Bitcoin Forum

Started this thread after a couple of the events I faced.

The first one was about a Chinese crypto fund management firm founder lost about 2,000 bitcoins in a 100x leveraged trading. Then he committed suicide.

The second one I was told in another thread:

"I already stopped.. I lost almost EVERYTHING… All my crypto and fiat funds… I was always believing in crypto and was buying ETH and BTC at the bottoms and the price was increasing. Even when the bear market reduced the value of my portfolio I didn’t give up.

Then the story was quite pleasant, with the market recovery I was actively speculating and increased my deposit from 0.02 BTC to 0.2. I was really euphoric. That was the time of my graduation and I was thinking to cover my tuition fees by my profits in crypto. I has trading for hours. The feeling of happiness came to me so quickly. And in the same mode it gone…

That time I dot known with leverages. Started trading at Bitmex (I see your screens are exactly from there).
So, I was confident in my strategy. I earned some more money and started my margin trading. That was a mistake. I did everything as before, but with one unexpected market movement I lost everything. Then started a revenge trading. And one more mistake followed. Willing to get back my money I used the ones I was saving for years… What I got is margin call and the one more margin call. The last money was lost tonight… What is left for now is zero. Zero deposit and zero desire. Seems like it is the end of my crypto trader career. Overall, I lost 1.6 BTC, which is probably  not a lot for you… But for me it is everything since I have just graduated. I feel really suppressed  writing it and sometimes I feel like I’d better have killed myself… I don’t know what to do."

We broke the situation down and the author is slightly recovering the deposit.

****

That is a really really often stories. Leverage isn’t as simple as many portray it to be. Be careful

I was asked to share the steps to undertake to copy with drawdown.
Here I wil also write on the reasons and the ways to prevent such cases.

****

Feel free to share your stories and ways to recover the deposit/stay profitable.


Follow me on Twitter to keep up with the latest trades, get price analysis and other trading hints:
https://twitter.com/MarkRobTrades

MAJOR REASONS


1) MM&RM violence (absence?)
2) Psychology (revenge trades, greed, tilt)
3) Wrong position sizing / leverage

P.S. 95% of traders lose because of that (!)

Aw I had a similar story a couple of years ago. Thx God I had good friends to stop me at a right moment...

Yeah. It was a terrible revenge trading. Since then I put harsh limits on my daily losses.

What are you suggesting in case of losses?

I see victims of margin trading all the time; this particular Reddit thread is a bit old but details a guy who kept shorting Dash until he got margin called for something like 150BTC when the price of the coin just kept going up. Thread is here (click for link (https://old.reddit.com/r/ethtrader/comments/606fz4/my_final_margin_call/?st=JWVD0IHL&sh=865f2cc4)). Pretty good takeaway from that thread is a market can remain irrational longer than you are solvent, especially in cryptocurrency, and you should never get married to a position.

A lot of people are also essentially gambling without a trading plan or a risk management strategy. If you have a good risk management strategy you can actually afford to be wrong quite a lot and still be successful.

High leverage is deadly look what happen to Chinese crypto fund management firm founder that lost 2,000btc because of 100x leverage. What will you do if you losing that huge amount of money?
Being a trader is not easy you need to be positive all the time dont be stress if you lose your trade. I'm here to this thread to observe what will you guide if you losing money like what happen to Chinese trader.

I don't know... Interested in what exactly happened with his trade. Probably stops did not work. If I were him, I would use a more reasonable leverage. Or position size...

Yes, that is a major problem. Looks like before starting trades the users are to get a lisense on trading, passing test on basic risk and money management

Trading alone is very risky because it can either make or break you which means that if you trade accurately then you have higher chance of return but if you only trade by just using your gut feeling or whatever then you might lose everything like the one in the story. In margin trading what made it more difficult is how to handle losses most especially if the leverage that you chose is high like 100x, yes it can give you high profits but you have to make sure everything will go as you planned, before entering in margin trading don’t bet everything try to test it by investing small amount to check if your strategy will still work, the market is unstable and the strategy that you used in the past may not work at present times that’s why you always revisit your trades for you to come up with better strategies if necessary. The market is always changing so don’t be too confident with all you strategies to work all the time.

That what I was writing as the suggestion to act in case of drawdown in the other thread.

