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5 Tips For Successful Trading in Late 2019

At BitQuant, we have quite a few successful, self-taught traders who know their way around trading cryptos. And as such, we’ve decided to share some of the most fundamental knowledge in this article.

Today marks the first day of Q4, 2019. For cyclical traders, that means only one thing - time to review the strategy, analyze the performance and think about possible adjustments. By doing these three things every set interval of time, experienced traders ensure their stable performance continues, the portfolio grows and weaknesses get resolved.

However, even the best-performing traders always keep certain fundamentals in mind. Even though these things may seem a bit trivial to some, they are essential to every trader, regardless of their trading style, position sizes, trading methodologies, success rate or other differentiating factors. 

The five tips presented below touch base on:

  • Risk management;
  • Building a feedback-based relationship with the markets;
  • Using the best tools at your disposal;
  • Keep the emotions down;
  • Reflect, learn and improve.

Always Manage Your Risk

For some reason, many believe that losing money due to the absence of a proper risk-management system (or a framework) is somehow only a problem for the novice… Well, telling from our experience, and from the traders whom we speak to - that is definitely not the case. Virtually everyone fails to meet their risk limits on a particular trade from time to time, either on purpose or by accident, regardless of the experience.

So, what do we propose?

There is one particular framework, by following which you will stay easily in line with the risk limits you have set for yourself. There are three main variables and a checklist to this framework. First, the variables:

  • RRR - Risk-Reward-Ratio - a well-known concept that doesn’t need much explanation. Something you have to plan ahead for each of your trades. A good rule of thumb is that RRR should be at least 3:1 for the trade to be worth taking.
  • Maximum risk limit per trade - how much are you willing to risk to take one trade? This amount will be the same for every single one of your trades. For the purpose of this article, let’s assume you are trading with BTC as collateral and your maximum tolerable risk limit is 0.1BTC.
  • Time expiration of the trade - by analyzing the trades from your trading journal (to which we’ll get back later), you need to determine what is the mean longevity of your trades. Then, multiply that by 1.5 - that should be the maximum duration of any trade for you.

Now, the checklist:

  1. Identify the trade, place your target and stop-loss and see what the relative risk (in percentages) is:In the case with this trade, your relative risk will be 4.48% (0.0448) of the position size. 
  2. Now, we’ll use that information to determine, what your position size should be. To do that, just divide the risk limit per trade (0.1BTC) by the relative risk:

0.1BTC/0.0448=2.232BTC

There - you have to allocate 2.232BTC to this trade in order to maintain your maximum downside of 0.1BTC (also, you may want to adjust for fees).

So, if you base your position size on the maximum drawdown you are willing to accept, you won’t have any troubles keeping the risks tight.

Appreciate the Feedback the Market is Giving You

A phenomenon similar to the Risk Management problem is surfacing the tides of trading communities - being in constant search for clout, people can neither accept nor admit that they are wrong. Once someone has gone out and publicly, with a great deal of conviction said “BTC will do this”, there’s very little chance the person will confess when proven wrong. 

And in doing so, in a tilted state, they continue to bet against the direction of the market, tilting even more and forgetting about the five principles listed here :).

Now, the working practice that some of us use is to always have a high time-frame bias, and stick to it when opening positions on lower time-frames. I.e., if your long/mid-term bias is short - you will only look for quality short setups until proven wrong three times. 

This way, if your long/mid-term bias is correct - you will benefit greatly from exploiting entertaining the opportunity of trading based on it.

Use the Best Tools Available

To keep the long story short, there are things which are called Trading Terminals. Something which came from traditional finance, but found its niche on the crypto market as well. It is software which lets you trade on multiple exchanges, from a single interface, use hot-keys to execute trades and in some cases, set unique orders on the book.

Our list of recommended would include:

If you are serious about your trading, make sure to use all the best tools at your disposal. It is very standard practice for traders, especially day-traders, to use a terminal.

Keep the Emotions Down

This one is probably the hardest - keeping cool when it’s getting very hot in the room. A piece of rational advice we could give is rather simple - use meditation. You probably already know what meditation is, and we’re not the best people to teach it - so don’t be shy to google up the details.

What we do know, however, is that meditation increases stress resilience. When we are able to switch off the sympathetic nervous system (responsible for the fight or flight response) and trigger the parasympathetic nervous system (responsible for the relaxation response) on a regular basis, we are training our bodies to rapidly recover from the impact of stress. Over time the brain learns how to stabilize the autonomic nervous system in everyday life without having to switch into the fight or flight response when faced with challenges or demands.

Reflect, Learn and Improve

Last but not least - keep these three words as a personal mantra. Reflect on your trades, their logic, rationality and timing on each specific trade. Compile boards with your averages of key metrics and undertake to improve them over time.

Follow credible and well-received influencers and insiders who trade with serious size, from whom you can scoop the knowledge and one day be just like they are. Try to identify your weakest points and work specifically on them. It might be execution, strategy, placement of targets or stop losses, uncontrolled emotion.

Having said all of the above, we can only emphasize that you should be intelligent in your decisions, cool with emotions and methodical in your approach!