Week 4 of the Experiment “Trader for a Month”  took our trader, Alex, through the lowest and the highest points of his adventure. “Week 4” actually stretched longer than one week as we decided to give Alex a full calendar month to trade.  And the Market, showed all its beauty in process: from the days of stillness, when nothing seemed to be moving, to moments of rapid, disorienting price swings. Quite a test for a novice trader!

For the entire duration of the final week, Alex maintained positions that were losing him money. His ability to continue making trading decisions were, without a doubt, affected by the growing and shrinking unrealized losses on his open positions. 

Obstacles in the process: minus 50% from the initial deposit, plus one sleepless night, grains of self-doubt, and tons of adrenaline. Where did Alex end up at the end? Read on to find out!

Style and Tools Used

Escaping the Liquidation

By the end of Week 3, almost the entire Alex’s trading capital is tied up in the positions. He started the Experiment only with the $100 equivalent of BTC, as the initial deposit. And, now, that his positions are carrying the unrealized loss, he is torn between the desire to make it up with better trades and the aversion to actually realize the losses by closing the positions.

This situation closely models what a lot of traders experience, as most of us operate with the constrained capital. Unless we can add more funds to maintain the existing positions, while the price is not moving in our favor, we simply need to absorb the losses to move on and to continue making new trades. 

Alex chooses to up the deposit and adds $100 more to his trading account. Adding the funds gives him a narrow escape from a nearing liquidation as his shorts were on shaky ground when BTC price shot up. With cross margin within a trading account on CEX.IO Broker, more balance provided Alex a “pillow of safety” for the positions to remain open.  

It touches an important concept in trading – the ratio between the funds tied in the positions and the free funds on the balance available to support these positions, Unused Margin. Very often, either immediately or gradually, traders deploy the entire deposit into the open positions. However, having a sufficient amount of Unused Margin is important to allow for your positions to live through the tough times without liquidation. 

And how much of the Unused Margin gives you enough cushion in the trading account with cross margin is a matter of leverage you use. Sometimes traders get surprised by a liquidation thinking that they kept a significant Unused Margin. However, they do not always understand that what is “enough” for an account with 10x leverage will not be sufficient for one 100x leverage. In other words, from the risk management perspective, the higher leverage you use, the higher percentage of Unused Margin it becomes prudent to maintain.

 

Averaging

Strategy-wise, Alex mentioned something called Averaging Down. In a nutshell, here’s what it means: 

Imagine you have a high conviction in a trend and open a position accordingly. But the price moved against you. Instead of just sitting it out, you open an additional position in the same direction as your initial one. This way, you are improving the average entry price for the combined total position. That means, when the price eventually moves where you expected it to go, you have an opportunity to make the entry price even better compared to the entry price you’ve started with. 

Here’s a simple example. Let’s say, Bitcoin is at $9,100, and you expect the price to go up. You enter a BUY position of 0.5BTC at the price of $9,100. Now, the price suddenly drops to $9,000. You do not despair and open another BUY position of 0.5BTC at $9,000. Hence, you have combined 1BTC long that is open at $9,050. Averaged down! That means, even when the price goes back to the initial $9,100, you are already making profits! If you did nothing, when the price returned to $9,100, you would have just recuperated the prior loss. 

Now, it is important to understand that Averaging Down (or Up, in the opposite price movement) is predicated upon a key condition: you have additional funds to open more positions with, see the previous point. If there is no untied capital left – there is nothing you can do.

Additionally, if you eventually turn out right – the strategy improves your average position entry price. And it can give you a better return. But, if the opposite takes place, your increased exposure (the position size) makes your loss bigger. In our example, if the price drops to $8,900, though percentage-wise your loss is smaller (from $9,050 entry price), your total loss becomes larger (because your position is 1BTC now, not 0.5BTC).        

All in all, Averaging, seems to be a good strategy for patient and well-calculated traders.

