Same Same but Different 

As you already know Trading Experiment 2.0 has the same main character – Alex. He is still not very experienced, still full of doubts and fears, and also he is filled with hopes and courage. Yet, if you think that Alex’s trading decisions will go the same way this time, we’ve got gripping news for you – the setup is totally different. 

A ton of currency pairs on to choose from and the variety of leverage options that were beyond reach previously will almost definitely make Alex’s trading journey much more interesting and surely more dangerous. Check the new trading parameters for Experiment 2.0 here:

So we leave Alex alone with all this variety. Yes – no special rules or guidelines. He has the right to decide what, how, and when to do. This means that he chooses a strategy and controls risks (or does not control them) all by himself. The way it is in life, anyway.

You’d think that in such a situation, not a super experienced trader should take the path of least resistance, but it’s not about Alex. He’s a thrill-seeker, judging by the strategies he’s chosen last time. Spoiler alert – this time too. Alex literally outdoes himself in the risks he takes. But this is exactly what we are waiting for – bread and circuses, aren’t we?

Only in 9 days, Alex managed to almost double his capital and then totaled it overnight. And though he tells you why that happened on the 9th day – this post offers some analysis of both his technique and psychology.

Once a Bear Always a Bear

In the Experiment 1.0 Alex admits that he is most comfortable with shorting. He does not cheat on himself this time either: most of his trades are shorts. 

It may seem strange, but going long seems less profitable for him. He assumes that the cryptocurrency prices are mostly growing, therefore, it is logical to open long positions. Yet, Alex doesn’t feel the right time and price to go long. More so, the most interesting thing for him, as he mentions, is to “sell assets that I don’t own”. That’s what margin trading is, at core. 

It’s just a matter of opinion, but we heard someone once said: “If you short, you are either professional or stupid.” If we had to guess, Alex probably felt both in the last 9 days.

Technicals and Stuff

Alex has chosen a trend following strategy i.e. buying an asset when its price trend goes up and selling when its trend goes down, expecting price movements to continue. 

Whereas Alex accepts that it’s scary when the price goes against you and you can’t do anything, following a trend pays off. 

Ironically, although he calls it “Trend Following”, on a bigger scheme of things, he was quite a trend contrarian. The markets were trending upwards, while he was mostly making gains on intraday corrections that accompanied high volatility.

Another strategy Alex puts into practice is Higher High. The explanation is straightforward: the trader waits for the formation of two green candlesticks on any timeframe. The close of the second candlestick should be higher than the maximum of the first one. Then he waits for the red candlestick and as soon as it closes, he opens a long position. The target is reached when the price moves up at the height of two candlesticks. The stop order is placed below the pattern low or below the low of the first candlestick.

By the way, we’ve published not one but two practical Cheat Sheets with Candlestick Chart Patterns and Technical Analysis Formations. Take advantage of them!

But if only it was all about identifying the right combo of candles on the chart! Alex knows all too well about it. Trading, as much as it is about analytical skill, it is also about psychology.  

And when a “glitch” occurs in the trader’s head, the strategy is of no help.

To Use a Stop or Not – That is a Question 

Almost every day, Alex resolutely convinces himself to use stops. It is a good discipline. It is prudent. A must-have for every trade!

Here’s a curious thing, however: as much as he talks about using stop losses, he doesn’t! And this is exactly what takes him down at the end. 

One thing is to conscientiously understand the importance of risk management. The other thing is to actually use it, especially when you trade with uber-leveraged positions. 

It is psychology! The trader might know what he is doing, what his actions could lead to, and even how to prevent the losses. Theoretically. But when greed and emotion prevail, common sense overshadows. 

One thing is to conscientiously understand the importance of risk management. The other thing is to actually use risk management in trading.

Risking with Profit and Risking with Principal

On the 2nd day Alex mentions that he prefers it much more to risk with profits than to risk with the principal. In simple words, “I feel better if I gain first and then place these gains at risk for further trades.”

The concept of preserving the body of trading capital makes sense. We discussed how keeping the margin of safety – the unused margin – is important in one of the synopses before. In a nutshell, it is crucial to keep a significant portion of capital as unused margin. And that portion needs to grow exponentially higher, with higher leverage you use.  

