A few thoughts on margin trading (UPDATE: SEE EDIT AT START)

I did deceive myself.

I did manage to fall into my own trap and Loose It All. rofl.
So, with that being said, I still think below rules make sense, but I for one wasn’t able to stick to them!
My biggest problem: making too many trades, lack of patience, jumping in too soon.
WAIT for that good trade… wait … only follow your plan and only get in when the chart does what you were anticipating… and take profits!
I lost most of the earned money (well, all of it) in the days following my big gains, and them some more (which I could afford), because I started microtrading based on half-arsed decisions.

So, with that being said, here is the original post:

Hi guys,

I have started experimenting with margin trading with leverage, and thus far I have actually been quite succesful. Out of the last 40 trades, 30 must have been correct calls. To be honest I am quite surprised at this myself, and I thought that some of my observations might be of use to you. So here goes :slight_smile:

First of all, please be advised that there are HUGE RISKS involved. Really, I cannot warn you enough. One second you are looking at a profit of 120 USD, and just the moment when you start thinking if you should maybe take a profit… nah… let’s just see where this goes… the next tick is against you and the losses start accumulating exponentially.

So, with that being said (again: never trade with money that you cannot afford to loose), here are my suggestions:

  1. Only get in with a plan. This cannot be repeated often enough. If you jump in a trade after a move that surprises you, you will definitely get burned. Always, and I repeat ALWAYS!!! get in with a plan, meaning: a move is happening that you anticipated or understand and are somehow clear about. If something happens that you cannot really figure out, you are in FOMO mode and will get burned.

  2. GET OUT as soon as you notice a trade is going against you. Every second counts. Every wrong tick is 40, 50, 100 more USD in additional losses. What I usually do is, upon realising the error. 1) biting my lip, 2) deciding in a split second if I am willing to take a bigger hit ie wait for one more tick. If not, I jump out. With that said:

  3. Accept that there will always be lost trades. Mentally prepare for taking these losses relatively lightly and quickly. The important thing is, to keep them small. See step 2.

  4. Likewise, profit is profit. This one trade is not “cooler” or has more “personality” than the next one. Ergo, as soon as you see a plus, why not take it? You are probably at that point feeling a slight hesitation, so there is nothing against getting out. I tend to ask myself if I would want to jump back in if there would be one more good tick. Often not, ie target reached, I get out. The most money that I have lost, was not in making wrong trades (because you can curb this by the discipline of getting out in time), but by sitting too long in a profitable trade that suddenly turns around. Prices move aggresively, always remember :slight_smile:

  5. Never get margin called. A margin call is when your broker decides that you do not have enough financial buffer left, to cover potential further losses on a position and after a warning, it will go ahead and close the deal for ya. Nice buddy. This is probably at a bad time and there are administrative costst involved as well (40 usd, smt like that).

  6. Never leave your pc, or work with a bad connection, without setting your stops.

Ok, so now let me get to the nicer part :slight_smile:

a) learn to use Fibonacci levels. It’s dead easy. Select the tool, click on the low, click on the high, drag the lines out to the right for future predictions. I have noticed that bitcoin is behaving really predictably, or at least, it has been doing so in my relatively short days of margin trading. It seems to be jumping between fib levels, and previous resistance levels (places where it has been halting before). You can draw Fib levels from multiple low/highs, you will see that often the lines are overlapping - these are the strongest supports.

b) recognise other resistance levels - levels where it has been halting before. Place a dotted line here, e.g. in tradingview press Alt-H.

c) notice v-shaped and diagonally resisted developments and place lines.
e.g. v-shaped convergions are often building up, see the picture. At the tip, you will probably see a move. In the attached picture, after a huge drop, there was this v-shape happening, and I waited for a decision, once it jumped above it, with 2 candles, I went long (see the dotted pink lines)

d) have a look at moving averages. I once googled and read that the 33/24 Double EMA (Exponential Moving Average) is quite powerful. It is the bright blue line in the picture. I often glance at it, and when it just brakes it, a change might be coming. In the example, I did notice that it had broken through it and as you see it stays above it all the time on the upmove, it is just an extra confirmation.
Also I am using WMA (Weighted moving averages), here I am still experimenting, currently 50 and 200 days. The difference with a simple average is that more recent values have bigger weight. This is important for something as fluctuating as bitcoin. You can see that as resistance approached, also this brown-yellow line showed up, for me extra reason to suspect it was time to get out.

e) I sometimes glance at the volume bar. When volumes are low, wild moves are possible. Sometimes however you see a volume bar growing very much, it also means that a reaction is due, because some big orders are coming in.

f) Some thoughts: MACD Indicator (not in the picture) is also somehow useful, it suggests oversold/overbought conditions, I am still integrating this. Another thing I am considering is to start looking at the order book, if there is e.g. a big sell/buy wall.

