Kitabı oku: «The journey of a Cryptocurrency Trader. Trading on futures markets», sayfa 2
During the training, D also taught him the fundamentals of technical analysis. For example, the concepts of support and resistance levels – price levels that arouse interest among market participants. In this case, we are talking not only about analytics but also about market psychology – trading participants, for various reasons, decide that the coin rate definitely will not go above or definitely will not go below a certain price. This collective opinion triggers a self-fulfilling prophecy mechanism: if everyone believes a coin should cost a certain amount, it often will.
The cornerstone of the philosophy of technical analysis is that the price chart contains all the data an analyst needs to predict market movements. This implies that the market price considers or reflects all the information that could ultimately cause it to change.
John J. “Murphy Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications”
However, the most valuable part of D's course was the lessons learned from negative experiences. In seven or eight months, it became clear why trading on small exchanges is not worth it, and why trading algorithms are useless – they don't work. As a result, we chose to work with Binance. (See img. 3)
Img. 1. The color of the candle shows whether the rate is rising or falling, and its height shows how fast it is changing. Very long candles indicate dramatic events in the market. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
Img. 2. The color of the candle shows whether the rate is rising or falling, and its height shows how fast it is changing. Very long candles indicate dramatic events in the market. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
Img. 3. Binance trader’s workplace. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
2. The Trader's Psychology
If you have the skill and genuine confidence that you can be a profitable trader, then one other trait is necessary to succeed: resilience. Never give up.
Jack D. Schwager. “Unknown Market Wizards: The best traders you've never heard of”
The Hungarian psychologist Laszlo Polgar showed in practice how to raise a brilliant child if you approach the issue systematically. And he did it as convincingly as possible: he raised three daughters, all of whom became chess grandmasters. The eldest daughter, Susan Polgar, played against adult opponents from the age of four and later won the world title and the title of grandmaster among men. The middle one, Sofia Polgar, brilliantly won the prestigious men's tournament in Rome at the age of 14, defeating her rival grandmasters. She ended only one game in a draw and beat the rest. Sofia became a grandmaster among women and an international master among men.
The youngest, Judit Polgar, received the title of men's grandmaster at a record age of 15, and competed as an equal in the highest-rated chess competitions, including world championships. For 25 years, she maintained the highest rating among female chess players. She did not become a world champion simply because she chose to compete in men's tournaments from the very beginning.
At the same time, the children's chess careers resulted from their parents choosing one of several other potential fields. The sisters' parents, Laszlo and his wife Klara, considered raising polyglots or outstanding mathematicians. Ultimately, they chose chess partly for the ability to evaluate the results of their experiment more objectively.
“If you start developing at an early age and devote yourself completely to your work, you can succeed in any field”, – Klara told reporters later, – “But we chose chess – a very objective and easily measurable activity.”
Poole Robert. “Maximum. How to achieve personal excellence with the help of modern scientific discoveries”
At the same time, Laszlo and Klara raised fully-fledged individuals – their daughters speak several languages fluently, participate in public life, and raise their children. Of course, in their experiment, the question of the line between violating a child's freedom and the parents' concern for their happy future remains open. However, in Arseniy's case, the training began in adolescence, allowing him to choose the fields that interested him.
As soon as the child shows interest in a certain activity and makes concrete progress, their parents take the next step: usually they turn to a tutor or coach. At this point, most children are first introduced to the principles of deliberate practice through their own experiences. Now, they must do more than just play: they have to work hard.
Poole Robert. “Maximum. How to achieve personal excellence with the help of modern scientific discoveries”
When looking for a teacher, it is always important to understand what level of knowledge their material is designed for and how well you match that level. That's why we chose M and his online course for beginners to study technical analysis. Although M later admitted that by beginners, he meant listeners with not zero knowledge, but at a certain minimum level – which was exactly what Arseniy had. Another argument for choosing M is that his teaching was systematic, with a large cycle of twenty lectures and a lot of independent work.
