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Tag: risk management

  • Big Profits From Crypto Market Extremes

    Big Profits From Crypto Market Extremes

    Crypto markets extremes can be BIG PROFITS. Once we know markets go to extremes, and we know how to measure it, we can put that on our side. Very few traders wait for that advantage, and fewer still are prepared in advance to exploit that advantage.

    And that’s what this video is all about.

    I’m sure you’ve heard the Cliche ‘cut your losses, hold your winners’, this will keep losses small, but it misses a second factor every pro uses to exploit the advantage of market extremes – for the big profits.

    Most of your money from trading is going to come from trades that take off rather quickly from when you put them on. That is the reason today’s video is so important.

    As crypto traders, we are after a better return than most would consider fair in any other investment.

    Many crypto trading plans have the trader in a position at all times, the thinking being that the market is either going to go up or go down. Perhaps you have been trading crypto this way, and maybe making 60% correct calls and still struggling to consistently grow your portfolio. Often, trying to guess every market move just encourages over trading, second guessing and a string of small losses.

    Without the strategy we cover today, you will find that trading still isn’t even a 50/50 game.

    You may win more often than you lose and never recover much beyond your losses.

    It is natural to want to take a profit to prove that we are right. Being right does not, in itself, make the most amount of profit. It’s important for us to keep a good position as well as impress upon your own thinking about having a correct position initially.

    Maybe you’ve put on trades and waited for the market to prove it was a bad position. And when your position are correct, the next step is wondering when to get out. It’s human nature to do it this way. It’s the source of many trading difficulties.

    The time to get out of a position is not when the market is proving your position to be a correct one. You have the opportunity to be wrong as often as correct, but when you are already proven correct, this is certainly the time to step off of first base.

    1. Our first risk control rule for crypto trading keeps us protected from our lack of certainty and the second risk control rule helps to enforce the certainty in those crypto market extremes that do prove correct.
    2. This is the second part of two special videos on risk control. If you haven’t watched the first one already, be sure to go back and watch the video on Rule Number One.

    Without a correct method to keep you in your winning trades and to press your correct positions, you will never recover much beyond your losses.

    When your trade is correct you must be bigger at that time. This will require a rule, a strategy, which is designed around adding to winners in an unfavorable game to come out ahead in the long run. And here it is:

    Rule #2

    Press your winners correctly without exception.

    Sounds pretty elementary but correctly is the key. What you hear quoted most of the time is “cut your losses.” Cutting your losses is vital for survival, but you need this pro strategy if you want to make profits.

    There certainly will be debate on how you know when to add to a correct position and on how a market can turn a correct position into a wrong position. I’ll get into specifics in a later video when I show you the flow chart for ‘The Five Stages Of The Trade’ – it is so important because Rule Number Two shows up in three of the Five Stages Of The Trade.

    I’ll share our most important add-on plan at the end of the video, but first, let’s unpack this – and get a birds eye view of this Pro Tactic.

    Press your winners correctly without exception.

    Rule #2

    Just because you have a position in your favor does not mean you must now add to that position. “Correctly” means you must have a qualified plan of adding to your position once a trend has established itself. The proper criteria for adding positions depends on your time frame of expectations in your trade plan.

    “Without exception” the rule indicates it is not an arbitrary decision on the trader’s part whether to add. It is not optional. Keep in mind that a correct way of adding in one trade plan may not be correct in another.

    You might be a day-trader just trading back and forth, a short-term swing trader, or a trend trader only. Each trade plan will have a different criteria for adding on.

    Most traders also want to get out before the market turns and takes away any profit they may have. We may let losses get larger because we are wanting to be right and hoping the market will reverse… and yet we may only let the gain get started before taking those profits… taken together, this will cause your losses to be larger than they need to be, and your profits smaller than they could have been.

    Be sure to watch our video on ‘the 2 mistakes that all traders make’.

    Rule 2, it states only that you must add to correct (proven) positions and that it must be done correctly. The rule makes no exception on adding to correct positions. The intent of Rule 2 is twofold: Reinforce your correct position both mentally in your thinking and your execution and to increase the size of your position.

    The rule does not tell you how to add, as this is your requirement in the trade plan you develop.

    Trend traders will start small and get larger when they are correct, but day-traders will start larger and get smaller when they are wrong.

