Every trade you take in this market teaches you something. These lessons are a blend of your wins & losses. But losses are the best teachers as they aware us of ground reality and keep us calm & humble when we emerge with wins. And if you get that punch of reality check in your early days then there can't be a better start. So here's a lesson I've learnt recently which I think is worthy enough to share. Read this till the end as the article might be a bit lengthy but will surely provide you tons of vital info.
How It Started
Before I start I would like to mention that I trade options in Indices in the Indian stock Market. So due to this exposure to one of the most risky trading instruments I felt confident enough to give it (crypto futures) a try. So starting of in 2024, I did a bit of mock trading in the beginning. Got to know the basics and rules of leverage, then started the next leg.
Here I started to scalp and did a few experiments. Like using leverage, how liquidations occur, understanding the risk to reward ratio & market volatility. My rules were simple.
Keep the trading capital fixed in futures account. For example my RPT (risk per trade) was fixed, it was $10. So I would transfer only $10 to my futures wallet whenever I wanted to trade.
Keep on scalping with decent or even small profits.
A big no to greed.
I never posted anything related to those trades as it wasn't worth sharing.
Then I Improvised The Do's & Don'ts
I wasn't much serious enough at that time since I hadn't worked on any specific trading setup. Scalping tiny or small profits and with a few liquidations (capped at $10 each) I took a break and worked on a steady setup. A restructued risk to reward ratio, a homework on positions and most importantly money management.
The 10/10 Rule
I won't suggest you to follow this as it may not suit your trading style. But this is what I worked on and I'd stick to this no matter what. Yes, when you trade then trade like a bot with zero emotions and follow protocols & data only.
So, the same $10 capital will be used for first 10 trades with a cross of 50X. This is my 10/10 rule. Now the riskier part here is the leverage which may lead to an early or even a quick liquidation if the market goes against your analysis. But I knew that I've to stick to the rules. Even I get liquidated 5 or even 6 times, the wins will be big in the remaining ones.
If I could hit đŻ a 6 or even a 5/10, I'll start the next leg which is 20/20. Yes, you get that right, $20 in the next $20 trades & lowering the cross to 30X. So with an overall capital of $100 I started my 10/10 challenge with a target of growing my futures wallet to somewhere around $300-350.
The Bumpy Road Ahead
The first trade as expected didn't go the right way. I got trapped in Near and missed on a few metrics. So, without thinking much about this outcome I moved on.
Now enters the most interesting part of the story. The second trade turned to be a winner. I posted regarding the trade (Solana) & took position as well. It hit the spot and I saw the fruits reaping. So I plucked some fruits and kept the rest to let it grow further, in short I sold my half position and took profits keeping the rest.
But little less I knew that breaking my own rules will backfire anytime. I thought of opening another position with the same capital ($10) and jumped on to the next setup with Fet. And before I could open the new position, I transferred $7 to spot so that in case of an opposite scenario my entire wallet won't get drained.
Now with 2 open positions, one running in healthy profits and other one just started to go in the green zone I packed up for the day. But the real surprise was waiting.
The very next day (Monday, Oct 21) the position in Sol was doing good even with pullbacks but Fet was nearing liquidation. And the shocking part was the profitable position in Sol was in danger as it's liquidation price increased. It means that Binance will close that position as well to make up for the leverage as the unrealised gains in Sol was taken as capital.
To be honest I had absolutely no idea about it and I even have no shame in admitting this. I entered Fet even before it hit my entry price (I mentioned that in the post) and this is where I broke my own rule. But I'm glad that this mistake actually taught me something really important.
This is how I think futures trading should be done. The first rule is to never break your own rules. But most importantly never open a second trade at all if you're not confident. That would end up eating your profitable position and the hard earned profit (though unrealised) will be gone.
Although every trader has their own trading style. But this experience has taught me an unforgettable lesson and I think every new trader would give some serious thoughts on this before starting their journey.