And here’s where Alex’s “I feel better about placing gains, not principal, at risk” narrative does not withstand the reality. With leverage he used for trading -100x – his gains on the 2nd day provide almost no margin of safety before the principal takes a hit. Remember, there is cross margin for positions within a trading account! A teeny-tiny move in price can annihilate the gains, and now the principal is at risk.

It is simple mathematics, but how little it takes to get to liquidation with highly leveraged positions often surprises even the smartest people.

Sufficient unused margin is essential to protect leveraged positions from liquidations.

What is ROI, Really

On day 8, Alex has shown a ridiculously fabulous ROI, by any standard: over 91% in a little over a week. But here comes a philosophical discussion: how representative is the ROI?

Alex calculated it as follows: [Balance Now / Initial Balance] – 1. There were no additional deposits or withdrawals at that time. 

Seems logical. He realized the profit and it was almost as high as the capital he deposited just 8 days ago. 

Yet, simultaneously his Floating P&L, the unrealized profit, was showing a big (and growing) red. He was losing on the positions opened at that moment. One would argue that incorporating this loss and calculating ROI with Equity would be a more honest way to do it. At the end of the day, if he were to walk away in that very moment of time – that’s what he’d get. 

BUT! Since Alex has his own free will – this is not what he chooses to do at that moment, i.e. the Unrealised Loss can turn around and become a profit in a short time. So, given the impermanent nature of the Unrealised Loss, it also makes sense to only account for what is set in stone. Balance that is. 

This type of dilemma is not only relevant to trading. Think of someone who has multiple properties but barely any cash because all the money is tied in liabilities, like mortgages and loans. Is this person rich because of all the assets? Or is this person broke because everything he earns goes to cover the debt? Rhetorical question…

Physiology and Spiritualism

If Alex does not make it in trading, he surely has a good shot in the weight management business. The way he describes what trading does to him got us intrigued.

Apparently, Alex went through all this once – there were sleepless nights, anxiety, stress. And lots of sweating. All of this combined with a heart-felt mantra directed at the price chart “Please grow.” How’s that for a way to burn off extra calories?

On a serious note, when Alex suffers losses, he writes: “It was as if I had been tied down, beaten and humiliated.” In this state, it is definitely difficult to make sound decisions. And while we may joke that trading can be an innovative method of losing weight, trading definitely puts a toll on the mental and physical state of an individual. And work with emotions and discipline with self-care are important here. So yes, even Bros need to take care of themselves to be able to do what they do. 

But we cannot do justice describing how Alex felt in the first nine days of his trading. The best way for you to appreciate it is to actually jump into his diary! There’s a lot to learn there!

And if you cannot wait to get back to action, go trade: the markets are ripe with opportunities. 

Let’s go onto Alex’s notes:

Day 1

🤩 I’m back in business, challenge again! Any undertaking must have a goal. 🎯 My goal is to double my capital in a month. I have $500 in my account, with 100x leverage it is $50,000. In fact, all I need to do is +1% for all my purchasing power, which is provided to me by CEX.IO Broker. 😅 Everything looks very simple. Even in my head it is difficult to imagine that in fact there is $50,000 in the account 🤪.

🙄 During the time that I trade, I have tried dozens of trading strategies that are presented on the Internet. 🤨 I don’t know how people make money with them.

💁‍♂️ I will follow the trend. I spied on the strategy in the Prop company 👀. Who does not know, these are companies that specialize in intraday trading. So I’ll check it out 👨‍💻.

🧠 The principle is simple, when an impulse is formed and a rollback occurs, then it is worth entering the market for the continuation of the impulse. It works on the stock market, which means it will work on the crypto market 💪.

I have not overcome my main problem with psychology 🤦‍♂️. The desire to win back, increase the risk, move away from the strategy – I still have all this 🙃. But I learned to work with it, I just stop trading when I feel the tilt coming.

🥳 Let’s go, the first trade on XTZ – short – 100 coins! And at the same time long on ETH for half of the lot.

