Welcome back, thank you for taking some time from your busy schedule and coming here to read part- II of the blog.
Your busy schedule right? Lol.
Let’s start with the sentence from part- I, ‘I highlighted the part around while talking about Support and Resistance’. The reason is that “Price pumps from support and dumps from resistance” only happens in books or YouTube videos. If it were that easy, then every guy would be trading by longing from support and shorting from resistance, making millions. If it were that easy, those big influencers didn’t need to rug their followers in order to earn money.
Social media is full of Crypto influencers, but have you noticed that only a small percentage of them are genuinely successful traders with actual winning rates?
Being a good trader requires a lot of discipline, mental work and stress tolerance.
That’s why I used the word “around”—because price pumps around a support and dumps around a resistance. That’s why your entry should be perfectly timed, neither too eager nor too lethargic.
I have worked as market maker for some Crypto projects and have learned few things that I will share with you. Smart money doesn’t have all the capital to change the direction of price, they have the fuel to start the direction but need more liquidity to continue. This is collected by hunting liquidity from both the buying and selling side. In order to win, you need to ride alongwith smart money, not against them. For that, your execution must be precise. I explained more about this in my previous blog THE BENEFIT OF LOSING.
Understanding the psychology of Smart money
By practising
The first thing we need to do is stop practicing our strategy with paper trading. You cannot understand the psychology of big money until real money is involved. It’s just my opinion but I think paper trading is not useful. If you want to practice your trading strategy without taking risks, use a small amount. Go with only $1 but to test a strategy properly, real money must be involved. You may have noticed that you achieve 80- 85% win rate with paper trading, but as soon as you use the same strategy with real money, you start losing trades.
This is because you are not vigilant when you trade with fake money. You take risks and sometimes you get lucky, sometimes you won’t. But real money is at stake, things change. After losing one trade, you get nervous and make poor decisions like revenge trading or taking short time frame trades to make the money back that you lost. When you lose two trades in a row, you become even more stressed and after losing 4-5 trades in a row, you start questioning the strategy. We wonder why the same trading strategy that had a good winning rate during paper trading is not working now.
This leads to rationalization. We think that the market conditions were different during paper trading but now the conditions has changed and this strategy is not longer suitable for current conditions. So we rush to find a new strategy.
Happens with you too?
Yup, that’s why you need to start testing with real money. It’s like playing Poker with your friends. They don’t become serious until money is involved.
In the next part we will discuss topics as
- Why people who rush in the trade are favourite prey for whales.
- Why higher time frame is important.
- Why you should always stick to your plan.
If you’re enjoying the content, please let us know in the comments and share if you find the blog relatable.
7 Responses
Excellent perspective. Thanks.
Thank you Silver Wolf BTC, awesome to read insight from someone who has operated as a MM for Crypto Projects. Any common emotional trading trigger management techniques of your own or that you’ve recognized as used effectively by other successful traders would be even more valuable information, should you be willing to share with us.
Your insight is so valuable! Thank you!
Totally agree with your take on paper trading. We lack emotions when we do that, therefore it’s not representable to our real trading skills. Thanks for your ongoing input, really enjoy your content!
Looking forward to read the next part 🙂
I am LOVING your blogs. Thank you so much for sharing with us. Cant wait for the next part!!!
Thank you for sharing your trading experience and keeping the explanation straightforward, which helps in raising awareness about the emotional aspects of trading. Could you write a post about account management software for buying and selling crypto? I’ve tried some software available on the market, but they don’t connect to all my exchanges, and I have noticed one, in particular, provides some incorrect purchase prices that are inconsistent with my exchange trading history.