    Trading Crypto In The Long Term

    These two rules are to give you the long-term ability to continue to trade with the least amount of drawdown and the best possibility of making the most money in the long run.

    Huge drawdown is the critical reason some traders go out of the business. You must start your trade plan with rules created to protect your equity. I am presenting those rules to incorporate into your plan. Experience has proven these rules a necessity in survival and reaching your objective of making the most return with the least amount of risk.

    It’s easy to focus on the predictions, on the potential profits, and unknowingly put the risk control rules on the back burner.

    In the last video we focused on Rule Number One, the strategies that will keep you in trading for the long-term. This keeps risk small at the start of the trade – but there are times when we want to increase our exposure to a market when our position has been proven correct.

    We must address Rule 2 when creating the trading plan – before the trade is placed.

    It is a solid rule and its importance cannot be diminished in trading. Until you see the reward from Rule 2, it is very difficult to understand.

    Many traders will leave a plan to add to winners on the back burner when it is time to add unless you fully understand the need for this rule.

    I believe most traders want to have a certain size position, and that is the position they place from the start. This is not a correct way to allow you to use Rule 1 and definitely Rule 2 properly. When you see an expected move from the start of trading, your thinking is counter to ever adding in the first place.

    True, you should be at least twice as big or larger when right than when wrong, but you must work that position into your trading plan. You never risk it all on the initial position being correct or you are defeating the rule.

    I want the traders to ask themselves two questions:

    “Do you put only part of your expected position on from the initial entry?

    “Are you planning for adds prior to your initial trade?”

    If the answer to either of these questions is no, then you must go back and rethink your trading program. I have said it before. If you can think it, you can do it. Perhaps the traders aren’t thinking it to begin with because it certainly is not expected thinking without the proper planning.

    This is your enemy . . . to love to be right. Your motivation must be to love to do the right thing in trading by either reinforcing correctly your position or removing it should it not prove to be correct.

    By incorporating Rule 2 in your game plan from the start, you will be eliminating the desire to be proud when the market moves your way and want to take profits to show that you are right. Traders love to be right.

    You will become the best trader you can be by being wrong small, not right small! Get that in your mind now. You are going to have to press your winners if you really consider yourself to have the ability to make a living or extra income from trading.

    Otherwise, face the truth that you are only playing to break even.

    You must understand that you are not the one who will determine your market position size. It is going to be the crypto market and must always be the market. Rule 2 is going to tell you to put a complete plan into effect before taking the initial position.

    I cannot help you with over-trading or being under-margined. You must correct that situation before you can ever expect to be on even ground with the big funds. You must at all times be able to put only a portion of your expected position on at entry and be able to at least double your size somewhere along the route of an expected move.

    The protection is Rule 1, but the biggest protection is Rule 2!

    Now I am going to tell you why Rule 2 is the biggest protection of all. You never suspected what I am going to point out.

    You have all heard that you should not add to a loser! Well, Rule 2 takes care of that from the start by keeping you with a smaller entry position in the first place. You never have your entire position until you are getting the move you had expected.

    Now, why would I encourage you to have half of your total position at entry?

    Because it is a losers’ game from the start and you knew that from Rule 1. Now, from Rule 2, you find out that, to trade it correctly, you were never really suppose to have your initial position upon your entry of a trade.

    Traders are over-trading most of the time when they say they can’t seem to justify adding to an existing position. Most of the time a trader does not think about the reason for adding because they have their initial position on from the start. This is their maximum risk from the start.

    That is never what you want in trading. You must take some risk but never your maximum. That is exactly what they are doing if they cannot plan for added positions along the way.

    Strategy For Adding On To Successful Trades

    Correctly adding to a proven position must be organized so that a top-heavy trade isn’t established because that will ruin a good trade in a minor reversal. Each add onto an original position should be done in smaller and smaller steps.

    As an example, if you had a $6000 trading account, and you planned to put 10%, or $600, into a specific trade. Put $300 on as your initial position, add on another $200 if your criteria are met, and be prepared with an additional $100 to add if the position continues the trend. This gives you twice the original position size when all three positions are in place. I practice using a 3:2:1 ratio in establishing a full position.

    All credits for this work go to Phantom of The Pits and thanks to Art Simpson for permitting me to share this work.