Psychological Patterns

Trader’s Patience becomes a real highlight of Week 4 of the Experiment. Patience has a far reach in trading, and Alex experienced it all:

  • When he was losing, patience was needed to wait till positions rebound;
  • When he was gaining, patience was needed to not close the positions too soon.

Performance anxiety – the urge to perform, achieve, do something – often comes in conflict with patience in trading. And management of this inherent conflict directly affects trader’s success. Craving for volatility in the quiet days was the most innocent outcome of this conflict. Alex wanted action when no action was happening. 

But what’s more, then trader’s patience is under a prolonged test of the money-losing positions, a lot of powerful emotions come to the surface:

  • Self-doubt: “Why in the world did I think I could be a trader”
  • Resentment: “I cannot stand these positions and hate trading”
  • Self-deceit: “Once I close these, I swear I will only trade according to a strict strategy”.

Traders, self-aware enough to pay attention to these emotions, can learn a big deal about themselves and even use this knowledge to their advantage. Alex mentions how trading opened his eyes to a lot of his personality traits. He even was able to calmly dissociate from his irrational, self-demeaning emotions he experienced.  

Though the nature of trading is often connected to action, to be a successful trader, it is equally important to be able to wait and be patient.

The patience to do nothing is as important in trading as the ability to act quickly.

As cliche as it sounds, patience is like a muscle that can be trained. Take Alex’s example! Though in the beginning, the lack of patience has made him jump from one asset to another, closer to the end he calls himself a “patient trader”. The one who can live, sleep, and work with positions that have a minus. Because that minus is not a final verdict and not a characterization of him as an individual. With one position opened for 18 days, Alex knows that for sure! 

And though we’ll spend more time analyzing the results of the Experiment, Alex has finished it with 30% gain overall! That’s a result only a few professional traders can boast! What was in his head at that time – read in his own notes below. 

Before you’ll indulge on Week 4 trading notes (because they are really good): 

And, finally, start working with the trading tools and make money when the market goes up and down:

And now, onto Alex’s notes:

Day 21

​​(we go from Day 18 to Day 21 as Alex does not trade on weekends)

💭 A terrible weekend 🤦‍♂️. The price didn’t really go anywhere, but hooked my sell order, the one that was higher 😤. Now I have 4 same positions, all for sale 🤷‍♂️. I have money left only for one position 💸, I dumped my capital a little. Well, equity fell much. So in total, I’m in losses for all positions 🥺. During all weekend I was checking is something had happened or not. I’m feeling down 👎. The price threw me a strength test 👊 It is good that the working week has begun. Finally a good distraction 😤.

📖 I understood my problem, it was necessary not to open positions in the same volumes, but gradually increase 🎢. The strategy is called Average Down 🧐. I’ve read that on one forum. When the price moves in the opposite to my needs direction, I should open a bigger volume position. 🤓 For example, if I had the first 0.01 position, then the second should be 0.02, and the third – 0.03 or 0.04 (depending on the aggressiveness of the trader). But the ending of this strategy is always the same, if there is little money in the account or volume is too big 😬.

📊 I decided to do nothing and just wait for the drop 🙈 🙉 🙊. I am currently handing on my mid-term bearish expectations 🤙))

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​​Day 22

💭 I did not sleep almost all night 😨 😓. Before going to bed, everything was fine, the price was below my last sale 👌. Of course losses were like an eyesore, but I somehow got used to it 🙄. I installed a bunch of mobile applications, set there alerts 🚨 for $9,800, $9,900, not to miss a sudden movement. And then 🌚 at night, notifications began to come from everywhere.  The price has crossed the 📈 marks. OMG 🗿. I ran to my laptop in a cold sweat 😨. Logged in at the second attempt. The price was flying up 🚀 and my losses were skyrocketing 😱 😭. I have not experienced such energy and vigor for a long time. It’s a hundred times better than caffeine! 😵

💭 Until the middle of the night I was just staring at the chart. I tried to find information 🧑‍💻 about what happened and thought how to get out of the situation 🥺. At that moment I was losing more than half the capital 🤯. But the price moved a little away from the maximums and I exhaled 🥴. I fell asleep only in the morning 🌞. But I don’t understand how I could fall asleep at all 🥺.

