Category Archive : Gems of Trading Wisdom

Trading Success is just a matter of always following simple, consistent rules. The following are my “Golden Rules of Trading Success”. There is no guarantee in trading, but ability to follow these rules can make a difference between a lifelong career as a successful trader, and spending the rest of your days an abjectly loser complaining on #CryptoTwitter.

  1. Buy low, sell high. Don’t sell low or buy high. And, always use stop losses and sell low to cut your losses. And only buy high to profit off breakouts without falling for fakeouts.
  2. The market is efficient, and prices in all known information instantly. Also, you can get rich by having the foresight to intelligently and reasonably pick the right crypto to buy while it’s still cheap, before it moons.
  3. The trick to profit is to continuously add to positions on winning trades. Start small and add to it by slowly buying as your position moves further into profit. Also, remember to lock in realized profits, by slowly selling as your position moves further into profit.
  4. Don’t use a million indicators. Find one that works and stick with it. For instance, use a moving average to indicate trend. To find out the most effective moving average, a quick survey of CryptoTwitter or TradingView posts will reveal that the only one you need is the 5, 9, 20, 21, 24, 50, 78, 90, 100, 120, 150, 200, 360, 360, 480, and 500 4-hour, day and week MA and EMA.
  5. Always wait for trend confirmation, otherwise you’ll get into too many fakeouts and bad trades. But also, “Confirmation is only for Catholics”- act quickly, because if you wait for trend confirmation, you’ll get into the trade much too late to have a decent r/r or any kind of profit.
  6. “Trade the range”. But “the trend is your friend”.
  7. Let your profits run, don’t take money off the table when it’s appreciating. Also, remember to pay yourself- take profit off the table frequently as it’s appreciating.
  8. The market is predictable- “History may not repeat, but it rhymes”. Trading pioneer Jesse Livermore said the market is the only place where history repeats. But also, there is alpha decay- any strategy will only work for a short while, then it won’t work anymore at all. Past results are absolutely unreliable for predicting the future.
  9. Technical analysis works because the market behaves in accordance with consistent rules. Also, the market can stay irrational longer than you can stay solvent.
  10. Stick to simple strategies, don’t overcomplicate things. However, you have to find a totally unique alpha or strategy that nobody else has figured out, because you’re competing against all the greatest minds and massive number-crunching computing power in the world.
  11. You want to short when price has tested resistance and been rejected, therefore the buyers aren’t strong enough and price is likely to fall. However, testing resistance weakens it, making a subsequent break past it and further pump more likely. So when you see the price test resistance, it’s a sign to short, and also a sign not to short. (The inverse is true for testing support.)
  12. You compete against the entire world in trading, so you have to find an “edge”, something no one else has. But also you’re competing against the smartest people in the world, who are on to your every trick.
  13. Nobody is ever going to share real alpha, it’s too valuable, genuine alpha is how you get richer than everybody else, and the more people have it the less it works. But if you really want it, you can pay one of hundreds of thousands of traders to share their real alpha with you for only $50/month.
  14. The trend is your friend. Also, the market distributes itself to spread maximum pain, and the more complacent and trusting you are that something won’t change, the sooner it will. Past performance is an unreliable indicator of future returns.
  15. Markets reflect the wisdom of the crowd. Also, 90% of traders lose money.
  16. . As your trade moves in your favor, move your stops up aggressively to protect your profits. But also, leave your stops wide to give price room to breathe, otherwise volatility will stop you out and you’ll miss the big profits.
  17. “Cut your losses but let profits run”. Use close stoplosses to cut your losses early when price moves against you. And, don’t cut your losses early, because then you’ll lose money on frequent temporary pullbacks before price reverses and continues on to be a big winner in the direction you expected.
  18. Markets are efficient, information moves instantly so everything is already fairly priced based on the most advanced information. And, the most successful long-term investing strategy of all time is Value Investing, systematically finding and investing in companies that the market had undervalued.

Trading vs Gambling: know which you are doing!

Most professional traders will tell you that there is a very big difference between trading and gambling. Use the following table to understand the differences, and make sure you’re on the only reliably profitable side of this crucial division!

 TradingGambling
0.) "Alpha decay": You win for a while but it will never remain consistent for long.
1.) In absence of actionable guidance on how to improve, or any return on lengthy efforts to discover a way to, the whole thing begins to look like a game of chance where "improvement" isn't actually possible.
2.) If improvement is possible, failures ought to be teachable. But in this, 99% of what you "learn" turns out to be about as reliable as a coin flip. Winning is dependent simply on time in the game, rather than on learned info.
3.) Some claim it's a real discipline, but it cannot be taught, other than "forune cookie wisdom" that everyone has plenty of to pass along.
4.) In analyzing it, everything is ambiguous. Anything can be read as confirmation or not enough confirmation. You can find a million different points it's likely to retest (to deny your thesis, set a stop, etc) and no reason why one is more likely than any other. Anything can be read as an "trend" depending on timeframe.
5.) "It seems right to me" and "It's always worked before" are foundational provisions, just like in a religion or a superstition, not like a science.
6.) You're trying to profit off a chaotic system, no cause and effect... overwhelmingly similar circumstances may give rise to vastly different results, for unclear reasons
7.) Consistent profits are very, very rare. Inconsistent results are common.
8.) Knowledge, understanding, technique, and analytical skill are only ever partially, inconsistently, and variably useful.
9.) Most people, regardless of intelligence or skill, lose their shirt.
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