  • ULTIMATE Crypto Risk Control (RULE ONE)

    ULTIMATE Crypto Risk Control (RULE ONE)

    ULTIMATE Crypto Trading Risk Control (RULE NUMBER ONE)

    What would happen if you could go from struggling to profitable in your trading with two simple rules that could shift the odds into your favor?

    I found these rules a couple of years after I started trading back in the 1990’s, after I lost all my money, twice.

    I had learned all about entry patterns, but I hadn’t learned anything about risk control.

    When I created my first crypto trading course in 2015, I reorganized all the random information I picked up over the years, and placed it into the order I wish I would have learned it.

    So I’m introducing these rules in this video series before I reveal my trading plan entries and exits. I want to help new traders establish a foundation that will help ensure that you don’t lose all your money, like I did.

    You don’t need to make these mistakes to learn these lessons, you can learn from observing my mistakes. And I’m happy to share them. I paid a lot for them.

    Crypto Trading Risk Control Rules

    Many of you have experience with trading already. These trading rules have provided some of our students with a flash of insight that immediately improves their crypto trading results, and others, like myself, may need a bit of study to build the belief around the profound shift.

    And if you are new to trading crypto, and you are looking for a Beginners Guide to Trading Crypto, learning this approach at the start will definitely improve your odds of success.

    Before you consider placing a speculative trade,
    you must be able to repeat these two key rules
    from memory – out loud – without reading them.

    These two rules are simple to memorize and state. That’s part of their beauty. But these two short and simple rules have profound implications on your trading – no matter what trading methodology you may favor, be it chart patterns and technical analysis or be it fundamental analysis and news events… these two rules can shift the odds in a game that is normally stacked against you.

    If you are serious about making money trading in any markets – learn this before you trade, think about it, practice it, just as a pilot learns and practices in simulations before they fly for real.

    Profitable Trader Shares Common, Learned, Habits

    The people who are profitable generally share common methods, common standards and common rules that they all abide by, even if they are wrong 70% of the time and right 30% of the time – they can be profitable in today’s difficult crypto markets.

    You may have been trading cryptos, maybe making 60% correct calls and still be struggling to make profits. If this is the case, I invite you to imagine what would happen if these two rules actually did tip the odds into your favor and help ensure smaller losses and bigger profits!

    More Than Buy Low Sell High

    When I first reveal Rule #1 and Rule #2, they may seem over simplistic. So before I do that, I want to uncover the subtle elements to these rules and consider the consequences over a long time frame.

    By the end of this video. you will come to understand the profound impact this approach can have on your trading and any other risky thing you are doing.

    No matter what kind of risk you are taking. you want to incorporate Rule #1 and Rule #2 to help you protect yourself against negative consequences, and to make the positive results even bigger.

    Once you see how the effects work together to help ensure your profitability – Rule #1 and Rule #2 will naturally become a part of all your trading.

    By practicing these crypto risk control rules with your micro-investing, you can develop habits and wisdom that will help you gain similar mastery over your fiat cash stack as well.

    Rules for Life

    Often these rules can also apply to other areas of your life where you can use them on setting goals, correcting missteps quickly, and boosting the successes of any of your endeavors.

    Growing your mirco-investments is a lot of fun! Dealing with money should be fun! And this is a great place to learn and practice success habits with money!

    Correcting Common Trading Mistakes

    One student wrote in: “I was trying leverage trading this week on gold and silver and I noticed I was really anxious of being at loss and I notice that I would get out very quickly if I’m in profit.”

    This is a wonderful example of natural human emotion, and it’s the reason you want to start off small, with no leverage at the beginning.

    Just play. Just get used to it. At the beginning you have to learn not to be anxious about a loss, you have to expect it, plan for it. It’s part of the work that your money is doing on your behalf.

    We must change our thinking about the difficulties of a loss. Instead, start with the perspective that the loss will help protect you against the nasty things the market can do.

    They who lose best, are the biggest winner in the end.

    I’m so very grateful for that comment because I also have the same emotions many times in my trades! …especially if I’m over-trading with a position that is too large, or if I’ve put on a trade with too much leverage and my stoploss is too close to the market.