💭 I’m sluggish the whole day, either from the fact that I did not sleep, or because of the night “adventure” . The mood is ruined 🙁. I’ve tried so hard and then fell into a banal trap ☠️, did not place a stop order ❌. I read 📖 that most people lose if they stop placing stop orders. I had the opportunity to fix all the positions on Friday and would have been in a good profit 🤦‍♂️. But I thought I was right, I though I made good money before that and could afford to sit a bit in a losing trade 🤬. Good job. Well, don’t wave your fists after a fight.

💭 This is an experience, it is a very valuable experience! 💡 If you haven’t defended your position, please pay for it 💸. The funny thing is that the market went against me as soon as I took a big volume for sale. Like it knew 😅)))

📊 Now I am thinking about what to do – fix the losses and try to recover the balance 💰, or add some money and wait 💵. If I fix the losses, market will definitely go down)) I literally feel it 🤪.

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Day 23

💭 Yesterday I was thinking and decided to make another deposit to my account 💵.  I decided not to give up and fight for my positions 💪. I took my card and bought bitcoin for another $100 💸.  I bought right at the highest prices, right before the fall 😅))) “Lucky” 🤦‍♂️!  It is clear that I did not have time to sell 😒.  Market fell down 📉.  I’m kind of happy that it fell and nothing threatens my account and balance anymore 😬.  But I’m also a little upset that I did not sell at $10,100 😕.  I would sell at least 0.04 BTC.. it would be great. 

Well, the main thing is that I am not in danger of liquidation 🥳. A weight from my mind)) I was falling asleep in such a good mood 😴.  Considering that I practically did not sleep the previous night and considering that the price returned to my orders, I slept like a child 😇.

💭 Today I decided that I wouldn’t do anything yet.  🤔 I’m waiting for the market to move: if it goes up, 👉 then I’ll sell.  If it goes down, then I’ll close my positions.  It’s good that now there is a financial cushion 👌 for my actions and for making trading decisions.  I just got little scared 😨 and had one sleepless night.

💭 I also realized that I had moved away from my strategy 🙃!  I have been trading recently the way I wanted.  I decided to sell.  Why, why? Where is the stop loss, where is the take profit 😳?  Just became fearless!  Selling because the price has to go.  So it went)) but not in my direction!  As they say, lucky to be alive 🤪. The lesson learned.

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​​Day 24

💭 The day is extremely calm 🥱.  The price is up and down, and up again 📈📉📈.  Although there was a price’s attempt to fall.  I would like to close my positions as soon as possible ✖️ and start trading normally 😎.  Not to worry.  I’m wondering if it’s just me who thinks that once I close these positions I’ll immediately start trading taking into account the risks, sticking to the strategy, following the rules 😅😅. Or is it newbies’ syndrome?  😆

🤔 I also wonder what other syndromes are, so as soon as I start feeling symptoms 😷 I  understand that I read about this, it is a bad idea 🚽.

💭 It seems to me that the market gave me a gift 🎁 in the form of a half deposit when it went down, but I did not use this gift 😤.  It was possible to fix 📌 a slight loss and work on from scratch 📃.  But no, I’m waiting for a bigger fall 🙃.  Inexplicably.  Now, if I put take profits and calculated everything in order to fix myself at zero, then I think I would have closed on that strait.  Okay, time to wipe the snot and get it together 🤧, but what if, but if I had this or that 🤦‍♂️.  Such reflection has not given me anything good yet ☠️.

📖 Today I worked on finding a more accurate strategy. Otherwise, moving movings with stochastics is profitable, but there are few signals and they are late 🤷‍♂️. You can trade this strategy, but you still need an additional, otherwise, I’ll start to think of entry points myself 🥴 again. 

