Margin trading victims and how to avoid losses

[Mark_R]

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.


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[Mark_R]

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 (!)

[Lunar_FAX]

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?

[leowonderful]

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). 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.

[dark08]

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.

[Lunar_FAX]

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...

[Mark_R]

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). 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.

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

[Rufsilf]

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.

[Mark_R]

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?

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.

[zonom]

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?

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?

[Mark_R]

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?

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.

[guoyu78]

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). 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.

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 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.

[Mark_R]

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). 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.

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 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

[MadeinCoin]

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.

[Mark_R]

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

[vixcious]

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.

[Mark_R]

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.

[leonix007]

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

[cryptotalk93]

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 

[FanEagle]

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.