    When trading a crypto market, you have to give it room to move. That means you have to trade a small enough position that you can comfortably give it that room to move within the technical levels.

    Before starting each trade, it is vital that we prepare the correct position size according to the size of our account equity. It takes repetition and practice. Like learning anything, it will start out difficult, but soon it gets easier, and with practice, it becomes second nature and almost effortless.

    Our premium community of traders refer to these two rules all the time. Lets review a few examples in order to appreciate the profound implications that each rule brings to your trading strategies.

    Behavior modification, without doubt, is the key to trading success — it starts with how we think, yet we also need to change our beliefs in order to truly change how we act in certain situations.

    We must be very clear about the trading situations we can control, and the situations over which we have no control.

    I offer these lessons that I have learned, and that I am practicing – as guidance, but it is your own determination that will make you a success. I can share the knowledge, but it is your efforts that will make these rules into a belief and a habit.

    These two rules will be responsible for protecting your assets, and will help to keep you in the trading game forever.

    I can be very costly to make mistakes in trading. You don’t need to learn from your own mistakes in trading, you can learn about correct trading from observing others. I am happy to share them if they shorten your road to success.

    Preparation For Crypto Trading

    1. First, you must be properly prepared for the trade.
    2. Second, you will do your work and you will let your money do it’s work
    3. last, you will do the cleanup, trade tracking and tax reports with CoinTracking.co

    First, in your crypto trading career you will find that the markets go back and forth without going anywhere a lot of the time. Second, in your trading you will find you do not ever control the market but only your position. You can stop your position wherever you wish. I want you to drill that into your thinking also. You can stop the market’s effect on your equity any time you wish. Simply stop (remove) your position.

    You must realize you are required to work with your positions and not let the market work on your positions.

    The main reason I’m creating these video tutorials is so that I can become a better Trader myself. There have been times where the market did a total surprise to me and I got killed in the market, taking big losses. And after the fact I wondered what I did wrong in my Trading and what I discovered was I didn’t even know what the right thing was.

    Fact is I had not taken the time to consider what a big move could do to my trading account. You may hear the cliche that the BIG money is on the surprise side. What this really mean is that the BIG LOSERS are on the familiar side or the expected side of a trade.

    Today we’ll uncover the two keys that separate the big winners and big losers.

    In the beginning, it didn’t ever occur to me that I should be preparing for the possibility of a big move against me. I was over-positioned, even though I thought I had a good protection plan, and, I was mistakenly doing the work that my money should be doing.

    Everything I did in my trade planning was based on estimates of how much I could take out of the market. My trades were actually designed to lose and the worst part is that I don’t even know my strategy was ruining a good trading system.

    Many times, when I thought I was smarter than the market and kept sticking to my predictions… I ended up taking a big loss in such a little period of time. Maybe this has happened to you as well.

    Why does it happen? Mostly because my plan didn’t consider, “What if I am wrong?” My thoughts are always expecting to be right… after all, why would I put on a trade if I didn’t think I was correct?

    Herein is the key to being a successful trader. I have learned this over and over again in my trading career. I haven’t found any crypto youtuber who will tell you what I am about to reveal.

    In trading, if you have bad luck, you will eventually have to stop trading. To be prepared for that bad luck is a requirement in trading. You will not survive if you do not plan for bad luck. My first steps in trading remove the bad luck altogether.

    Plan For Bad Luck

    We must plan for the assumption that the trade will go against you as long as it is a possibility and not just when it is probable. This is a very important point in trading correctly!

    This will be the surprise side in trading. The surprise side is a possible outcome but not a very high or likely probability. Most traders plan only for the probability side and that, to them, is always what they consider the winning side. This is the biggest mistake you can make in trading. Instead, you must plan for the losing side.

    Trading is not a favorable game in most circumstances, and that is what we must use as our assumption in trading. The big mistake made by traders is thinking and expecting trading to be a favorable game.

    The correct way to control positions is to only hold them once they prove to be correct. Let the market tell you your position is proven correct, but never let the market tell you that your position is wrong. You, as a good trader, must always be in command of knowing and telling yourself when your position is bad.

    The market will tell you when your position is a good one to hold. Most traders do the opposite of what is correct by removing positions only when proven wrong.

    Think about that. Your exposure and risk is much higher if you let the market prove you wrong instead of your actions removing positions systematically unless or until the market proves your position correct.