Most strategies are very strange 🤨.  But it seems I chose that I will trade more.  A  strategy that works like a machine, whenever you turn it on. You turn it on, get result, and you’re done 🪓✔️.  Walked away and do not worry about your position.  Plus broker.cex.io allows that, because the spread is very small, most often the spread is almost zero 👍🏼. I will start trading it either tomorrow, or when I close my old positions.  In the meantime, I am bearish, mid-term investor, although I was a trader 🤪))

💭 When you got into such a 🍑, you are already afraid of risks and miss potential opportunities in the market 😒. I need to get rid of these positions quickly, I already put takes in case of night movements)) Takes are as always optimistic 😜. And price goes not in the desired direction… who buys so expensive? 😳

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Day 25

🤓 I spent the entire day testing a new strategy on historical data. And only at the end it hit me: I have a demo account! I can test my ideas with “paper money” and no risk to my funds. 🤙😃

That’s exactly what I’m going to do: will be testing my new trading ideas on DEMO account and use strategies that work for me on the LIVE account. In future, I’ll open one more trading account for super risky stuff. And the other one will be for relatively conservative strategies with risk management and all.

😴 Trading gets boring when you got no unused capital and it’s scary to make moves because I got minuses in my positions. But I need to move on, I get it. There are wins and there are defeats. I guess the one who keeps going is the one who wins at the end.  🥊 It’s not how hard you hit, it’s how hard you can get hit and keep moving forward… That’s how I console myself.

What I understood is that I need to work with risks. I omitted a Stop Loss once and all my prior good work is gone.  💨

Week 4 bottom line:

🤷‍♂️Almost no new open positions (shorted some more though). And no new closed positions. So the realized profit remains good. With unrealized one – different story. 😶

My total deposits are 0.02135 BTC. My Equity now is around 0.02. So, if I closed everything now, I’d end up with a small minus. That’s kinda sad. 👎 But I’m not closing the shop! Balance-wise, I still made +4% over the period. ✔️

Couple of my positions (below) are SUPER close to profitability👌. Fingers crossed and I am waiting for BTC to dump. 📉

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Day 28

(we go from Day 25 to Day 28 as Alex does not trade on weekends)

😎 🤘 Trader is a cool profession. I had days off and in my free time I could open a platform and see 👀 how my investment was doing 📉.  💲 Actually, it’s enough for me now only to see the price and that’s it, I can already draw a chart in my mind 👨‍🏫 📊))

☀️ 🚴‍♀️ 🚴 On Sunday, while cycling with friends, Bitcoin dropped to $9,400.  I looked at the phone 📱 when the price was close to this point and it gave me strength)) seriously, I had a new breath. I already 💡 created a chart in my head where bitcoin dropped to $8,900 while I was riding 😜.  That’s why trading is cool 🤩 👍.  I ride the bike – the price drops – I earn money 🤑 💰.  This is a business that brings me money without my participation.  But the price quickly turned around and returned to its previous values ​​🥴😑.  This upset me, but it happened after the bikes))

Falling to $9,400 is a very cool opportunity to buy. As it turned out 🤷‍♂️.  But what I noticed – the price began to drop less in percentage. This means that there are less and less opportunities to earn money. 🧮A trader earns when the price changes ⚡️.  If the price does not change, then the trader does not earn.  Trader needs to wait for the movement in the market 🌪, then there will be more opportunities to earn 🔎.  And I’m already a little annoyed that the price does not fall 😤.  I’m already tired of having my positions open, they annoy me 🤬.  I have open positions at bad prices.  🙄 If I take larger volume now, then a drop in a couple of percent will bring everything to zero, or maybe to small profit ➕.  But I’m little scared… 😕

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Day 29

🙄 When there is silence in the market, no matter how cool the strategy is, there is nothing to make money from. I made several ETH trades today 👨‍💻. It moves like bitcoin 🔀. And I have bitcoin positions so not to get confused I decided to try to trade other assets 📊. At night there was an impulse down ↘️ and I thought that it would continue 🙈, so I went short. It’s probably stupid. I have a bitcoin short and I also opened ETH short 🤷‍♂️. Well, it went in my direction 😎. But in dollars it fell only for 2 dollars. Then it came back and closed my position at stop loss ✖️. And fell again. When there are no unidirectional movements ↕️, it is probably better not to fuss. The loss is small, but still… 😩