5 SIMPLE STEPS TO RECOVER FROM DRAWDOWN

1) Accept that you are losing. It is an integral part of trading. The earlier you accept it, the more money you will save
 
2) Analyse. This is what our trading journals for. I often make screens of the trades to look through them and understand what the reasons for the failure are
 
3) Cut your losses. Part by part reduce the position which causes your drawdown. Make it insignificant for you
 
4) Having got rid of the losing position, you need the recovery:
4.1) Minimize the position size. It would not be so stressful (if you feel you are in tilt, stop trading for some days)
4.2) Understand what your best strategies/tools/trades/markets are
4.3) Use them only. Be it one trade a day or a couple of days. But it should be confident and perfect
 
5) Try strategies:
5.1) Scalping
5.2) Strong trend would be your true friend that time
5.3) My fav pyramid trading (increase the position step by step) and reversal (take profits by several steps)
5.4) Manage stop losses (you can use breakeven strategy), but not rush into it, cutting profits. This point should be applied in a very careful way.
 
Actually, these rules and strategies are applicable in any case. An effective way to cut losses and make more profits with less risks.

May you please explain that pyramid trading in detail?

Sure. This is one of the effective ways to maximise profits and cut your losses. In brief, the position is enlarged step by step, opening more and more positions if the price goes your way. Thus, in case of success you have more profits, and in case of failure you lose what you risk in a current position.

Here is the illustration I find one of the best to explain pyramid trading illustratively.

https://i.postimg.cc/qRhcZLky/Pyramid-trading.jpg (https://postimages.org/)

Trading is a personal decision and no governmental body will impose certification of skill in it on anyone except the traders willingly approach a body in charge to examine him and certify him or her for such. 

There are lots of these tools out there, and that is why a trading platform would always put demo practice in place for any intending trader to use and get acquainted to trading platform and practice to the fullest before engaging the real live trade in other to avoid trading in a premature way which is the best way to avoid future losses when you get full knowledge.

Definitely. That is the nature of trading. By the phrase above I meant that sometimes the simple things are ignored by newbies and it takes time and money to get it. That's normal stuff for trading

The problem for a beginner trader in my opinion is skil, emotion, MM. Beginner traders are more likely to have a little knowledge so that many losses are generated, so therefore take advantage of the best demo account to improve skills.
Middle traders are more likely to be unable to hold back emotions and look after MM, I think if you are a beginner trader it is better to learn gradually.

So far I also often lose, even the value is not small but from there I get valuable experience, and experience is my best teacher in trading.

Tend to agree. Losses are an integral part of trading and learning. You can have brilliant tutors, but without your own experience you will still be a newbie

Yes, I anticipated the risk of this type of transaction and it was really dangerous for new people. You know, there's something called whale signal. When so many people place money at a certain price, exchange exchange companies will notify whales and they can manipulate the price of BTC back and many traders are not aware of this.
it is completely a trap and it is not for inexperienced people. I will never engage in margin trading because it is a whale game.

Yes. Interesting point. Have you had an experience of margin trading?
Personally I cannot resist such a temptation. But tread margin trading carefully. This way, it is not so dangerous.

There are actually ways to go with temptations wisely

The key is Proper risk management

Protect your fund by setting up stop losses, Lower Leverage, Look at Risk Reward ratio if its worth entering a positions

I am a Margin player.
https://imgur.com/ngIOuss
For me, to win the market.
Follow the trend, read the news and do not catching high.
believe what you see, most of the time, people get control by emotional.
FOMO will make you lose your money.
Over prediction will make you lose your money.

Just follow the trend and your feeling  ;D

Margin trading will always have victims, there will be people who put too much leverage on their trading and they will lose because bitcoin is a very volatile currency and it will always go up and down in small numbers when you least expect it, so there is no way of stopping people from losing their money on high leverage.

What you can suggest people is to keep the leverages down if they really want to which I think they don't even need to since bitcoin is already giving you a decent profit on no leverage at all, you can simply have bitcoin and put it on a wallet and wait and you can double your money easily, if you doubt it check out people who bought at 3 thousand levels and now selling about triple that amount. Of course these are the only two options that have less risk but less reward as well so some people won't even listen.

I don't do margin trade and that is because I have tried it in forex market and find very difficult to make profits. When I came into cryptocurrencies trading I tried to reduce my risk as minimal as possible and in that I don't used more than 2% of my capital in day trading and the remaining amount is for holding. Margin or leverage trading is not much different from gambling and it is very impossible not to make loses when you are gambling and so it is in margin trading! However, the trend is always our friend and the earliest we understand how to draw trendline and interpreting some candlestick pattern,  the better it will be for us in trading.

