Crypto Academy Week 12 | Homework Post for @fendit | Don't get lost in the fuzz
Introduction
It feels so good to be back here at the academy to learn from seasoned professors and this time, I attended the lecture of professor @fendit that was based on the topic "Don't get lost in the fuzz" and with no doubt, it was a great lecture. This article will be used to solve the task given by the professor.
Tasks
A) Place yourself in the following situation:
You bought BTC a couple of days ago at a price of USDT 62K. Suddenly, you see that this situation is going on:
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What would you have done before reading this class?
In a situation as shown in the chart provided above by the professor, if I bought Bitcoin at the rate 62,000 USDT and suddenly have it dropping in value. Before reading this lecture, I won't sell off to cut loss as many traders would have done rather I will go back to the asset's chart pattern to conduct price forecasting before concluding on what to do next. As I've highlight earlier, I won't sell the asset rather I would forecast to see if there is tendency of the asset to rise in value anytime soon, if not, I would use my stop loss function in the trade. An example of my price forecasting would be shown through the chart below using the BTC/USDT chart pattern.
My Entry/Buy position- 62,000 USDT
From the screenshot above, for example, I made an entry into the trade at 62,000 USDT and shortly as seen on the chart, the price started falling then I will explore the chart pattern to see the price behaviour of the asset over time. In this case, I will look for two strong supports that could assure me the price of the asset is going to rise again. Let's proceed to the next chart that showed supports.
Two supports caught at 58,499 USDT
And the screenshot above revealed that two supports were caught earlier at 58,499 USDT which gives me an assurance that the value of the asset would be triggered again at that support (58,499). My conclusion, in a scenario like this, I won't sell immediately the price falls rather explore my chart pattern and as seen in the analysis, anything below 58, 499 USDT would be used as my stop loss, for example, my trade stop loss would be kept at 58,000 USDT to avoid further loss.
What would you do now?
My Decision after reading this lecture: The lecture of the professor has taught and enlightened me the more about the importance of stop loss and as such, if in the same scenario when I have the price of my Bitcoin asset bought at 62,000 USDT starts falling then I would input a stop loss at around 59,000 USDT as the process of doing the technical analysis might take some time and I might be too busy with other things such that I may not be able to carry out the analysis on time. So, if I set a stop loss at 59,000 USDT (which cuts my loss at 59,000 USDT) and the price goes down beyond which would give me the chance to position myself for another buy.
B) Share your own experience when it comes to making mistakes in trading:
1.What mistakes have you done when trading and what did you learn from them? If you have little experience when it comes to trading, tell if you got to know about someone else's experience.
My Trading Mistake
I've made several trading mistakes in the crypto ecosystem and the one I would be talking about is the trade I carried out on the Binance exchange where I traded Bitcoin Standard Hashrate (BTCST) in the BTCST/USDT pair. Why did I enter the Trade? The price behaviour of the BTCST asset went bullish and I experienced "FOMO" (Fear of Missing Out) without carrying out proper analysis on the past price behaviour of the asset. BTCST was 67.6 USDT (filling 1.069 BTCST with my 72.3 USDT asset) when I bought it on the 19th day of March 2021 with all my available asset, not quite long after the purchase, the price of the asset falls extremely. See the screenshot of my successful purchase order below.
Purchase history
Obviously, I made the wrong choice as the price of the asset dropped extremely and I couldn't sell it off as it would only result to massive loss on my side. I waited for 24 days before I can come close to my initial investment even though it was still at loss (wasted time and loss of asset). I sold the BTCST asset on the 12th day of April 2021 when the asset was worth 63 USDT (bought at 67.6 USDT) returning just 67.4 USDT (initial investment: 72.3). With this illustration, I waited for long 24 days before I was able to recover some of my investment (I still run at loss). The screenshot of my sell order is shown below.
Sell history after 24 long days (with around 5 USDT loss)
What I learnt from the Trading mistake
After experiencing such long days of delay and loss, I learnt to be patient before making an entry into any trade and that's where the concept "FOMO (Fear of missing out)" comes in. I learnt that I shouldn't enter a trade because its price is bullish rather go through my analysis to be sure of the investment before making a buy decision. I made the decision to enter the trade because I believed I could make some profits and having the "fear of missing out" which cost me wasted time and loss of asset, and it taught me a hard lesson not to be caught by "Fear of Missing Out" any longer. Also, I learnt to only put a part of my total assets into such trade because as at the time of that investment, the 72.3 USDT is the whole asset I had in my Binance exchange wallet.
2.Which of the strategies discussed in this class you find the most useful for you? Why?
Strategy that Interests me in the lecture and appealed the most useful to me
All the strategies discussed by professor @fendit are all great ones and each individual traders can find one to adopt as their trading strategy and in my own case, the strategy I found most useful is "Never Invest money that you are not willing to lose". And Why? The aforementioned strategy is the most appealing to me, which talks about risk management whereby you should only put in what you can afford to lose and as such, the money that won't affect your investment in the crypto ecosystem. Like the popular saying "Don't put all your eggs in one basket" which also applies in the crypto investment such that a failed investment shouldn't affect your overall investment if you segmented your capital for various investments and not all capital on one investment alone.
C) Place yourself in the following situation:
You're browsing Twitter and you see this:You see that whenever this kind of things happen, BTC prices rush. What would you have done before reading this class? What would you do now? Explain in detail if there's something you would do differently.
What I would have done before reading this class or after reading this class would be identical. When I come across something like this and if I should act on it then it's a Sentimental Analysis whereby I will be carrying out a price forecasting based on what I have seen on the social media. Knowing fully that, a tweet like this one in the image above tend to increase the utilization of Bitcoin as the asset can be used to buy Tesla and its value tends to appreciate greatly.
After seeing that tweet, I strongly believe the price behaviour of Bitcoin asset is going to be bullish and I will be positioning myself for an entry into the trade of the Bitcoin asset. Before buying, I would have done a price forecasting by Sentimental analysis through the tweet seen about Bitcoin and I will add Technical Analysis to it, to analyze the price behaviour of the Bitcoin asset over time to mark out an entry position for my purchase and mark out my stop loss to make a wise and safe investment on the Bitcoin asset.
Conclusion on this, in a scenario like this, I am going to conduct price forecasting through Sentimental and Technical analysis to position myself for an entry and put my strong stop loss in place.
In conclusion, the best practice for crypto investments is the ability of traders to be certain of the investment they are entering having gone through different analysis of choice and as mentioned in the lecture of professor @fendit, there are numerous strategies traders should adopt as own trading strategy and that would enable them to make good investment decisions. Thanks to professor @fendit for this awesome lecture and I am glad to have participated. Thank you all.
Cc: @fendit
Written by; @fredquantum
Thank you for being part of my lecture and completing the task!
My comments:
Nice work!
All explanations were really clear and I can tell that you know what you're talking about
Hope to see you next class! Good job on this one!
Overall score:
7/10