May the force be with us)) and profit)) 😎😎

Day 2

🏃 The start was successful. +$8. It is very important for me to close the first trades with profit 😎. It’s like some kind of superstition))

I took small volumes, so that in the case of a price movement against me, the first loss was not significant 😅. Well, risking a profit is much more pleasant, than risking the deposit. But I need to get started faster, otherwise it will be difficult to fulfill the goal 😜.

😷😬 Trading under quarantine conditions is not that easy. The wife walks around and there are also work tasks. And I want to trade 🙄. As the number of pairs on CEX.IO Broker grows, so does the click-through time for the entire watchlist. And on almost all charts, I can find a potential entry point for my strategy. This is cool 🤩.

😤 Yesterday I’ve realized that trading is difficult, because in addition to trading risks, there are also non-trading ones. For example, last night my internet provider decided to have the maintenance for an indefinite period 😡. Fortunately, there are several sources of the Internet. Good for me as I didn’t place the stop loss)) 🤦‍♂️

😁 Now I have stop loss and take profit everywhere, so the inability to get to the terminal is not scary to me. I look forward to the weekend to have more time to trade 👨‍💻. Excellent day)

Day 3

Today is a more active day 🏃‍♂️. The altcoins moved well. My focus was on UNI 🦄.  An upward movement was good for me but still, most of my trades are short positions.

Intraday trading is difficult. All attention is focused on the chart👨‍💻 and the P&L indicators. I have increased the trading volume and had a 2000 UNI short position. It’s about $ 7,000 😳. My balance jumped like a cardiogram 😱. And my heartbeat was in sync with the change in the position result. Even my hands were sweating. Great feeling 👍. I haven’t felt such an adrenaline rush for a long time. And I also got a positive result! + $ 25 😎. That’s super. I was in a good mood. You need to trade in the morning to wake up 😴. I think scalping can be recommended to people who think that they have a boring life with no thrill.

Following the trend pays off 💵, and placing stops orders helps a lot. I am sure that if I had not placed stops, the result would have been much worse because I either would not have had enough time to close the position, or would have kept it further. And my minus would grow and grow 😨. It’s scary because the price goes against you and you can’t do anything 🙅! In scalping, stop orders are a must. Fortunately, the terminal’s functionality allows you to quickly set them up 👍 if you did not add protection orders 🛡 before opening the position. You can even move them on the chart. It is very comfortable.

Day 4

The weekend is a great time for trading 👨‍💻. No distraction because of work. Woke up early while the family sleeps 😴. Found a few cool entry points. Made good money 💵 with XRP.

But I foolishly lost part of my profit on ADA. Placed a stop order 🛑 too close. Considering that the volume in the positions was not small, I was greedy 🤑 and decided to reduce the potential loss by placing a stop order right below the minimum. Price slid down ⬇️, took my stop order, and made a reversal 🤦‍♂️. Classics. A cheapskate doesn’t pay twice, he just pays… always ✍️. It is better to take a smaller volume and set the stop further. I earned on UNI 🦄 by opening both short and long positions 😎. I like how this asset moves))

In general, I have a positive result without big losses. I have already earned $92. And that’s 18% 👍. I am slowly moving towards the goal 🎯.

Enough for today 🙅‍♂️, you need to know when to stop. And the family wants attention.

Day 5

The winning streak continues💪 The man with a goal is unstoppable!

Although there was not much time to trade, I made a couple of swing trades.

🤔 Can you guess how I made money this time? Again by Short positions. The strategy was as follows: I sold XRP and LINK. There was also a Long idea for ADA, but I’ve closed it ahead of schedule, without waiting for a Stop order.

🧐 Was this idea right? Sure! The ADA price slid down again and only then reversed. It is the coin that you can revise your strategy for and go

Long only after the straits.

❗️I get almost all the big profits on Short positions. Even the thought of moving on to just Short trading only. Working in Long is more difficult for me and feels more unprofitable.

😯 Although it’s kind of weird! The cryptocurrency prices are growing, therefore, it would be more logical to go Long. But I often fail to choose the right time and price for this. With Short strategies everything is different.

🤷‍♂️ Everything is individual! I remember my first trading experience – the most interesting and pleasant thing for me was to sell assets. Maybe it’s just hard for me to grasp the fact that I am selling an asset without having it available, but it is as it is.