It seems crazy to me that people invest so much capital into margin trading. IMO, the benefit of doing it is that you don't need to invest and risk as much in the first place. I think the key is to be 100% comfortable with the fact that you could lose it all and decide whether the potential gains in the outcome of a successful trade is worth the risk of losing it all if unsuccessful.  It is essentially a gamble if you use as much as 100x because a price action of just 1% can liquidate your position near instantly.  I say either don't invest what you can't afford to lose, or don't use high leverage. If you wanna risk $100 for the opportunity to turn it into significantly more, then, by all means, go ahead - that seems like a fair trade-off to me. Just be aware of the risks. Also, you could try to hedge with an opposing position if possible.   

Also the problem is that most people specially newbie or just new to trading do hurry up on doing margin because they do
saw that making money or profits is way too big compared on other system of trading like swings/trends etc. but they do lately
realize that it isnt really that simple and that do really cost them money.

A lot of people make big mistakes to be sincere. A lot of people has destroyed their life by this belief that cryptocurrency is everything and the future. Don't be a fool, cryptocurrency is no future. Yes a lot of companies/institutions are getting involved, not because they think it is the future but because they want to make profit and that's all. So don't be deceived. Trade wisely cause cryptocurrency is a very risky business and when you mess up, your life is gone. The second story got me thinking the author is a very greedy person. He had two chances to stop but he refused and kept on, and now he feels like killing himself. That's very stupid. He lost the first one, came for revenge and lost, then he decided to pull out the coins he was saving and trade with it as well? Like who the heck in his right senses does that? If others does it, then not me… margin trading is not easy, don't be a fool. Yes a lot of money can come from it, but do the one you can do and save your money.

Never tried Forex. Could you please tell more about your experience?

Exactly. They consider it as easy money. Btw, I guess overall approach and the way newbie and experienced trader trade are completely different

Definitely. As trading becomes more systematic, the life and mindset become so as well.

STOP-LOSS

This is an issue I was asked about in another thread, but find it appropriate to post the answer here as margin tradins is all about risk and money management

1)   ALWAYS set stop losses (obviously, but still)
2)   The base for your stop is not a book, but the current pattern, market state & your strategy:
-   Look at highs / lows, strong levels
-   Consider volatility
-   And volume
-   Pattern size
3)   Do not link stops to beautiful numbers (8000, 9000 etc). Just calculate it
4)   Calculate possible risk you can afford in advance (this is about the position sizing also, as well as the next point)
5)   Calculate risk-reward ratio in advance

Sometimes I move stop losses to breakeven, but this is a searate issue and should be treated with extremely high attention

Or set your stop loss in a state that invalidates your Trade positions  ;)

I personally move my stop loss when its already in green portfolio state, protecting my gains

Yeap. Good strategy, but sometimes it cut potential profits. Anyway, you  stay profitable, that's good enough

I never get it myself. If you have $100 to trade, then trade with $100. Why would you ever want to pretend that you're trading with $1000? People forget:
To make profit as much as if you had $1000, you also have to risk that when you make a loss, you make a loss as if you had $10.

It's the same as borrowing money. Why would anyone ever borrow money to trade just makes me wonder. Trading is high risk as it is and the stats keep reminding us. But people just refuse to learn!

Yes. feel the same
As I understand lots of patience is needed to do successful margin trading

Risk management is without a doubt the most important aspect of trading, many think of entry and exit points as the most important but even with a winning strategy if your money management is nonexistent then you will not make money, there have been studies that show that getting in the market at random but with a strong money management strategy can be enough to produce profits, also when we take into account the huge volatility of this market adding leveraging on top of it is an invitation to bankruptcy.

The higher the leverage the higher the risk that is why it is better that you are well versed in trading when you enter leverage or margin trading. Margin is good because it can give you big profits if you trade correctly but if you failed and made a mistake then you could lose everything. You have to really keep an eye on the market to make sure your win and if you think the trend may go down then exit to avoid major losses

There is a theory on the ratio of the position size or leverage to profitability. It is not linear. The thing is to find optimal leverage/postion size.
You may have the same profits having x5 and x100 leverages, but in terms of risks these things are really different, obviously.

What is this theory? :)

You can find it here:
"Money Management Principles for Mechanical Traders" by Ralph Vince
Valuable book

In some situations losses are unavoidable. I think margin trading is for professional traders only.  I, as an amateur, stay away from it.

I suppose losses are an integral part of any trading strategy

I have read that article where a Chinese person who had 2000 BTC portfolio, lost everything. I was shocked and at the same time weirded out with the happenings because a professional trader wouldn't let that happen. He should know the risk of margin trading. The x100 leverage wouldn't be friendly even in a small way. It's a matter of the fact that you should know how much you have and how much are you risking.

