2020 Year in Review, Plus a Lesson (or two) About Day Trading, Pt. 2

2020 Year in Review, Plus a Lesson (or two) About Day Trading, Pt. 2

By BitcoinGordon | BitcoinGordon | 31 Dec 2020


Read all of part 1, and now we continue forward...

So, I've got funds on 4 different exchanges and need a primary place that I can trust, has decent volume and liquidity, very low fees, and did I mention a place that I can trust? I've gotten burned 3 times and I'm almost out of chances. The pandemic is now eating away at any sense of normal. Family, friends are nervous, the news is bleak, and numerous parts of town are unsafe, not to mention out of toilet paper!

I find a new exchange I can test, and it is a trusted platform, good email support, but a few drawbacks:

The trading engine is very good and very fair, but the interface a bit quirky. One has to be very cautious to triple check entries to avoid errors.

The spread could be tighter.

Volume and liquidity are very small compared to Asian exchanges, but it is also largely because in the U.S., it would get in trouble for fake volume and wash trades which make up a vast portion of Asia's markets.

There are other issues, but that covers the main concerns. Even though it holds me back from my true potential, I find that I am now scaling at a reasonable rate to out pace the losses mainly in time. I am doing a good job and trust the platform as much as I can.

As a result of a grueling process, I can see a trail of what I would consider very positive things resulting from 2020.

I have a deep knowledge not only of general rules to watch for in a good exchange, but I actually know intimately from firsthand experience how to avoid certain pitfalls, and in the worst of scenarios I have been able to rise like a Phoenix. The current success trend is much sweeter having escaped the clinches of wickedness numerous times. Along with fundamental knowledge, I've privately built a network of contacts that I write and remain in contact with when they need information from me regarding their exchanges, and when I need answers regarding things that I simply have a 6th sense about. I will provide one example.

As you may know, currently there is a lot of fear spreading through the industry in the irony of the company named Ripple, as it is causing a ripple effect across the industry, seeking clarification in areas that otherwise have been relatively clear for decades. "Clarity" seems to be a government code word that really means "we want more control but we haven't figured out exactly how to get it yet". As a result of shedding uncertainty in the name of clarity, the XRP lawsuit has caused massive sell-offs and now one of the top cryptocurrencies is getting delisted or suspended from one exchange to the next. But, did you also know that there has been a massive, unreported money laundering scheme spreading across Asia? In fact, this is at the center of 'wallet maintenance' for Litecoin that has been going for nearly a week on numerous exchanges. This has been covered up in many cases, but it is by diligence that I was able to get the truth from an exchange CEO, speaking to concerns for customers and protecting accounts by placing the notice on Litecoin wallets as 'maintenance' not to cause alarm.

So, 2020 has deepened my senses that it's important to do one's due diligence, but I also feel a sense of honor in seeking to protect fellow investors and traders. Just because a company is big, does not make it safe. Just owning one's keys does not protect them from technical glitches, programming errors, hardware failures and safety breaches. Blaming the victim for terrible things that go wrong in the crypto world is not a solution and is often unfounded. 99% of the people out there will not be anywhere close to as cautious as I've been, and most will never even know the right questions to ask.

As I place all things together, I've found that you have to know who you are as a hodler, an investor, a swing trader or day trader. Know your strengths and play to them. We all benefit from a strong, educated community, but in the end no one knows your circumstances or will be perfectly sympathetic to them, so even if you're an XRP maxi or a Hodl-Or-Die philosopher, there are going to be people that you can value and others you have to ignore the opinion of. There's a cute little slogan that goes "to thine own self, be true" and it's a little bit the point, but even more, I like to think that there is a purpose behind the things we do, and often that purpose goes beyond the things we think benefit us the most. The best plans are those that will impact others in a meaningful way, and not just the individual. A large measure of my trading system is designed around the wish to become financially free to help those around me. It has given me a killer instinct to survive trials in 2020 that honestly were total spirit-crushers.

The biggest take-away I offer you is to know WHY you're doing what you're doing, Study it. Perfect it. Test it to the limits that you determine. If it does not work, simplify, re-define, improve, tighten the ship, and stay at it. Do not ignore the potential challenges, and keep your eyes open to the stupid political climate; it is going to determine all of our fates much more than the awesomeness of the math beneath the crypto projects, I hate to say.

Be loving, generous, a part of community any way that you can, and if you are blessed, smart, and talented enough to have a system that is growing your wealth, do not be deterred. Stay on course, and work hard at it as if your financial future depends on it.

If you have any interest in knowing what works for me, I will break it down into the simplest form. If you do NOT possess the talents required to succeed at day trading, PLEASE do NOT try it! more than 90% of people lose most of what they invest trying to trade. The strongest character is susceptible to FUD and FOMO, and even the technical indicators seem designed to help lure one in. But, if you have the funds to support a steep learning curve, and you are willing to ignore some of the classical advice many will give you in order to do something better than the odds:

Do not do binary trading options. Avoid futures guessing games. Do not borrow on margin. Develop a strategy based only around what you can afford and what you can predict. Use limit orders to establish a base line for as low as you are willing to wait for the price to drop, and how high you design your profit to take. Do not get angry with yourself if your order does not fill because it did not go low enough. That is what is going to happen often. Do not get angry if it went way higher than what you took as profit. Stick to the plan. The number of times you will save yourself from being stuck in a crappy position because you wanted just a little more far outweighs that one chance to get a little more. Again, make the plan and STICK to it!

