How To Be Wrong And Still Make MoneyOk guys,
Let's get straight to it. The exact opposite happened after my last post and i still made 6.5% profit. Even the best investors have 67% win rate. So, how do you still make money while being wrong?
First, charting and trading are two seperate skills. You can be a very good charter and a terrible trader and vice versa, because it's the execution that makes the difference.
The secret here is to keep your losses small and let your winners ride, but you probably heard this many times.
Example:
You lost 1% on average on 9 out of 10 trades and win just one trade with 15% profit. This is 5% profit with 10% win rate. It shows you are a risk taker and not afraid to take risky trades. Your risk to reward ratio will be 1/15 which is hard to accomplish, but this is just an example right :)
You get the idea, so how do you cut losess, fast?
This is something i always do, but not always share and that's why i'm sharing this post today.
IT IS THE F****** STOP LOSS!
Let's face it, you will never have a 100% probability of winning a trade. We are not fortune tellers, nobody knows what's going to happen next. That's why you have to have a mechanism in place to protect you and that's called the humbe Stop Loss and it's not as simple as you might think.
So How Do I Set My Stop Losses?
First of all I don't set a fixed stop limit order, but a dynamic market order :) I'm using a trailing stop indicator TOTT Bands, which i told you about many times. It works both ways for longs and shorts. It's a trend tracking system that uses a variable moving average that adjusts itself based on volatility. Stop loss level adjusts itself with each candle. Here's how it looks on one minute chart:
This is algorithmic trading with pure math and probabilities. I use 1 min chart for short term profit taking opportunities like the one happened just yesterday and use 1 day chart for long term. Here's how it looks:
But don't be fooled by the simplicity of how it looks. I've spend almost a year to get to this level before i found this indicator. I had to learn how to optimize it, because the default values WILL loose you money. I purchased a software just to backtest it and just realized the software wasn't working on 1 min chart due to a bug, so i had it fixed etc. I now have a short term profit taking system along with long term strategy.
But you still have to learn technical analysis to optimize this indicator, simply because you should know where the system should sell and buy or you will end up with some lucky trades which will later turn in to bust. It's not easy.
This is how i survived yesterdays drop with 6.5% more Bitcoin by taking profits with my stop loss indicator and buying back lower. I used 30% of my account to take this trade which was set earlier for risk management purposes, because i've planned this trade and traded my plan! I was sleeping when stop was hit and on the way to my daughters school when it bought back. It works like a charm and i have not lost a single Sat since i started using it in May.
How Do I Automate This?
Using tradingview alerts and 3commas DCA bots which is connected to your exchange. Any alert you set on your charts, be it a trend line, price alert or indicator, can send a sell or buy signal to 3commas bots and it will execute on the exchange. You don't have to use this indicator, but use any stop loss that you can set.
I may not be the best analyst in town, but i know who is. I use the tools they build, learn from them and i wil continue to sharpen my skills. TOTT (Twin Optimized Tracker) Bands was built and shared at no cost by veteran trader Anıl Özekşi in Turkey as an upgraded version of his long time tested MOST indicator. It's published free by his colleague Kıvanç Özbilgiç, who is in the pine wizards list of Tradingview (www.tradingview.com). I also take courses from wyckoff analytics along with chart champions to sharpen my TA skills, so i nvest heavily in this.
Context Matters
When i share an idea, i'm interpreting the situation from my perpective. Which is the long i took at 41k. If we reject from 48k and take a nose dive, that's not a problem for me as i also have both the short term and the long term stop loss as i explained above. If you agreed with my idea and opened a new long position without using a stop loss, you need to sharpen your trading skills and learn risk management.
What now?
Let's go back to our chart, i think yesterdays price action is undeniably the spring. The shakeout on Sep 13th had the spring type nature for sure, but it did not cross below the Selling climax.
Lessons learned: Spring should cross below SC.
Also, notice how yesterday's volume is less than tiny Sep 13 shakeout. Diminishing volume shows supply is exhausted and all weak hands are shaken!
The double swing high was also confusing. It's a combination of upthrust and sign of strength, or may be just a bull trap after Upthrust. It did not even reach the resistance zone before going down which is a sign of weakness. Yes, i think it was a bull trap after the upthrust.
Right now price sits at the support zone, waiting for the FED meeting. I don't expect further downside and we should see a restest of the spring followed by a strong rally. This will validate the accumulation. If we go below the spring, then this turns out to be distribution which i don't think it is.
But remember, this is a similar situation we had back at 29k. Elon Musk & Jack Dorsey moment. But that was the restest of the spring, not the spring itself, so expect further sideways as well.
So, i'm even more bullish now (Note that this time at support zone :)))
but hey what do i know :)
PS. I know some of you will start trolling this post just like before. If you are happy when i'm wrong, that doesn't change the fact that i'm still winning while being wrong, but on the other hand you should see a phsycic :)))