👀 I feel that soon there will be a big short. The market is too calm ☀️. But if there is a strong upward movement, then I will not survive 🥵)) More precisely, the deposit will not survive. We’ll see 🧐. In any case, this is an experience. I need to train the ability to wait for the right situation 🙌. I feel a little depressed. Probably because of the weather. Hah, whom I am fooling, got into obscure positions, and that’s why the mood is not very good 😬 🥴. I don’t know how professional traders handle that.

📖 I read today about supply and demand. I need to find a tool that will show how much traders buy and how much they sell. After all, it is the actions of participants that drive the price, not the 🧠 indicators. Why aren’t these members doing anything? 🤯 Trade turnover has fallen dramatically, it can be seen on the histogram.

Bitcoin just tests me for strength, but I will not give up 💪, I will fight for my positions) I will wait for a profit for my shorts! 🙏 💰

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Day 30

🥳 Finally something good. Today I bought ETH. 🧰 I bought with all the money that remained available on the account. And made profit!! 🎉 🤑 I caught a great move 🏄‍♀️. And that’s not all. 🙈 From way back I had bitcoin sell order at $10,009. 📊 I opened the platform, looked at the chart, and the price just showed a maximum of $10,009.4. This is just unreal!! How perfectly the order has been placed, how lucky I am! Luckily I did not cancel the order, luckily the price reached the mark I needed 🙊 🎊. And luckily I bought ETH. It made me profit and the order was opened just for that profit. 💸 According to my calculations, there was not enough money to open a position at 0.03. ETH closes at take profit and bitcoin short opens. Awesome! 🚀 💣

🤨 Why I decided to place an order above the level of $10k? I do not remember. According to all the canons and axioms of trading, you need to put it under the level, I already learned this 🧠. And I also took a larger volume)) Now the chart is a mess. I have positions everywhere 😱.

👀 Honestly, when I saw the impulse, I thought that bitcoin will go to the moon. But it rolled away and now I’m waiting for the fall even more 📉.

😜 👍 Mood is very cheerful. Now I have a much cooler position and the fact that I stood below $10,000 means something. We’ll see tomorrow)

I don’t know whether everyone does it or not, but when I close these positions with profit, I’ll celebrate 🍾. And after that I will trade only according to the strategies. I already have two of them in the arsenal! 💪

 

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​​Day 31

I have little margin. 😬 It’s scary to open new deals)) I’m still delighted with yesterday’s situation.  Sold at the MAXIMUM!!!!  🥳 🤩 I already have a good profit on the top positions 🤑, but I will wait until I have all positions profitable💰.  Although I want to close them and get profit that I already have 😋.  How many times in a row there has been such a situation that the price goes down and then up 📉📈.  Only on those swings I could earn a fortune!!  But I am a patient trader 🙃.  I am waiting for the realization of my idea.  💡 And the idea is to make a fortune on the drop.  I have a feeling that the fall will begin and a good profit can be made 💸 💸 💸.

👀 Everything indicates the fall.  Or am I trying to interpret everything as the fall sign))) Probably, my brain is fooling me 🤪.  I’m in positions, I really want the price to drop. That’s why everything I read, everything I see indicates a potential drop ⤵️.  Critical thinking should work, but the brain does not filter information, it absorbs and distorts 👻.  Is it so for all traders.  How to protect myself from this?

🤔 In any case, I need a drop)) Maybe I just want it, maybe it’s really obvious to everyone.  I see almost all signals as an opportunity to open a short position)) ↘️ ↘️ Closed below the moving average? 👉 This is a short.  Strongly grown? 👉 This is a short. Updated the local maximum, it seems like this is a sign that the trend will continue, but for me this is manipulation and removal of stops))) 👉 This is also a short.  It’s crazy how much new you learn about yourself when you start trading 😅.