    You never want to be in a position that is never proven correct. If you only get out when the market proves you wrong, it is possible to have higher risk due to the longer time period required to prove your position wrong.

    So here is Rule Number one:

    In a losing game such as trading, we shall start against the majority and assume we are wrong until proven correct!

    Positions established must be reduced and removed until or unless the market proves the position correct!

    In other words, the one criteria for removing a new position is because it has not been proven correct. We do not wait to remove a position until the market has proven the position incorrect.

    There is a big difference here.

    If the market does not prove the position correct, it is still possible the market has not proven the position wrong. If you wait until the market proves the position wrong, you are wasting time, money and effort in continuing to hope it is correct when it isn’t.

    Hope is a beggar.

    If you are hoping your trade is correct, it obviously wasn’t ever proven to be correct. Remove the position early if it doesn’t prove correct. By waiting until a position is proved wrong, you are asking for more slippage as you will be in the same situation as everyone else who is being proven wrong.

    What makes this strategy more comfortable is that you must take action without exception if the market does not prove the position correct.

    Most traders do nothing and let the market stop them out – and then it isn’t their decision to get out at all — it is the market’s decision.

    But this approach will increase your losses. Instead, consider this thinking: When your position is right, you have to do nothing instead of doing nothing when you are wrong!

    Lets consider the kind of thinking that might keep you in a losing position too long

    Who is to say a position that was not proven correct turns from a bad position to a correct position?

    If we fear being wrong when they get out and we are worried that the market will show us we should have stayed with the position, then we don’t take early losses when they are small, and it becomes more difficult to take a loss as it gets larger.

    It’s the occasional big losses can take away the money you had working on your behalf,
    and it’s the big losses that demoralize you, and take you out of trading.

    Our first job, our primary responsibility is practicing the swiftness needed in keeping your losses as small and quick as possible. It won’t always prove to be correct, but you will stay in the game this way, you will avoid the big losses this way.

    I didn’t know what my choices were when it comes to assumptions about what is possible in trading. I started with the assumption that my job was to make money by trading, but this totally backwards. My job in trading is to take losses quick and small. 

    I now know that these ultimate crypto trading risk control rules assume my position is wrong until the market proves my position is correct. It is my job to know my trade is wrong.

  • Crypto Trading Mistakes When Winning, Mistakes When Losing

    Crypto Trading Mistakes When Winning, Mistakes When Losing

    In the beginning, I was making crypto trading mistakes on my losing trades, and I was making trading mistakes on my winning trades.  Even with a great trading plan, I could not successfully earn a profit. 

    Watch on YouTube

    This video may provide a shift in perspective that will help, if you are making the crypto trading mistakes where you’re losing more money than you should have, and you’re also making the trading mistakes where you’re not making as much money as you could have 

    Gaining Skills With Money 

    In just ten minutes per day, you can learn to apply repeatable laws of money that can help you get wealthy.

    How can this be true? Getting wealthy is a matter of making money, keeping your money, and growing your money. 

    Even if you are making money by working at a fast food restaurant, you can get rich over time, if you simply develop the habit of saving just $20 per week – and carefully make your savings grow with just a little bit of interest, compounded, year after year. 

    RELATED: A Simple Plan To Become A Millionaire

    The trouble that most people have – that prevents them from getting wealthy – is they do not feel good about keeping their money –  and they have not practiced feeling good about watching their money grow.  

    Instead, they feel good by spending their money.  They act on the slick sales message of debt-pushers ‘get it now with easy payments’, and end up paying interest on that purchase… in effect, they are compounding the growth of someone else’s money! 

    Keep watching the other videos in this series as a way to reinforce and practice rehearsing good feelings about keeping your money and watching it grow. 

    Before we can truly overcome the two mistakes that all traders make, we need to understand them.  This understanding comes from learning new knowledge, and second, from practice.

    Mistake One

    The first category are mistakes that we get punished for. We get punished by losing more money than we should have. Most people will learn from those mistakes over time – or they just quit trading because it’s not working for them. We’ll cover some specific strategies to help you prepare in advance to keep your losses small. It’s not wrong, and it’s not a mistake to take losses in trading – but if you are making the dollar cost averaging mistake we’ll cover in a moment, then your losses are much bigger than they should have been.

