In this article you will find all the content from our first trading tutorial, learn the basics of futures crypto trading. It took place on our Telegram group last Thursday 16-Jan. The community members had the chance to learn a lot about the trading basics from our Head of Derivatives Products: Kamil Skolarus.

Tutorial: Market trends

Trading is easy: you just need to buy low and sell high. That’s all. 

Judging when it is low and high is the tricky part. First off, it’s good to determine whether the market you want to trade is in trend or range.

Trending market example

According to the Investopedia, an uptrend describes the price movement of a financial asset when the overall direction is upward. In an uptrend, each successive peak and trough is higher than the ones found earlier in the trend. The uptrend is therefore composed of higher swing lows and higher swing highs. As long as the price is making these higher swing lows and higher swing highs, the uptrend is considered intact. Once the price starts making lower swing highs or lower swing lows, the uptrend is in question or has reversed into a downtrend.

Ranging market example

A downtrend refers to the price action of a security that moves lower in price as it fluctuates over time. While the price may intermittently move higher or lower, downtrends are characterized by lower peaks and lower troughs over time.

Trendlines helps to determine where support/resistance areas are. In my own trading I use 100 and 200 period moving averages, volume, and try to find support/resistance levels utilizing trend lines and looking at prior highs and lows as price rejection areas.

Example of trendlines

Tutorial: Trading basics

It is very important to have money management in place. For me personally it is the most important part of trading. I took my biggest losses in situations when I have entered the market with no emergency plan.

What to do when the market goes against you pretty quick?

It is very important to have money management in place. For me personally it is the most important part of trading. I took my biggest losses in situations when I have entered the market with no emergency plan.

Thinking “it just can’t go lower” or “it has to go up now” mixed with a leveraged position is a recipe for a margin call. It is easy to get caught in a downward spiral when you’re not ready to take a loss and it feels almost like you can’t get out. I believe most of us have been there.

Question 1: Mr. Kamil, for me it is very important the memory of the market and its fundamentals… for BTC its use and mining are important, but what about FUDs and its influences?

Kamil: FUD and FOMO are also market drivers, we can’t predict it, so we just need to react fast – that’s the only edge. Here I would like to quote Leo Melamed, board member of CME group, who once said:

“The market will test you, and do what you don’t expect it to do.”

Leo Melamed

Remember to always have a plan if the market is going against you. Use stop loss orders to decrease your losses.

Question 2: What is your thought about this premise to play in the market? “Only enter with the amount you are willing to lose.”

Kamil: Strongly agree with that. Always use stop losses guys! That’s why minimizing your losses is so important. Eventually at BBOD you can move part of your balance to a spot account. Using this solution you risk only the amount left on your perpetual account. That applies to both, BBD and TUSD collateral markets. Avoid averaging down – adding contracts to a losing trade. The only situation when I do it is when the market is testing support or resistance and I always place a stop loss for the whole position, just below support/above resistance.

Tutorial: Let’s talk about profits

Did you know that if you were to deposit 1,000 TUSD and earn just shy of 1% everyday, using compound interest you would end up with over 37,000 TUSD after 365 days of trading.

For 2% a day, your year-end balance would reach an astonishing 1.35 million TUSD assuming you are reinvesting the 2% gain every day. That is the power of compound interest. That is assuming you would make 2% profit every day, that’s why cutting your losses early is so important.

Try to place break even stop losses when your position is in profit. That will help to avoid turning winning trades into losing ones.

Remember: trend is your friend. Don’t fight the market; it’s always better to wait for a trend reversal confirmation rather than trying to guess the very top/bottom.

Also, set your profit target before entering into a position. Give your position time to reach your profit target and try to avoid closing it on first pullback. Don’t cut your profits early.

Controlling your emotions and stick to the strategy: these are just a few basic trading rules that can significantly help you improve your trading.

Some trading strategies

I determine when to enter using 100 and 200 period moving averages, volume, and try to find support/resistance levels utilizing trend lines and looking at prior highs and lows as price rejection areas. 

First Single Position Strategy:

  • Enter with a small position and add to a winning trade as the market moves.
  • For a long position just place bids near support areas.
  • Avoid chasing the market and buying highs – be patient.
  • Remember to always set a break even stop loss (stop loss is a few ticks above average entry price).
  • It might get ugly in a hurry when the market drops significantly and you are left with a massive losing position.

Utilizing this strategy you can get to max leverage with very little risk. Set take profit point – the market will not trend forever and you will get stopped out eventually if you won’t take the profit.

This strategy works in trending markets, and its biggest advantage is that you risk money only with the initial trade. Especially in strong trends like the ones we have recently seen in the crypto space. 

Second Single Position Strategy:

I like to use this simple scalping strategy in a ranging market. Zero fee markets are perfect for this kind of strategy, as trading fees are your biggest enemy if you are a scalper. Lets say BTC is ranging in 8,600-8,630 range. As a scalper you want to open short close to 8,630 and reverse to long close to 8,600, and do it until the price breaks out.

Remember to place stop loss orders as range breakouts tend to be sharp moves. This strategy works in ranging markets.

Multi Position Strategies:

It’s hard to encapsulate these in a few sentences. The most basic one is to buy one cryptocurrency and sell another to make a spread.

This strategy in general protects against sharp crypto moves because you do not have net long or short exposure. To hedge even more you can buy a few cryptocurrencies and short a few of them to build a diversified portfolio. Just remember that the value of long and short positions should be equal.

Let’s say ETH moved 8% in one day and is approaching resistance, and BTC moved only 3.5%. It’s good to sell ETH and buy BTC in that scenario. To make a symmetric spread, both positions should have the same value.

This strategy relies on the assumption that cryptocurrencies are positively correlated, so BTC should catch up or ETH should fade the rise.

It is important to decide when you want to close the spread to limit eventual loss – imagine shorting dash at 60 TUSD/contract… on the other hand it could be very profitable to short BTC and long ETH in recent days, as the ETH rise occurred a few days after the initial BTC burst.

You don’t have to close both positions at once. If the market rallies and you think it is going to go even higher, you can close a short position, add to your long position on a retrace and set a stop loss that would make up the loss realized on the closed short position.

That’s all for this session! I hope you enjoyed this tutorial and learned some new skills.

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