Trading Rule #1: Have Trading Rules and obey them

If you don’t have your own personally compiled list of guidelines/principles/rules/regulations then you may not have full control over your actions, when it comes to cryptocurrency trading.

I’m not here to tell you what the rules should be. The only person qualified to decide this is you!

 

These rules can be very specific, kind of like a set of strict technical instructions E.g. Never risk more than 5% per trade.

A trading rule can also be a general principle to guide a thought process, a reminder that our emotions may be impacting our decisions E.g. Don’t Panic Sell

An effective list of rules will likely be a mix of general principles and technical instructions, tailored to your own financial goals and personal circumstances.  This list is constantly referred to and read over and over; ways to ensure that key decisions made are reasonable and have solid grounds.

Get into the habit of running through the rules in your head or jotting them down on a page every now and again. By being consistently aware of their presence and obeying the laws you will find yourself making fewer bad trades in the long run.

 

Everything discussed above can be applied to trading commodities, stocks, forex, anything really. All markets are different and have various behaviours associated with them.

We are (or hope to be) cryptocurrency traders. There are tonnes of blogs and content sites that will hand you something like “Top 10 Crypto Trading rules” or “15 Principles to follow in Crypto-land” The information in these posts may be very helpful to you. My problem with some of them is that they are hard to teach without experiencing the mistake/suffering a loss firsthand and, how likely are you to remember each specific rule?

 

Here is a giant list of 40 Trading rules, drawn from reputable industry sources, that I’ve put together. All good rules. Lots of these rules have similar meanings. Some are very specific while others are wildly general. Have a scan through them. Hopefully they are inspirational to you when it comes to constructing your own Crypto Trading guidelines.

 

 

  1. Have Trading rules!
  2. Hold Nothing Long Term Except BTC
  3. Never buy into a coin after a dump
  4. Learn to understand the correlation between bitcoin and an altcoin.
  5. Learn to understand candle stick charts. They offer significant information, which can’t be figured out of normal lined charts.
  6. Secure winning & limit losses
  7. Learn technical analysis. This plays a major role in the market movement.
  8. Don’t trade if you have sleep problems because of a single trade. That is just not worth it.
  9. Build the Portfolio on Bitcoin
  10. These are Early Days. Be Bold!
  11. Index Track the Top 10 Cryptoassets
  12. Scale Out (Take some Profits)
  13. Buy the Dip, and do not Sell the Dip
  14. Do not Over-Trade. Lock up Coins
  15. Let Profits Run. Cut Losses. Watch 7d Price Change not 24h or 1h
  16. ICOs are a Great Opportunity. Do Your Own Research. Beware Herd Mentality
  17. Research Micro-Caps that might rise by Orders of Magnitude. Buy them at CoinExchange. (I like EquiTrader $EQT, a $3 million Micro-Cap only available at CoinExchange.)
  18. Leveraging has a Role. Most traders buy Bitcoin Futures at Bitmex Exchange. Use Futures if you want greater, faster returns (at a higher risk). Start with tiny trades until you gain experience
  19. Ignore Biased Sources – pump and dump schemes
  20. Set a realistic plan of return on your investment, whether it’s 5%, 10%, 15% or so forth
  21. stick to your long-term goals
  22. Don’t panic and make snap decisions. Do the research
  23. Don’t rely on guesswork
  24. Do your Homework before following Hunch
  25. Learn from your mistakes. The only regrettable mistakes are those from which we learn nothing.
  26. Buy and sell based on long-term data
  27. Educate yourself
  28. Don’t just make your investment and sit and stare at charts all day. Connect with your fellow investors and share your thoughts and experiences.
  29. Buy low, sell high
  30. FOMO is real. Avoid like the plague
  31. The Market is always right. Don’t argue it
  32. Trading with leverage in the cryptos is like juggling Cobras.
  33. Never let a winner turn into a loser. (Forex)
  34. Logic Wins; Impulse Kills – logically focused traders will know how to limit their losses, while impulse traders are never more than one trade away from total bankruptcy, (Forex)
  35. Never risk more than 2% per trade (Forex)
  36. Being right and early means you are wrong
  37. Differentiate between scaling in and adding to a loser
  38. What is mathematically optimal is physcologically impossible. Dont let emotions rule over intellect.
  39. Risk can be pre-determined ; Reward is unpredictable
  40. If you do not understand what is going on in the market, it is always better to step aside and not trade

 

Sources: coinstaker , @BambouClub , coinpursuit , hackernoon , investopedia.com

 

As mentioned already, everyone has different financial and personal Goals/Circumstances. Identifying these will help you optimize.