I think that everyone needs to try trading in order to learn more about their dark sides 😈.  Greed, faith, hope, anger… So I was greedy two weeks ago and did not close positions with a small profit – and got huge losses. I need to work on the psychological aspect!☝️

Update 🔥

I waited for the fall of bitcoin! 🎉 It didn’t reach take profit, but equity is already positive. Already +14% to deposit 💲. I worked out the loss and returned the profit that I had previously earned 🤗 😎

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Day 32

😴 How cool I slept today! I did not worry about the position, I was not afraid to wake up and see zero 😅 on the account. Finally, Bitcoin fell ↘️. And I knew, I felt, I believed in its fall 🤞. I had not closed the positions because I hoped that at night there would be another wave down 🌊. That’s why I set take profit ✊. It didn’t go down right away, but it’s fine, I’m a patient trader. I am waiting for my goal to be achieved 🙄.

Moreover, it is very pleasant to have profitable deals. I’ve counted a hundred times how much I’d earn if the price drops 🤑. Although I’ll be honest: it’s sooooooo hard to deal with your greed. When I saw yesterday that there was a fall and I already had a good profit, I barely kept myself from not closing my positions 💰. At the last moment, I clicked Cancel ❌. Maybe I should have closed them… The price went up but I still have profit 🙏.

🤫 But here’s what I noticed!!! Now all the signals in my head are to buy 💡. Seriously! Previously, when I was having losses, everything I saw indicated a fall. Now if any movement is against me, I have a feeling that 🥵 I’m stripped, robbed, that I urgently need to close my positions before it returns to $9,900 🥴. I opened the daily timeframe 📊, and there the price is on the moving and it is support now and I can buy from here. On smaller timeframes, the uptrend begins…

😭 How much it will hurt if the price comes back higher. I had such a chance.. To close at the price of the first sale and get an excellent profit. I need to pull myself together 💪)) I’ll sell!! I now have free margin and I will sell more volume a little higher 👨‍💻)) The impulse will continue, but I’m not completely sure on that 😅))

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THE LAST DAY of our trading experiment

A whole working month!!! A whole working month I has been trading cryptocurrencies 😱 🥳. I managed to trade almost all assets, with some I earned 🤑, with some I only lost 🙄. I managed to sit loosing more than 15% of capital, and managed to earn 30% to capital 💰. 💻 I did a lot of work during a month, 📰 read so many articles and posts that my head exploded from all the information 🤯. I learned about the new world 🌐, a world where money are hidden in plain sight, but there are many traps around 🕳. They are invisible because they are in my head. These are psychological traps. I still have to work on them 🧠.

✔️ Today I have fixed all the positions. The price has not reached my take profit. Only 4 dollars!!! 😳 But I have a question: what did I think about when I set take profit right at the round number 🙃? It’s not right, I had to set it a little higher. I could set at $8,910 and everything would be perfect 🤩. And I fixed above $9,000. But still, the profit for the trading month is excellent. Not every newcomer can hold out for a month. And I also managed to make money 💪 😎.

🔙 There was a time when I was on the verge of liquidating the account, but I managed to ➕ add money to the account in time. And it was the smartest decision 🤓! I got money for maneuvers and I was able to short bitcoin at the very maximum! If I hadn’t added the funds, the result would have been much worse 🤭.

🌟 I got tremendous experience. Sleepless nights, and a bad mood due to negative deals 😖 or my stupidity 😩, and euphoria after a series of profitable trades 😃, and the enjoyment of the work done and the result 😍. It was awesome. It was cool 👍. The first step is always the hardest 👀.

Trading has already become an integral part of my life 👨‍💻. This is still a hobby, but I will try my best to transform it into a business. Trading is a unique opportunity to work for someone and simultaneously build your financial freedom 🦅.

Let’s fix the result:

🔹 For all the time I have deposits for 0.02135.

🔸 Now the balance is 0.02811088. Growth + 30% to the total amount of all the deposits

🔹 The longest transaction is 18 days. The shortest 3 seconds))

EARNED ON SHORTS! 🔥