Each lecture lasted an hour or two. At first, you just sit there and don't understand much: it might sound like gibberish. So, at the same time you google, figure it out, and study. Towards the end, you start to understand how everything works. But it was hard – I had to really push myself.
(Arseniy, 17 years old, five years of experience)
In addition to technical analysis, M gave Arseniy his first knowledge about the organization of a trader's work and an idea of the main difficulties in this work. According to him, M experienced many ups and downs in trading before he found his style and way of life.
We met M while doing sports. He deliberately strains himself physically, plays music and sometimes drives around the city. All this is to release the stress accumulated during the day, and to rest the mind. When I got seriously involved in trading, I realized how right he was – occupational health is a matter of survival for a trader.
(Arseniy, 17 years old, five years of experience)
Today, when we train novice traders in our dealing centers in Russia, Estonia and Spain, I can formulate what was missing from the M course – full transaction support. Of course, a beginner has to get used to the profession: study technical analysis, find his trading strategy, and learn professional hygiene. But then comes practice, working with real money, emphasis emotions, and a lot of energy consumption.
The market may move in the wrong direction, their trading strategy may fail, and losses may begin. This is a serious test of a trader's will, especially for beginners, and it is much easier to navigate with the help of more experienced colleagues. If Alekhine's opponents could have received advice from a senior comrade, he would have surely advised them to grit their teeth and follow the plan. But they had no such opportunity.
Conversely, there are situations when it is essential to stop, take a loss, and take a break from trading. But if you don't have the strength to do this, there must be someone who will turn on the parental control – force you to stop trading and help you understand the reason for the loss. This is transactional support combined with risk management.
If we imagine a trader's work in a simplified way, it consists of three parts.
1. Analysis of the market situation.
2. Choosing a solution from a limited set: buy, sell or wait.
3. The implementation of that decision.
Alekhin's chess opponents, whom we discussed above, were cut short in the third part – they could not implement their decision because they were psychologically unprepared for the temptation and became greedy. But psychology has no less influence on the remaining two parts of the work.
When we say that the market situation is such and such, we mean fundamental and psychological reasons. A harsh winter increases the demand for energy resources – the price of futures contracts for them is expected to rise. But what if traders had anticipated a cold winter long ago and had taken a long position on gas in advance? Then the price should stay the same. What if traders were preparing for an even colder winter than what happened? Then the price should go down. In other words, whether you are trading gas futures or bitcoin, market participants' confidence in a particular forecast often drives the price more than objective reality.
However, traders do not have a union through which they can voice their assumptions. Therefore, the only way to understand the general mood of the market is to analyze current transactions and see the trends behind the numbers. i.e., this is called technical analysis.
Technical analysis is the only way to measure this 'irrational' emotional component in all markets.
Neeson Steve. “Japanese candlesticks. Graphical analysis of financial markets”
In practice, technical analysis means looking for certain patterns in a candlestick chart and predicting price movements based on them. For example, adouble top is a common sign of the end of a bull market. When a quote rises to a certain level (the first top), then falls to a valley or neck, rises again to the same level (the second top), and then falls back to the valley, the chart shows a distorted letter M. And such a formation says that the rate is very likely to break through the horizontal level and fall further – i.e., this is a signal to sell. (See img. 4)
A double top shows that the balance in the market is changing – first, demand exceeds supply, then in the area of the first top, there are more sellers than buyers, and the graph goes down. At the horizontal level, there is another reversal – demand again exceeds supply, but when the second peak is reached, buyers run out of steam and the asset price falls. In another sign of falling demand, the volume of transactions at the second peak is usually significantly lower than at the first one.
For obvious reasons, a double top can only begin to form in a growing bullish market. And if the chart first has formed one peak and then another, it is a sign that the growth has ended – the bearish phase is beginning. In a bear market, everything works the other way around, and the double bottom formation indicates that the decline in the exchange rate is ending, and the price is beginning to rise.
