Trading Strategies

This will serve as quick start guide for those that are interested in trading and would like some strategies to try.

Check headers for what is to come as I will just release it now and add updates later. Roughly every week or so.

1.     Trading Tips

2.     Trading Patterns

3.     Securing Trades

We will start things off with a couple announcements:

DISCLAIMER!

I AM NOT A FINANCIAL ADVISOR. All OF THE INFORMATION HERE IS ONLY FOR ENTERTAINMENT PURPOSES.

AFFILIATE DISCLAIMER!

THE ARTICLE CONTAINS LINKS TO EXTERNAL WEBSITES. I DO NOT OWN THOSE WEBSITES. THESE LINKS ARE CALLED “AFFILIATE LINKS.” WE MAY BOTH MUTUALLY BENEFIT FROM YOU USING THE LINKS WITHIN MY ARTICLE. IT WOULD BE MUCH APPRECIATED IF YOU USE MY LINKS IF YOU PLAN ON VISITING ANY OF THE WEBSITES LISTED BELOW.

My Recommendations:

1. Do not use trading as a get rich quick scheme. Use proper risk management to grow your portfolio.

2. Make use of tools, technical analysis and/or enlist support to help you make winning trades.

3. Do not be afraid to close trades early to secure profits.

4. Trade on the 1 hour chart or higher.

5. Do not short in a bulls market, and likewise, do not long in a bears market.

I will start by addressing:

1. Trading Tips

1 A. The Trade Mentality

1 B. Winning a Trade

1 C. Losing a Trade

1 A. The Trade Mentality

Consider this section very carefully:

Trading may not be for everyone. It takes a certain mentality and patience. Your margin is certainly a factor here, but you typically cannot expect to win that much from a trade unless you’re pouring thousands into your trade. If your position size is as large as in the thousands, then you really should consider making sure that you use proper risk management. A full-time job takes about 8 hours a day. Perhaps winning a trade could take just as long – if not longer. With that said, think about whether or no if trading is right for you.

• How should you start trading?

Use a demo account or just walk through scenarios to see if your strategy results in an ROI  (Return on Investment) >50%. It should be higher than 70% to really be acceptable. Most traders I know have an ROI of 80-100%.

• When should you stop trading?

If you have been trading for a while and you lose more than 50% of your trades, then you should probably stop trading.

If your ROI is negative, then you are losing money and should probably stop trading.

1 B. Winning a Trade

Another short and helpful section.

Just consider this scenario: You take the time to carefully plan a trade which includes some technical analysis and asking the opinions of other traders that you know. You conclude a good long entry point and a closing (short) entry point where you will take profits and end your trade. The market is open, and you open your long position. The trade goes towards your entry point and you exit your trade and take your very high and well-earned profits. The price continues to go up and you think that you can continue to make more money if you re-enter the trade. You do this and then the price reverses very fast and you lose more than the profit you made. Lesson learned. Only make the trades that you plan and do not re-enter a trade since this adds the unnecessary risk of turning a winning trade into a losing trade.

1 B. Losing a Trade

I will assume you read the above section.

You enter a trade just as planned. You have a stop loss which is the amount that you are willing to risk. The price reverses directions and hits your stop loss. It reverses again and you re-enter the trade and adjust your stop loss for that possible reversal. The trade reverses direction again, and yet again, you are stopped out. This may not be the formal definition of chasing the market but is my own definition. You should probably not repeatedly re-enter into a trade with the assumption that you only made a small error, and your next entry will be the correct entry. If you are stopped out, then you have lost that trade and your loss is the amount that you were willing to lose before you entered that trade. Live to trade another day.

2. Trading Patterns

A long position means you are hoping to make profit from the change in your upper closing price to your entry price.  You may use either geometric patterns or technical indicators (I use both). Consider the following long position scenarios (not comprehensive)

2 A. Geometric Patterns

2 B. Technical Indicators

2 C. Fibonacci Retracement

Prices tend to retrace. This occurs over the daily range. The price retraces from the beginning of the movement (the bottom over the curve) to the end of the movement (the top of the curve). You can get a better curve by switching to the minute chart and using the alt + F Fibonacci tool on Trading View and drag from the bottom of the curve to the top of the curve. Lock in your short exit and long entry for 0.5. BTC may tend to go down to 0.786 or even 1. The retracement is invalidated if the price closest past 1.

If the price is currently on the rise and you lower your margin then you may consider entering at a 0.236 retracement such as the Bitcoin example shown below. You can see that the price bounces moves along the 0.236 for a while before breaking out higher.

You might want to target between 1 and 0.786 if BTC is crashing. The retracement is invalidated if it moves beyond it.

Fibonacci retracement is typically considers the closing price values and are valid for high volume markets. You might end up carrying negative PNL if you enter on the wrong retracement level, but you can still win the trade if your analysis is correct and you are properly managing your leverage-margin ratio.

2 D. Ascending Triangle

2 E. Head and Shoulders

2 F. Needle Formation

2 G. Descending Triangle

2 H. Double tops

2 I. Symmetrical Triangle

2 J. Double tops

3. Trading Plans

3 A. Leverage

3 B. Margin

3 C. Securing Profit

Use the information from the long and short positions on how to find entries and exits of the market.

This section is necessary to help you secure profits and control your position.

5 A. Leverage

Leverage: It is like a multiplier to your trade. That is the plus side. The down side is that leverage is also like borrowing and that multiplier, meaning that 20x can also go in reverse to -$ if you let the trade run in the losing direction. If your balance is $10 then you will get liquidated up the price reaching -$5. Liquidation typically occurs at 50% margin rate. It can be as low as 0% for some platforms. As a beginner, definitely do not try trading above 20x leverage. You can also try spot trading cryptocurrency which is no risk of liquidation. It is possible to trade with leverage in the 100-150x range. Perhaps even higher depending on the platform and type of regulations. Trading with higher leverage requires that you look at a smaller timeframe while still considering the larger time frame and opening your long position right at the bottom or opening your short position right at the top. It is necessary to use much less margin if you use higher leverage.

5 B. Margin

Margin: Creating a trade that has leverage which will limit the number of trades you can make based on how well your margin is doing. That leverage has a maximum margin ratio that you can read more about on the broker’s website. In general, I would recommend that you not make more than one 0.01 trade for every $20

5 Trades for every $100

You’re doing well if you make it above $100, but continue to manage your risk the same way or even increase the risk management.

You may want to have a stop loss and target price on your trades as well. These can be adjusted while the trade is open on Meta Trader.

There is a margin to leverage ratio to consider.

Example: If you use 100x and start trading BTC isolated contracts with $500 then the maximum that you can put in your trades should be $10

If you use 20x and start trading BTC isolated contracts with $500 then you can put a bit more in, perhaps up to $50.

Upon a 5% price movement:

You stand to make $50 from your $10 trade at 100x

You stand to make $50 from your $50 trade at 20x

If your risk was consistent then you would put in $10 at 20x and stand to make another $10.

Leverage has its benefits, but it is necessary to trade to secure profits when using leverage.

5 C. Securing Profit

Example: You open 3 $10 trades and you close the first one at a profit of $20. That's about breakeven + the trading fees. Then you could close the next at $25 and see if the last will run to $50.

If you use the trading strategies properly then you secured breakeven, closed into profits, and won your trade.