If you truly are good at trading multiple times a week, even multiple times in a day, choose assets that are the most likely to be around in a year, 2, 3, 4, 5. If the long term technicals make sense, HODL when you do guess wrong, which means design a trading plan that breaks your principle into smaller trades in order to withstand the rough times when you are wrong.

Use the principles of compound interest to gain wealth, instead of riding the ups and down on a single investment. Again, this is ONLY if you actually possess the character traits needed to day trade. Stay current with accounting to prove to yourself you are accomplishing your goals.

Here's how the math looks from a few different angles:

A day trading strategy with large enough principle to support multiple $1000 trades, trying only to earn 1% profit per trade over fees, done 1000 times, will yield you $20 Million. Yes, that's right. You HAVE to have enough principle to keep it going a long time. But, tell me a lot of guaranteed HODL strategies that will turn, lets say $100K into $20,000,000. 

Let's say you have much less in funds, but more determination and time. Then, we look at a substantially smaller principle and a smaller, safer percentage to earn.

At a $100 initial trade size, when you complete 1000 trades at 0.5% above fees (yes, just 1/2 of a %), you can grow that into more than $14,000. Do it 2000 times and grow that into $2 Million. Do it 3000 times and it grows into more than $300 Million! This is compound interest. Unless you have $10,000 in Bitcoin and believe it will hit $90 Billion for a single Bitcoin, HODL'ing is excellent until the true value of exponential growth kicks in. 

There are drawbacks to this strategy.

It requires accuracy that rules out any guessing. You must be nearly perfect in your trades. You may think at a small profit margin it is easy. It is not. It is near impossible. The actual odds of guessing correctly is less than 2%. The other main challenge, is that you cannot simply grow a single trade exponentially. You must account for the need for more capital and for those times you are wrong. Therefore, my strategy involves creating a reserve that helps grow my principle at a similar rate to the growth of my trade size. The good is also the bad; one grows the trade so large, that it is larger than the principle initially begun, so one has to intentionally shrink the trade size to protect the funds needed to support the growth. If one divides this too deeply, it simply slows down something that works. If one does this too little a percentage, a single bad move can ruin the strategy to move forward.

If you have a large amount of principle and want to actively do something to grow it, a multi-sided strategy is absolutely the best. Invest in a few coins you feel the most confident in for a multi-year plan. Use a portion of funds to simply hold through longer times, but establish a point to sell a peak, and buy back in when it drops by a small amount. Even your slowest HODL should have some flexibility to sell high, buy low. If you are paying a fee of, let's say, 1/2%, selling at a nice peak and waiting for a 2% drop is a small risk. It doesn't have to drop much to be a better entry point than simply holding that whole time without increasing earnings. A single holding position with an occasional 1% profit-above-fees, will double if you follow this strategy and do it only 100 times over the course of 2-3 years.

Use a portion of funds to select a few strategy points that you feel confident the coins will drop and peak once or twice a year, and plan to buy in low, sell off high, and circulate that idea specifically for that one part of your strategy. You can use a grid-type strategy for setting up a few trades this way, or just do a single big trade with very little risk range and watch it a little more often. Plan to only buy or sell it a few times/month, 10 at most.

Use a portion of your principle to do a more aggressive day trading strategy if you are good at it, and divide that portion of principle into small individual trades. Pre-determine the profit and the number of times you need to buy and sell to reach your goal. If you do this part correctly, it will end up being 100X larger profit at the end of a few years.

It is true that you learn more from the bad times than the good, but it is also true that the better the game plan, the fewer bad times will be at your own hand. What I have learned over the course of a few years of aggressive trading, is that the technicals and fundamentals both matter, that most of my predictions of what COULD go wrong have almost all happened at one time or another. Unless it is a random pump, small coins with a lot of bragging rights are total crap, and the high yield promises are often, repeatedly over-shadowed by lies and a 'change in plans'. I am still recovering losses from the very, very, very few HODL's I unintentionally held from back to 2018. In total, I have done thousands and thousands of trades, and by choosing coins that did not live up to their claims, there were in total fewer than 30 HODL's out of all of those thousands of trades, but they dropped more than 90% by this time. Unless a pump group takes some of the edge off, I will be selling off the last 2 of those in 2021 at a huge loss. Meanwhile, the main strategy I have worked since second half of 2019 has now remained 100% accurate in strategy, with a few human error losses that bring my accuracy to 99% at this point. By working that strategy, it should not take a long time until it far surpasses the most painful HODL's that never paid off, the linear monthly expenses it takes to get through these hard times, and to quickly grow into the kind of funds that will change my future. If that plan thrives in 2021, I will be sharing that knowledge in more depth. If conditions in the world, economies, politics force my hand to fold despite a perfect system perfected, I will share those woes as well, perhaps at that point more for my good than yours.

God bless you, and I pray to be a blessing to the crypto community through 2021.

Should old acquaintenance etc. Happy New Year!!!!!!

And for now, Gordon Freeman, crypto detective and sometimes super hero, out.

 

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BitcoinGordon
BitcoinGordon

Hi! I'm Gordon Freeman (I hear they made a likeness of me in some video game... totally unrelated... or...).


BitcoinGordon
BitcoinGordon

Welcome! This is my blog for all things crypto, from my day trading and tutorials to general crypto news.

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