There are many reversal patterns – head and shoulders and inverted head and shoulders, triple top and triple bottom, wedge, diamond, and so on. Some patterns indicate a continuation of the trend – a bull market will remain bullish, and a bear market will remain bearish. For example, these are the flag and triangle patterns. (See img. 5, 6)
M only talked about a small part of the possible patterns at the lectures since they can be studied endlessly. Another fascinating subject was the use of indicators. These are more complex tools that involve the use of mathematical and computer calculations:
1. A sliding average is an average price indicator for a certain period. Depending on the mathematical method of averaging the graph, they can be simple, exponential, smoothed, or weighted.
2. Fibonacci levels are a grid of several correction levels superimposed on the price chart. The levels are separated by the Fibonacci numbers known from mathematics (1, 1, 2, 3, 5, 8, 13, 21…).
3. MACD (Moving Average Convergence/Divergence) is an indicator used to determine the direction of the trend, its strength, and duration. It calculates several moving averages and predicts price changes based on them. (See img. 7, 8)
Img. 4. Large participants on the calm market accelerated the rate, after which it drew a double top and fi nally almost returned to the previous level. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
Img. 5. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
Img. 6. The exchange rate dropped unexpectedly, followed by the release of customized negative news. It seems that market makers were forming a short position and provoked panic for profit taking. When the chart the double bottom, the rate went up and in 51 days it was back to its previous level. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
Img. 7. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
Img. 8. First, the “inverted head and shoulders” formation was formed, after which a jump occurred of the rate, which was indicated by MACD indicator. TradingView. Platform and social network for traders and investors [Electronic resource] – London, England: TradingView UK Ltd., 2024 – Access mode: https://ru.tradingview.com/.
Initially, the formation of M's re-trading system was focused on positional trading, emphasizing accurate, labor-intensive calculations with minimal risk. This is good for novice traders – few beginners can count as quickly as experienced ones. Therefore, such training suits him best until a person has chosen his specialization – long-term, short-term, intraday trading, or scalping. The necessary knowledge is received at a slow pace; there is time to absorb everything.
The peculiar characteristic of M as a trader and teacher is a constant calculation, recalculation, and many different criteria in the trading system. His scientific degree may have had an effect. His trading system was very complex, but I learned a lot about technical analysis from it.
(Arseniy, 17 years old, five years of experience)
The downside of such a cautious strategy is low profitability. M earned 3 % – 5 % monthly in a relatively stable market. At the same time, he devoted a lot of time to diversifying his assets, kept about 10 % in cryptocurrencies, and did not use exchange leverage. When the market moves, it could significantly increase profitability – up to 14 % per month.
Of course, such indicators are nice for big investors, but for a novice trader with a small deposit, more than 14 % per month is often necessary. Moreover, this is not a passive income, but hard work – constant observation, analysis, buying, and selling.
But for those who managing large amounts of money, M's strategy is perfect; his calling is to work with investors and help them manage capital with minimal risks. We still read his analyses, price forecasts and economic reviews with great interest. M is a very competent specialist; he explains and lays out everything in detail, and his predictions often come true, which is why the channel has over 100 thousand subscribers. This is an indicator of competence. It's one thing to show old charts and draw obvious conclusions about the past and quite another to give accurate forecasts about the future and constantly prove your skills.
Today, Arseniy conducts trading livestreams – he makes transactions in real time, explains the logic of his actions, and answers questions. It is also a demanding job that requires you to stay in shape constantly: no one will trust money to a trader who always loses it in the exchange.
Everyone understands what is a mathematical mindset – correctly analyzing information, finding patterns, and subordinating emotions to logic. Treat life as a series of tasks or as a complex game of chess – the same qualities are essential for success in technical analysis.