Below are mine, relevant only to the CAD$1,000 portfolio set aside for The Coin Movement.

 

Financial Circumstances 1k<5% current annual income. Can afford to lose. Low personal risk. My own BTC &  altfolio are hodl bags and in cold storage.
Financial Goals Target value of at least 1 BTC return on 8/31/2018. Limit losses. Slow and patient market gains are ok. High risk is ok too but adjust stake accordingly. I want to buy a house using Bitcoin in 5 years.
Personal Circumstances Working full time and having a blog takes up most of my time. Limited  intraday trading opportunities. Trades can be risky once justified with Fundamental and tech analysis.. Have some fun with it too.
Personal Goals Promote the exercise of due diligence, taking ownership of decisions. Be honest to readers – show gains/losses/winners/losers. Learn from the losers. Continuous Learning and research. Tell others about Cryptocurrency. Be a positive advocate. I want to buy a house using Bitcoin within 5 years.

 

Everybody’s goals and circumstances will vary. I’m asking myself questions such as how much of my own wealth am I willing to risk? and what level of fundamental research will my free time allow me to complete?  The answers to these questions will help establish your strategy and trading rules.

 

Here are my 5 Trading rules specific only to The Coin Movement portfolio:

 

  1. Fundamental analysis overrides Technical analysis – respect the news and be ready to take action.
  2. Never risk more than 20% of the total portfolio value on one trade.
  3. Scale out and take profit.
  4. Avoid selling at a loss – hodl.
  5. Win or Learn.

 

These rules are non-complex and very elementary. In fact, mostly common sense.


Fundamental analysis overrides Technical analysis – respect the news and be ready to take action.

This was a lesson learned recently with the China ICO ban and aftermath. I was not quick enough to react and could have turned this bad info into my favor by shorting Bitcoin. Similarly, if there is a lot of positive hype around a coin then a spike in interest and trading volume can cause a price rise. This hype can be created by a new developer release or a piece of encouraging industry news that potentially strengthens the future of the asset. Sources like twitter are lightning fast to escalate information that may affect price and market sentiment. Stay current and connected. This is not a diss on TA. TA works.

Never risk more than 20% of the total portfolio value on one trade

I’m fond of taking a risk and gambling on an outsider. This is a very simple risk control measure to stick by. We want high profit margins and can afford to be bold but we do not want our portfolio funds to drain dry, potentially overnight. Determining the level of risk is a judgment call based on various factors we already know such as volume, rank, community, concept etc.

 

Example: 

  • Asset is ranked 380 on coinmarketcap with volume less than USD$500k.
  • Potential shitcoin but has innovative concept, tackling a niche industry, applying blockchain technology to revolutionize efficiencies.
  • Core dev team are legit but not very active or vocal in community.

Conclusion: High risk. Invest 1-5% max of portfolio s/m/l term

Example:

  • Asset is in top 20 coinmarketcap with volume greater than USD$20million.
  • Proven and in use
  • Mass adoption and usage inevitable

Conclusion: Low Risk. Invest 18-20% of portfolio s/m/l term

In short – Risk can be predetermined; Reward is unpredictable

Bitcoin is our base currency for now. We are trying to accumulate as much Bitcoin as possible. Cryptocurrency trading is already a high-risk sector due to market youth, volatility and lack of central governance/regulation. We’ve already chosen to take on that risk and counteract it with some good practice in security.

 

Scale out and take profit.

This involves setting some shorter-term target levels. These levels can be predetermined by identifying support/resistance lines and correctly positioning our ”Asks”. We want to ensure we are taking some profit off the table. Limit sells can be placed on exchanges and will sit on the order book until they are filled or cancelled. We are all somewhat driven by our emotions and it can cloud our better judgment. By scaling out at these predetermined levels we’ve made our buy/sell decision already and do not have to make an irrational snap call during a pump or a dump. We want to get on with our lives too and not stare at charts all day.

 

Avoid selling at a loss – hodl

The market is very volatile as we know. I don’t have my life savings at stake here so I’m happy to hold my positions through difficult periods. A price plunge can happen but a bounce will eventually come, provided you have trust in the viability and future success of the coin/project/business.

Win or learn.

Learning from experience is the best way to master a craft, profession or art. Trades will not always work out as expected. Be willing to swallow your pride and identify the reasons why the move was a wrong one. The market is always right. Every trader is constantly learning.


These rules work for me based on my own financial and personal circumstances and ambitions. Draft your own rules aligned to your personal needs and wants.

 

Thanks for reading and subscribe to stay updated with my Trading Journal and take a share of my yearly profits.

 

Stay Tuned!

 

Cathal – The Coin Movement

 

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