Final thoughts: I am using a combination of the Plus500 trading platform, and Tradingview. What I noticed is, plus500 absolutely S*CKS monkey ass, especially because the spreads are very high. If you get in for a price X, and you go long, you actually have to pay the selling price; in other words with high spreads, before you even start seeing a profit the price will have to go up like 20, sometimes 30 USD. Vice versa for going short. Be really aware of that!

I think Bitfinex could be a better alternative because the volumes are supposed to be higher, and the spreads lower. However the reason that I am still using plus500 (though often cursing at it) is because I suspect that it is rigged. Ie, manipulated. However in such a way, that you can actually abuse it.
What I mean is the following. I am using tradingview’s BTCUSD Bitstamp chart, and I noticed that plus500 tends to react with some delay to this. Hence, if there is a huge move in the wrong direction, I can still jump ship.
The downside however is, that you will also not get the very shapr price drops. e.g., sometimes Plus500 is almost 100 USD behind the bitstamp price, especially on drops. It tends to even out later, but because those drops can be super sharp, often the whole price level is never reached on fking plus500. Not just the ask, but also not the bid. So don’t curse too loud when you see bitstamp showing your bottomed target price, and plus500 is happily cruising along at pre-drop levels. I once asked support what chart they use as a basis, and they gave me some useless cryptic answer about their prices being some sort of accumulation of “different factors” including multiple exchanges. Whatever. Still works for me :smiley:

I really have developed a love/hate relationship with that platform :slight_smile:

This is all that came to mind, let me just conclude by again warning you for the huge potential of money loss if you just jump into something. There will be many times that you are cursing yourself, for jumping in foolishly. Slowly things should start getting better, it is really important to be watching the movement of the chart, and only getting in when you start getting this feeling that something is brewing. If you on the other hand, get in because of a feeling of being “pushed”, “having to trade”, you’ll likely loose a significant sum of your money with that trade. To repeat, not just the money that you invested, but also your reserves. That is the “snake bite” of margin trading.

Caveat lector!

(I had to Google that)

I look forward to any suggestions, especially regarding other platforms or things that I am in your eyes overseeing, e.g. risks that I do not realise I am taking, or tools that may be helpful.

Happy trading :slight_smile:


Thanks for writing this down man! Ill give this a read later tonight!


My pleasure, just wanted to give something back to the community :slight_smile:


Wow. You are a risky man. I would never do this. But. We all have our niche! I’ll stick to cost avg ma bitcoin. Thank you! :rocket::rocket::rocket:


You know, I had a good thought about what you wrote. Because I am also long bitcoin, and “believe” in the technology. However that is the point… it is still a “religion” :slight_smile:

One could argue that holding and accumulating is actually more risky because you are making a gamble based on parameters outside your “model”. Ie, assuming that bitcoin will go up in the long run, this is something you cannot control.

Whereas in leveraged margin trading, you have all the control.

I like to be in a space in which there are a clear set of rules (be it board games, software development, driving cars?), and the creativity is in how you apply those rules to your benefit.

I can exactly control how far and how long I stay with a trade, if it runs against me I must apply my discipline and get out. Same for staying in… these are conditions that I control.

However by going long bitcoin I am trusting in my own understanding of the world, which is playing by rules that I probably didn’t even know htat they exist (China??).

In that sense, I would argue that day trading is actually the safest of them all :slight_smile:

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Fortune favours the bald


LOL the bald, or the bold?
Fortune gives you grey hairs, for sure :smile:

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updated! see edit above :smiley:
self deception brings nothing indeed :slight_smile:

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lol. it is good that we learn from our mistakes… :slight_smile: to the moon?

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