    Mistake Two

    The other category is harder to identify; these are mistakes we don’t get punished. That is, when we make this mistake, we simply don’t get the benefits we should have. We may never become aware of this mistake, because there is never a signpost that pops up to say  ‘You didn’t get all these extras!’. Later in this video series, we’ll review a pro tactic that overcomes this mistake and makes winning trades bigger!

    If you are making the mistakes where you’re losing more money than you should have, and you’re also making the mistakes where you’re not making as much money as you could have – then you want to break even in your trading, but you are struggling consistently, and it’s deeply frustrating for you.

    You can overcome these mistakes. It will take some practice, but it’s so worth it!

    Why We Make Trading Mistakes

    The reason we make these two categories of trading mistakes is fear and greed.

    The successful trader feels fear and greed, and the unsuccessful trader also feels fear and greed as well. The difference is, the successful trader feels fear and greed at opposite times to the unsuccessful trader! 

    Here are a couple examples to illustrate the point.

    Mistakes When Losing

    Let’s say we have two traders that go into an identical trade that moves against them; that is, they buy the same coin at the same place at the same time and price goes against them.

    Right away, the successful trader is fearful of losing money – and so he sells out of the position quickly. The unsuccessful trader starts to get greedy because he sees that the price is now lower than it “should be” – and it’s even a bigger opportunity to ‘buy the dips’.  

    They may rationalize: ‘So if I bought 100 coins at 100 satoshi and the price is now 80 satoshi, then I could buy another hundred coins and I would average out the price… therefore I would have two hundred coins at an average price of 90, so really I’m only down 10’, and, such a trader might begin to imagine potential profits as a way to avoid dealing with the current loss; ‘When the price rebounds I’m going to make it killing because I’m into this position when it was even a bigger bargain!’

    In reality, this trader is not managing risk correctly. 

    If the price should continue to go down – the trader now has a bigger position when he’s losing. As the price goes down, he may finally get to where he’s feeling so much pain that he has to get out of the position, and ends up with a much bigger loss than he should have. Naturally, this trader will feel discouraged and kind of panicky when he trades another position. 

    And actually, that emotion is a good guide.

    You want to be feeling confident and prepared when you are ready to put on a trade.

    Mistakes When Winning

    Let’s go to the second example where both traders buy the same coin, at the same time, at the same price – and it goes with their expectations so they’re both profitable. The successful trader now feels greedy – because he’s been proven correct – any buys even more of the coin to have a larger position.

    The unsuccessful trader, however, may be fearful of losing his profits and quickly cashes in the position – too soon. As time goes on the price continues to go in the direction they wanted, the unsuccessful trader now will feel even more anxiety watching the price go… and will head into the next trade with more uncertainty, fomo and doubt.

    And so many traders gets killed in the market – by making mistakes that cause greater losses and making mistakes that reduce their profits.

    Both of these mistakes are the result of trying to do the wrong job.  Most new traders believe they are responsible for making money in their trading… but this is not our job at all.  Successful traders know their job is all about managing risk.  Reducing risk on losing trades and increasing risk on winning trades.

    Surround Yourself With Success Thinking

    DigitalCurrencyTraders hosts a private community. Interacting daily in our membership area can help you change the way you think and feel about your trades – you CAN gain the knowledge and build the habits that successful crypto traders have! 

    While you are safely adding to your savings each week, you can gain more perspective on the challenges and difficulties of trading.  You can overcome mistakes.

    When you start taking smaller losses when you are wrong, and start gaining larger profits when you are correct, added together, you end up creating a cycle of steady growth of your investments, you can trade larger volumes – and dramatically expand your future wealth potential! 

    Both paper trading and backtesting are a good starting approach. You can learn and prepare for each stage of the trade before risking real money – yet a simulation lacks the realism… Paper trading and backtesting do not include the all important emotions of fear and greed that so often cause new traders to make bad choices and lose money. 

    Now you know how the average trader is affected by fear and greed and how these emotions work against them, holding them back from making great profits, and often causing them to lose their money. 


    In a later video, we’ll reveal how to overcome some additional ways that fear and greed may be working against you in your trading, so be sure to subscribe and hit the bell notification icon so you don’t miss out!