❗️In fact, CEX.IO Broker is very easy to use and provides the volume I need on the security of personal funds. But, it happened so that in trading I am 100% Bear and this is my personal preference 🐻

🎯 How about motivation? I noticed that work gets done faster when there are open positions. It works like this – when I want to check positions, I set myself a condition: “You’ll finish it and check it”. Thus, it turns out to work more efficiently! 🧞‍♂️

📝 Was it interesting? Tomorrow I will share my observations regarding the physiology of traders ☝️

  • ROI for today +1.7%
  • ROI for last trading week + 20.4%
  • ROI since the beginning of the trading month + 20.4%

Day 6

Wow, what a day 😳. Bitcoin price is going up, altcoins are going up and down. Today I have faced all the risks that I could only imagine. My minus has even reached $200 for a while 😨. Not only my hands were sweating, but my body was also sweating while asking the price to rise 😂. It was very funny. An adult says “Grow!” 🙏 next to the monitor. It was a long position on Litecoin. I thought since Bitcoin is growing, then its younger brother should do the same 🤔. But it’s not. Bitcoin was going up, but Litecoin was going down 🤷‍♂️.

But then I decided to open even bigger short on Ripple. It was so stupid 🤦‍♂️. As soon as I did that, the Ripple price started going upward 😐. Moreover, Litecoin fell further, while Ripple surged. And bitcoin surged. And the minus surged 😧. It was tough. When the minus on the Ripple trade was already decent, I thought that misfortunes never come alone. And I have opened one more maximum allowed short position on Ripple 😎.

I had $30,000 in all my positions 😱. And I had NEO on sell, ZRX on buy, and LINK on buy. I was waiting for a disaster. But the market calmed down and my positions went in the right direction 🥳. Some of them.

Long story short, here are the results. I have closed two XRP positions with +$166. Litecoin gave me minus $130. And it’s the closing of position at the very minimum 💪.

All other positions showed not so big results.

I had a ton of emotions. Such stress enough for a year ahead. And one thing for reflection came to my mind. I often look at trading and investment gurus 🤴, communicate with some traders (yes, I made some friends in this business). So here is the point. I have not seen 🙅‍♂️ at least one overweight trader. Everyone is either average, or thin, or skinny like me. It seems to me that trading can be recommended as a new revolutionary method to lose weight ✍️. Brain activity is off scale, emotions are stunning, a lot of excitement — all this burns calories pretty well.

Today is a crazy day for intraday traders and I am glad that I had the opportunity to benefit from today’s movements 🤑.

  • ROI for today: +$30, that’s +4.9%.
  • ROI for the last trading week: +26.4%
  • ROI since the beginning of the trading month: +26.4%

Day 7

Well, the first week is behind 📆. It means that I like trading because I haven’t even noticed how the week passed. I think I have good results 👍. The strategy is paying off. The goal is getting closer. And the pace impresses me 🤑.

I didn’t trade much today. There were a few opportunities to go short that I tried to benefit from. I tried to trade UNI\ETH. But this pair looked too sluggish 🥀, I don’t like such things. The LTC short showed the best result for today. And it would have shown even better results if I hadn’t closed the position so early 😕.

I should practice partial close ✍️. Because when I see a profit, I don’t wait to take profit order execution. I close the order at the slightest pullback. I don’t want to lose profit 🙅‍♂️. But you need to let the profit flow. If I had waited a bit, I would have earned much more. It was obvious that the market will go down eventually .

Bitcoin climbed so high and so fast, so a correction was expected. I also stuck with ZRX long position. It seems that the volume is not so big, but I still have a decent minus 😥. That’s what you got if you haven’t placed a stop order 🛡. One mistake and the market immediately starts pressing. I don’t want to close this position, because it’s a significant loss for me 🤔. But I understand that there is almost no sense to keep waiting. The market is falling and I will get even bigger minus. That’s sad 😔.

So I don’t know how to calculate ROI 🤷. By closed positions or by equity. Think that closed positions option sounds better. If you haven’t fixed the loss, then you don’t have one 😜

  • ROI for today: +$131, that’s + 20%.
  • ROI for the last trading week: + 52.6%
  • ROI since the beginning of the trading month: + 52.6%

Day 8

Just one moment, one second and it would have been the end of my trading month 🏁. A few points higher and my position would have been liquidated. But the upward movement has stopped before it happened. Right now I sit and pray 🙏 that the price will go down. And this is just one Litecoin position.

