to use your liquidation level as your SL. After all it is “only” 0.01 BTC. Do not make this mistake, set a proper SL at a level where you would say the setup you have entered for has failed. Take the loss to fight and live another day. Getting liquidated isn’t getting you anywhere so avoid it at all cost.
3) Do not trade 1 minute charts solely. Of course for shortterm trading it is tempting, but I recommend to focus on higher timeframes. If you are looking to trade intraday to learn most (due to many patterns unfolding over the course of a day) use 30 or 15min chart as reference. This means at the beginning of the day you assess the higher timeframe charts to conclude whether the market is trending up or down, what the key levels are and where support/resistance is expected. There is nothing wrong with 1m charts in general but your trades need to be aligned with those higher timeframes and the overall momentum of the market. In my trading always use a pair of charts for reference. Usually I am trading Daily charts, but I check details in 2h. If i trade 5 minute charts, I am using 1hr or 30min charts as a reference, to be safe im in the direction of the trend. As a starter I would suggest to trade 3 or 5 minute charts with 30 minute or 1hr as reference.
4) Experiment with different order styles so you have a toolset that you fully understand. There is nothing worse than placing a stoploss using a wrong order type and it doesn’t get activated, and you get liq’d instead. Do yourself a favor, learn the different order types, even if it is with 1 contract only, experiment so you can use them effectively in the future.
5) For the purpose of effective learning, track all trades of yours in a special sheet. I use the freeware charts of Beam to quickly enter the current balance after I closed the trade. After you closed the day, save this chart for future reference.
It will give you great insight into your trading mentality. You will likely see patterns unfold which then can be used to analyze how you are being triggered by the market and how to decrease this risk in the future. It is simply a tool to better understand how you are trading and which patterns you are unconsciously forming in your trading game.
Additionally, you can use a trading diary which is certainly effective, in which you make notes on entry price, SL, thoughts behind the trade and target, but that’s of course fully optional. Example of such trade tracking is given below:
As a sidenote, it certainly helps to set the Bitmex balance to mXBT to handle trades and balance more optimally.
6) Define personal rules that suits your trading style. Eventually every trader has a unique style, it is your mission and responsibility to find your own style and master it fully. In my case I tend to have my Stoploss too far away from current price action, so I restricted myself to have a SL no greater than 50 USD, no matter which margin used. Choose what suits you most, but have some ruleset in which you are allowed to operate to reap maximum effect (learning) on your investment. Write it down for clarity before you begin the challenge.
Remember, this is solely about learning. It is not about the money invested, nor the profits reaped. BUT if you do well, and learn the lessons you inevitably have to learn as a trader, you will be able to increase your capital from 0.01 to 1 BTC and then, you have the fundamental understanding and skills needed to turn this into another 100x. It is certainly possible, the only factors determining if you are going to be successful is your ability to reflect and learn the lessons provided by the market, the dedication you put into that work and your toughness & strength in overcoming mental resistances.
One more important thing. Depending on your current portfolio 3x 0.01 BTC is simply not feasible and not necessary in the first place. Expect, first of all, that you will lose your entire capital, this is the only way to trade free of barriers in your mind. Transfer the money to a new wallet in the thinking that it will never come back, easy as that. Thus if you are here for the learning – as I am – you would think about only sending 3x 0.001 or even 3x 0.0001 BTC. It really is not about the number of contracts you can afford. At the same time a 100x in profit should make at least some difference. You are the only one who can choose how much you are willing to risk, but I want to make sure and emphasize that in case of uncertainty, choose rather less than more. I don’t want you to destroy your portfolio, I want you to learn something valuable that you can use in the future to make profit, not immediately now.
Of course before presenting such challenge to you I tested it before myself. It is the most valuable thing I have done in the last couple of months and I will continue to trade because there is so much more to learn. One more thing to have in mind. The trading of crypto will not get easier in the future. We saw the effect of institutional investors entering in end of 2017, trading got way more difficult. This actually is the reason why I exited Forex for Crypto, because the trading here was so much cleaner. This will change when more institutions jump on board and bring their wicked trading bots with them.
If there is a time to learn these things in a relatively easy manner, now is probably the best moment to start.
May you extract real knowledge, and may the Learning be with you,
Just in case you want to use my reflink intentionally to create a new account, I just drop it here for your voluntary use:
If you have done something similar or want to share your experiences and/or progress in this challenge, comments under the tweet are much appreciated, so we can discuss effectively and potentially adjust this method so it might transform to something even more productive and useful. All the best and happy learning.