On the one hand, technical analysis is a set of tools for understanding the market situation. On the other hand, its correct use is a way to separate yourself from emotions and fears during trading, strengthen your will, and subordinate yourself to a cold mind.
The advantage of technical analysis is that it helps you commit to disciplined trading and overcome emotions, one of the biggest enemies of all traders. Once you start making real trades, emotions immediately take over, and reason and objectivity go out of the window. If you don't believe me, try trading on a demo account without risking anything, and then move on to trading with your money.You will very quickly notice how much emotional stress and fear of loss begin to affect your actions – usually in direct proportion to the amount invested. Technical analysis tools put objectivity back in the driver's seat: they will tell you when to go in, when to go out, and at what levels to set stop losses. Technical analysis teaches you to weigh risks better and manage capital more rationally.
Neeson Steve. “Japanese candlesticks. Graphical analysis of financial markets”
There is no miraculous, foolproof way to profit from trading consistently. The main reason is that people make the market – traders and the businesses behind them. And it is possible to predict exactly how a certain event will affect the behavior of market participants only with a certain probability, far from one hundred percent. Therefore, any signal, pattern or regularity on the chart is only a change in probability, not a vision of the future.
A trader is influenced by many external factors – information from various channels, their current position, their physical and mental state, and the actions of other market participants. This is a mixture of conflicting signals from which each trader draws their own conclusion, which is only sometimes correct.
Intuition and logic are mixed in this cauldron. For example, a controversial event occurred: a famous person praised a certain coin. Intuition tells market participants to follow the leader, i.e., to buy this asset.
In the following chapters, we will examine examples of how prominent market participants work out such schemes. The most important thing to understand is that the market is always uncertain. You can reduce the uncertainty and increase your chances only with the help of a trading system that uses a probabilistic approach i.e., it suggests market entry and exit points with the highest probability of a positive result.
Emotions have a significant influence on both a trader's intuition and logic. Moreover, this influence can both help and hinder. On the one hand, a positive outcome in the market motivates us to keep doing what is working so well. A hostile result forces you to look for your mistakes, study trading more thoroughly, find weaknesses in the strategy, and eliminate them. On the other hand, one random profitable trade can cause a emphasis surge of positive emotions and overshadow logic, which is a sure way to lose money. Excessive stress due to inevitable failures can lead to burnout. An experienced trader learns not only about the market but also about themselves. They know how to control their emotions, relieve tension, and make thoughtful decisions instead of intuitive ones.
But you can't read a few good books and immediately stop panicking when you're on a losing streak. You need to stay calm and use complex mathematical tools to learn how to make money even when you want to give it all up.
The manager of one of our shopping centers compares the training of young traders to the training of athletes – he is a boxing champion candidate, coach, and teacher. In both sports and trading, training occurs through developing a punch – mastering basic techniques until they become automatic, muscle memory, and immediate appropriate response to the situation.
With each student, a future boxer, I always began by discussing the basic rules. I told each one I would teach them only two punches: the left jab and the right jab. And with these punches, he should win, say, the city championship. He must win a low-level tournament with just two punches before we learn the next two. “Perhaps,” I would say, “you will not become the champion of Russia, you may not reach the Olympic Games, but the fundamental skill you develop during your first few lessons will stay with you for the rest of your life. You'll develop muscle memory and you'll develop a punch.” I tell traders the same thing: “First, you listen to your mentor, trade one or two strategies, and polish them to perfection. Then you study. If you don't have experience, results, or the necessary skills, you do not have to rely on yourself – learn from the more experienced people and practice tools by one or two at a time.”
(Vladimir, 30 years old, eight years of experience)
We will consider in detail further how to select a trading strategy and what this choice depends on. It is essential to understand that the success of training and actual trading is primarily determined by discipline. You also need theoretical knowledge – how the market works, how you can make money from its movements, and practical skills – the ability to follow a plan, finish the job, and not give up at the first difficulties. And vice versa – go where the risk is manageable.