It started yesterday after work when I decided to trade actively 👨‍💻. Just started opening short and long position like crazy.

Everything was cool. Before falling asleep 😴, I closed almost all my positions. Left only ZRX (long) and LTC (short). My equity increased and I went to bed with a smile on my face 😀.

In the morning, the positions I left showed the same result. But then the Litecoin price rally has begun 👀. +12%. And I have a short position. With no stop order, of course. It showed me minus $300 😨. I didn’t want to close the position, so I started averaging it. And came to the verge of liquidation 🤦‍♂️.

I noticed one very cool button — Net aggregation. I knew about it before but did not use it often. It is very convenient with it, as you can find the average position price ✍️. It helps me in setting up take profits.

Since I almost messed up, I should at least tell you about my strategy 📊.

People call it Higher high ⏫. The rules are simple: we wait for the formation of two green candlesticks 🟩🟩 on any timeframe. The close of the second candlestick should be higher than the maximum of the first one. Then we wait for the red candlestick 🟥 and as soon as it closes, I open a long position. The target is reached when the price moves up at the height of two candlesticks. The stop order is placed below the pattern low or below the low of the first candlestick.

Similar thing with short positions.

You may ask, “So why you are sitting with such a minus and averaging the position?. 🤨 It’s simple — psychology. If you forgot to place one stop, then something will go wrong — an unwillingness to accept a minus, a desire to make a comeback, and dull confidence that the market will go down 📉.

If I don’t lose everything, I will describe tomorrow additional rules of my strategy. Some moments I have deduced for myself during writing trader’s diary. Wish me luck 🤞.

  • ROI for today: + $194, that’s + 25%.
  • ROI for the last trading week: +88%
  • ROI since the beginning of the trading month: +91.4%

Day 9

My account did not survive 😔. My positions were liquidated near the Litecoin high.

Feels lousy and depressed 😥. It’s like being beaten and humiliated. It’s hard to lose money. But everything looked so nice. The equity gain was +$250. That’s +50% in a week 😎. But I played too much. Stopped placing stops orders 🛑. The market sees everything. As soon as you start cheating with no strategy, you get a bad result 👎. But if everything is correct and you control your emotions, then the market gives a good profit 💵. While trading according to the strategy, everything was fine.

For those who do not know what happened. I have earned 50% in a week. But because of my euphoria and feeling that I have enough funds, I decided to open the 50 Litecoin short position and removed the stop order 🤦. I did this because I was confident that the market would fall 📉. So the first mistake — I removed the stop order.

Litecoin has surged by 10% 📈 and my minus became significant. I didn’t want to close the position and I decided to average it. Opened another 50 Litecoin short position. Litecoin continued to go up and I continued averaging. It was scary, so every time my top shorts went into profit, I fixed the profit. Minus was still with me. These are two mistakes at once 🤦🤦. First, when the minus rises, you need to reduce the position. Second, do not average against the trend.

My position was 350 Litecoins in short. It means I had a $30,000 short position with about $750 on my account 🤯. This is the fourth mistake. I completely forgot about the rules of risk management. The result is obvious — zero on my account 😔.

Draw your own conclusions. People say you need to learn from the mistakes of others. I knew what I was doing and what this could lead to. I could prevent it 🤔. I could at least reduce the position volume, close a few positions in order to free the margin, and continue the fight. I’m not even talking about that I could trade using a strategy. But greed and emotion prevailed 🤑. This should not be allowed.

If you thought I would stop at this point, then you are mistaken 🙅. I’m not going to stop 💪. I made an analysis of my actions, realized the mistakes, made conclusions ✍️. Today I will rest but tomorrow I will start from scratch 🗓. Without a fight there will be no result, it is not the final ❌🏁. You can earn money on the market and I will prove it. There is still time to fix everything before the end of the trading month 😏.

The fun only begins!  Don’t miss the party — stay tuned!

If you missed Experiment 1.0:

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