Trading Secrets & Background

Risk Management

 Cut your losses and let your winners run. Even if your win rate is 40% while trading, I believe you still can make a profit. How do you do that? If you go with the trend (Following trend) according to the above example while doing 10 trades, you will get 6 losses but still, you will make 10x the capital invested. (Imagine you enter a trade at a coin at 10 cents. If it goes to .80 cents, if you cut the losses and let the winning trades run, you can make an overall profit). In trading, the more successful person is not the one who analyzes properly, but the one who manages the risk properly. In another example, imagine your win rate is 99%. In 99 cases, if you bought a coin for $100 and sold it at $101, you made a profit, but if you make a bad trade, you lose the $100 invested in one single trade. Because of that managing risk is very important.

Trading is combined game of probability & statistics

The coin toss experiment is also like a trade. The reason is that when tossing a coin, the probability of heads falling is 50%. As shown in the chart below, the first time (at the initial stage) the chart varies greatly in the first 25 cases. (more ups & down) but going up to repetition 400,500,800 it goes like a line. After understanding this you can identify losses as a percentage, and how much you profit as a percentage in the market. One does understand this will not allocate 100% of his capital to trade once. He divides his available capital into small slices and distributes his trades according to his win rate by doing more trades. ( if you have 10,000$ trading capital you can allocate 1000$ × 10 or 500$ x 20). This is emotionally challenging work. But what we do here is to smooth the expected return. Many people lose money no matter how well they analyze and trade because of this reason. It is here that by making more trades in accordance with a certain strategy, you can achieve meaningful results.

Can the future be predicted from past data?

What we do when trading is to gather some information from the past and determine the price of crypto in the future.  Otherwise, it is predicted that the price will move in this way.

But my answer is somewhat different.  In the cases of predicting the future only by doing chart analysis, it is likely to be wrong.

To avoid it, we have to carefully find out whether the background data supports changing the relevant direction or moving in the same direction.  Example - Recently, after bitcoin crashed to the 30,000$ level, many people said that this is a strong support level, so it is going to take an uptrend again.  After bitcoin crashed 25,000$ and after 20,000$, various people expressed their opinions on social media/news that there will be a big reversal (BTC to 100,000$).

But today BTC is at 15,000$ level. No matter what support levels the chart comes to if the market is to go up, if new money is to come into the market, it should be seen whether the necessary background is formed.  Such a background has not been formed.  So how can there be an uptrend when there is no such background?  Before technical analysis, that is the point to consider first.  Before when the uptrend started, were there any problems like this in the world, Was there inflation, was there war, was there any economic crisis, was there any recession, there was nothing.  It was very positive.  The market analysts have said the market bounced from the 200-day moving average three times before, and it will happen again this time, but it doesn’t.

Before making such decisions we have to consider whether the necessary background has been created.  It is difficult to tell the long-term from past data.  Therefore, you can save a lot of money by avoiding making decisions based only on technical.

 

How to identify the market bottom fundamentally?

In determining the market bottom, from technical analysis, it is very easy to look at the support levels and use Fibonacci to reach some decisions.  But this is done by fundamentals when the market participants get tired of the market, when they get to the point where even asking about the market becomes a headache, the bad news keeps coming and there is no end, the bottom starts.  That is where the bottom is made.  This is when smart money enters the market.  It is from this time they collect to the long term.