The journey of a Cryptocurrency Trader. Trading on futures markets. Денис Цыро
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Of course, many technical issues seem obvious to an experienced trader – they would not even consider it necessary to discuss them. However, everyone has been a beginner once and has gone a long way to their first trade, which is fraught with dangers and difficulties. You need to choose a trading platform without falling for scammers who prey on novice traders and regularly create clones of the largest exchanges. After that, you'll need to go through the stages of registration and identification, set up trading accounts, deposit funds into your exchange account, and finally get the opportunity to make your first trade.
In this book, for obvious reasons, I will use professional terms, but I will try to give everyone an explanation. An experienced reader knows all this, but a novice trader or someone who is just looking at cryptocurrencies will benefit from basic information. D helped Arseniy take the very first steps in trading, and he also gave him initial knowledge of stock exchange terminology:
A position is an open transaction in any direction. It can be long or short. For example, buying Bitcoin for digital dollars (USDt) is going long on BTC If the BTC rate rises against the dollar, you profit: if it falls, you lose.
Open a short position on BTC means selling bitcoins you do not yet have – in anticipation of a fall in the BTC price. This is one of the features of the exchange – you can sell what you still need to get if your deposit covers a potential loss.
To close a position means to make a reverse transaction and bring the previously opened position to zero. Closing a long position means selling previously purchased BTCs; closing a short position means buying previously sold ones. At this stage that the result, profit, or loss, is “locked in”.
A candlestick or Japanese candle is a method of displaying the price dynamics of a traded asset over a certain period. While a regular line chart only shows the price of BTC every minute, a candlestick chart gives some idea about the reasons for the change. (See img. 1, 2)
The body of the candlestick, i.e., the rectangle itself, is limited by the opening and closing prices. The longer the candlestick, the more actively the exchange rate has changed in each period. A rising candlestick, when the closing price is higher than the opening price, is usually green or blue. A falling candlestick is usually red.
If the price has changed little over the period, the candlestick is very short and is called a doji. The upper shadow and lower shadow of a candlestick are represented as its wicks at the top and at the bottom and show the maximum and minimum prices for the period. The longer the wick, the more active the price has been.
Liquidity is the ability of an asset to be sold quickly at a price close to the current market price. It is believed that the higher the capitalization of an investment, the more funds are invested in it on the website, and the higher its liquidity.
We quite quickly learned what limited liquidity means. Bitfinex is a relatively small exchange, so trading could have been more active for many coins. You can perfectly predict the movement of the exchange rate, calculate your future profit and rush to buy an interesting coin. But no one wants to sell it to you in the quantity you want: there is simply no such offer. And you can see a nice long candlestick on the chart.
One could say I saw my personal candlesticks there – I closed the position and immediately a long red candlestick appeared. Five to ten thousand dollars in a single lot would drive the price of the coin down or up, because the exchange had little liquidity. This is how I learned an important rule: in case the exchange has too little turnover in a particular coin, a beginner will lose money right at the start, if he wants to spend a hefty sum on coins at the market rate. It doesn't work that way. It seems obvious that if you want to open a position, you should write, for example, '10,000' and click the Buy button. But instead of the position you want, you will get a 'personal candlestick' – the rate will jump, and you will pay much more than expected. Experienced traders refer to this as 'liquidity gathering', where beginners effectively give their money to the market. Besides, you will draw the same candlestick in the opposite direction if you want to close the position in one lot and sell everything. Experienced traders enter and exit the market much more carefully.
The experience with personal candlesticks came in handy for Arseniy a few years later – when he became an experienced trader and started working with large deposits. Although the Binance exchange had sufficient turnover and good liquidity, entering a position with a single order of this size would have meant losing money immediately. Therefore, at the beginning of his career, Arseniy opened and closed positions gradually so as not to excite other participants too much.
During the training, D also taught him the fundamentals of technical analysis. For example, the concepts of support and resistance levels – price levels that arouse interest among market participants. In this case, we are talking not only about analytics but also about market psychology – trading participants, for various reasons, decide that the coin rate definitely will not go above or definitely will not go below a certain price. This collective opinion triggers a self-fulfilling prophecy mechanism: if everyone believes a coin should cost a certain amount, it often will.
The cornerstone of the philosophy of technical analysis is that the price chart contains all the data an analyst needs to predict market movements. This implies that the market price considers or reflects all the information that could ultimately cause it to change.
However, the most valuable part of D's course was the lessons learned from negative experiences. In seven or eight months, it became clear why trading on small exchanges is not worth it, and why trading algorithms are useless – they don't work. As a result, we chose to work with Binance. (See img. 3)
Img. 1. The color of the candle shows whether the rate is rising or falling, and its height shows how fast it is changing. Very long candles indicate dramatic events in the market. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
Img. 2. The color of the candle shows whether the rate is rising or falling, and its height shows how fast it is changing. Very long candles indicate dramatic events in the market. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
Img. 3. Binance trader’s workplace. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
2. The Trader's Psychology
If you have the skill and genuine confidence that you can be a profitable trader, then one other trait is necessary to succeed: resilience. Never give up.
The Hungarian psychologist Laszlo Polgar showed in practice how to raise a brilliant child if you approach the issue systematically. And he did it as convincingly as possible: he raised three daughters, all of whom became chess grandmasters. The eldest daughter, Susan Polgar, played against adult opponents from the age of four and later won the world title and the title of grandmaster among men. The middle one, Sofia Polgar,