It's all about the mental state that you should have. I know that losses are pretty hard to take in but if you practiced it and understood what you are doing, you could recover all the losses that you have.

REMEMBER that it's both strong in gains as well as losses. It's like a double-edged sword; it is up to you on how you would wield it. Take cautionary steps. And you might save yourself the right trades and see your portfolio grow.

Indeed. These are the equal parts of trading and you should be able to be strong in both cases

This is so sad, leverage is good because it may result to huge profits but 100x leverage is too much for me, I didn’t think someone can really do 100x leverage. Based on what I noticed, no one has ever done 100x leverage, 50:1 is the maximum that I know and it is very seldom to have traders go with 50x because it is very risky because if you don’t make the right decision then you will lose 50x as well. But this one is something, he is so brave to go with 100x but sad to say it didn’t pay off, it only cost his life. Therefore, if you want to take advantage of margin trading don’t go overboard and think it over in over because entering and be ready for the consequences.

Even if we are proficient and have good skills in the market and in the trading field, margin trading is not within the scope that we should participate because as the numbers that a lot of people are seeing, margin trading is just the massacre of big whales, big fish kill small fish and bigger fish kill big fish. A lot of money and a good team will win this war, little money can still win but in the long run, all the money will still fall into the pockets of giant whales, the best way to avoid loss would be to avoid participating

Indeed, greed can really go too far, in his hope to get huge profits from trading it cost more than what money can’t afford which is his life. I guess as traders we have to think carefully on our actions and don’t let our emotions or greed take over, this incident should serve as an eye opener to all of us. Well it is true that margin trading can double your money but the higher the leverage the higher the risk so don’t jump right to it. Think before you make a decision and weigh all the possibilities to avoid major problems.

Greed is the main reason why traders lost during trading because they were trying to recover their losses by doubling the amount they trade. It's just like doing a martingale strategy which is not really a good strategy if you don't know what you were doing. And i'm sure that trader risking a 100x leverage know what he's been dealing with. It's just that someone didn't know what is risk management.

Yes... But that's a sort of  double-edged sword

The best way to avoid losses in margin trading is stop doing margin trading if you don't know how it works. Margin trading is difficult so If you cannot do it then it's better you stay clear from it than trying to do what you can't do and losing your money. There is huge risk there, but some people, because they think that big money will come margin trading, so they always would like to take that risk and at the end it would be a loss. If you can't, just do the normal trading and also trade with an amount you can only afford to lose.

This is something that bothers me, many traders conduct themselves as if they do not make mistakes and as if every single of their predictions will always be right and that is a recipe for disaster, there is not a single trader alive that has made more than 100 trades and has not lost a few of them, so when they lose they are completely unprepared for it, I will be honest I do not see the necessity of margin trading since many books about trading advice that the most money that you should lose in a trade is 2% of your capital and margin trading can expose you to lose 100% of your capital in a single trade.

Quite funny of you, and has funny as you may sound, you really made lots of sense with that, it is better to abstain from marginthan to believe one can manage the risk involved in margin trade, margintrade is really not an easy one, and I think it is greed that usually make people go for it, when they consider the chance of making so much money when it goes in favor of them, and they become so blind to the disaster it could bring if the market goes against them.

Margin trade really dealt with me in Forex trading and ever since I lost most of my money to margin trade, I swore never to use it again, because it is really a dangerous game to play in trade and it is indeed a game of luck and not strategy, no matter the strategy you have in trading, you have to rally pray to Good when applying margin to trade.

Stop and learn I guess

I searched for the most preferred leveraged ratio, google said that 100:1 ratio in leveraging is better than 50:2 but take a look at this. Many people cried of 100x leverage . Usually happens if there is an assumption that the price would hike, a week or a month before you have seek in leveraging your position. I don`t use margin tradings or leveraging because it is too risky. In fact, I am not still pro and rich to use some kind of that. I just believe upo my technical analysis and funds in trading.

Looking at it from the jackpot part of it, it is very cool to leverage at 100x, if you are able to get the trade right leveraging at 100x, you are already made, but as cool as it is, it is the most dangerous spot to choose in leveraging, if any trader is to leverage at all, it will be best if such trader can leverage low.

I think greed is what usually make a lot of people leverage high, and I am not sure I have seen too many positive testimonies from people that have tried this,what you end of hearing from them is cry of regrets, they had wish they never leveraged that high, so I would not advise any trader to do more than its power, the most important thing is to make profit, isn’t it better to make little profit than not to make at all, and to the extent of even losing the capital completely out of risk.

From my practicy and general statistics, 20x is already risky leverage
6-12x is moderate
below 6 is low