Good Trades Gone Bad - A Critical Retrospective

Howdy folks, long time no blog. I hope all of your respective butt holes remain in tact after a wild week in the Bitcoin market.

My strategy issued a sell signal earlier today, but I actually exited three days ago while we were crashing and my profits were being chewed.

I grew my account by 28%, which would seem like a good result, but considering the account was more than doubled at the top and following my strategy to the tee would of yielded 38%, it's actually a shocker.

Strategy exits for a 38% profit

So what went wrong?

Leverage - the doubled edged sword

Leverage magnifies gains and losses, I never would of doubled my equity being positioned without leverage, but my rolling profits would not have been chewed up as fast on the way back down either. I'd stated regularly in prior posts that I was going to be nimble with the leveraged component of my position, but when push came to shove and the market turned I failed to do so. Kind of.

In actual fact I was a little too nimble, I did close the leveraged component very close to the top when we first turned lower, but then got suckered in by a few green candles off short term support and not only got back in, but increased my exposure right before the next leg lower:

Buy the fucking dip is a great strategy - til it's not

Loss aversion

Being wrong is fine, it's a part of trading. Most traders have no or very little edge over the market when it comes to accuracy, getting 50% of their trades right. From my experience researching and developing automated and semi-auto systems, lower accuracy strategies with larger reward profiles actually tend to generate better results.

Increasing your exposure at the wrong time is one thing, but not rectifying that decision once you're proven wrong is the next level of degen and will only lead to buttpain.

FOMO and over-trading

Though getting out before my strategy said sell actually didn't directly lead to reduced profits, it did leave me in a shitty situation. I was no longer in an awesome position from 34K, I was flat and my strategy was still saying hold long.

As such, deep FOMO took hold and 2 days of schizophrenic over trading took place - "It's going up - quick buy!" -> "Shit it's going down - SELL! SELL! SELL!". Though I had a couple of good entries during this phase, both long and short, having just wiped out so much of a good trade, my head was not in the right place for discretionary trading and I should not have been doing it.

Losses here were not too bad, a small fraction of what I lost on the way down, but still losses and a waste of energy.

The brightside

This post may seem negative, but it's not, it's just realistic. If you're not constantly assessing what you've done right, what you've done wrong and how you can do better next time and actually actioning all that, then you'll only ever be a mediocre trader, if not an outright loser.

At the end of the day, my strategy just proved itself in live trading conditions on a real account and if I'd followed it to the tee I would of made a 38% return in just a few weeks. Returns like that compounded over a year on a decent sized account = megabucks.

Following the strategy on the way up was a breeze and was honestly the least mentally intensive trade I've ever taken, even though at one point it was the largest $ value rolling profits I'd ever generated. Following this experience I am 100% converted to systematic trading over discretionary.

Finally, I am out with a profit and BTCUSD is looking heavy, if the speculative stars align, I will be getting back into the market at a discount to my exit and hitting a new equity peak the next time Bitcoin makes ATHs. If that happens I will likely actually listen to my wife and take some profits early - greed is a bitch and a risk averse queen can be a great check on that.

Talking Shop

What good trading decisions have you made this week? How about shitty ones? What could you do better? Maybe you're just starting out trading or know nothing and would like to learn?

Let me know in the comments below or come on over to the chartfarm discord server and degen/trade responsibly with me and a few other traders in real time. Pants are optional.