I started my cryptocurrency journey only from last week. Even though I have been trading equity market since 2008, I never tried my hands with crypto, since I have always been calling it as a bubble since 2017, eventually when Bitcoin crashed in 2018 from $20,000 to $3500, I thought bubble is burst. But Bitcoin stayed flat for next years, then it broke its all-time high resistance of $20,000, once that was breached, then no stopping. It went all the way to $60,000 and also more coins joined the party, like Ethereum, Matic, Doge etc.
But then I realized, as a trader it’s not my job to predict when the bubble is going to burst, that’s the job of analysts who never trade. As a trader, our primary job is to react to market movements, not to predict. We are here to make money, that’s all. Let the bubble burst whenever it wants, but I should be able to short it when the trend ends. And the only way I can do is, open a futures account, so that I can go long when the trend is up and also go short when the trend is down. This way, I should be able to make money in both ways.
When I tried to trade with crypto 2 years before, it was hard to open an account, transfer funds and get started. This year, I opened an account with WazirX which made the whole process simpler. Let me explain how I took my first trade with cryptocurrency.
Just like how we open an account with Zerodha or any other broker, map our bank account, transfer funds to broker and get started, there is a similar process followed here. Remember, my primary choice is to trade futures not only spot. WazirX provides platform to trade with spot, not with futures. So I have to open account with Binance to trade futures, but the restriction here is as an Indian, I cannot directly transact with binance platform, as they don’t accept INR deposits yet. So what is the solution?
As mentioned earlier, my primary choice is to trade with futures in binance,
- First I will deposit INR funds to WazirX from my linked bank account
- Buy USDT in WazirX platform using the INR we transferred. So everything is converted to dollars now
- Now transfer this USDT to Binance from your WazirX account without any fee. Then the funds will be reflected in your Binance account as USDT. Using this, we can now transact in cryptocurrency futures.
Just have to go to futures segment https://www.binance.com/en-IN/futures/BTCUSDT and make the transaction buy or sell.
I initially transferred around $950 and tried to place trades manually based on simple price action but with robust risk management where I do not want to lose more than $100 when the trade goes against me. Even though I have 10x of risk as my capital, I do not risk my full capital in one trade. Almost one tenth of the capital is what I risked in a single trade.
Consider the below example, I went long in Bitcoin at $38400 with a stop loss of $36500, so my risk in this trade is $1900. As I mentioned earlier, I want to risk only $100 in a trade, so that if stop loss is hit, am not going to lose more than $100. For that I should calculate how much quantity i should buy, for that just divide risk $ / risk = 100/1900 = 0.0526, that’s total bitcoin quantity I need to buy.
I simply followed swing high/swing low trend following rules and entered the trade. Most of the trades gave 2x, 3x of what I risked.
Slowly the account balance started to move up, by next day morning $950 dollars invested, became $1950. Luckily, I started my first trades after the recent corrections in cryptocurrency, so I simply bought the dip with perfect risk management. And it really helped.
Rules I followed to take the trades:
- Check overall market view, see if most coins trade in uptrend or downtrend. If most of them trading positive, avoid shorts.
Then next step is to find the right coin to trade, there are more than 80 coins available in futures segment, not everything is liquid. So it’s recommended trading with the one that has higher liquidity. Since the over all trend is positive with most coins trading in green, I sorted the pair based on the highest gain % in the last 24 hours. I could see MATIC moving up more than 30% with the highest volume. So I would pick this one to trade.
I would check 4 hours chart first, as per 4 hr chart, it has broken its resistance level and poised to move up further. So if I am going to take buy order now at this level, then my levels are
Entry price 2.11400
Stop loss – recent low which is around 1.5000 so as per my risk management calculation, the quantity that I can buy here is 162. Since if the trade reverses, risk is higher, my quantity gets reduced, as I do not want to lose more than $100 in a trade.
- Currently, we are developing a fully automated trading bots to trade the cryptocurrency with zero manual intervention. Yes, unlike equity markets, trading with Crypto with API is lot easier, lesser restrictions. So once you set your capital to trading bots, it would run 24*7 without any manual intervention, it would automatically enter, exit, set target, fix stop loss. But remember, this is one of the craziest market, one tweet from Elon Musk would drive the price to swing wildly. So it’s always wise to trade with the capital you can afford to lose. Just go ahead and get started.