Market Meditations | March 16, 2021
Building your freedom, wealth and desired lifestyle comes down to the basic building blocks of trading ? Our focus today will be on:
✅ Personal Fitting
? Risk/Reward Ratios
? Exit Strategies
As usual, we’ll cover the main crypto market updates but remember, no one is going to give you your wealth and freedom ? It’s up to you to grab free educational content like this with both hands ?
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Crypto. Bitcoin continues to sell off ? with the bears having their fun (for now at least). People who read yesterday’s letter would have been expecting this ✅ Main drivers likely: a new weekly open, high funding rates and stablecoin inflows. Crypto company prospects were more ? bullish: with European crypto company Bitpanda gaining unicorn status with $1.2 billion valuation and eToro going public with $10.4 billion valuation.
Legacy. Following a brief risk-off tone, traders appear to have shrugged off decisions by Germany, France and Italy to suspend the AstraZeneca Plc vaccine ? The Dow and S&P 500 both hit fresh record highs ? All eyes on the Fed’s communications tomorrow. Specifically, any comments on the speed of economic recovery and inflation ? There may well be a rollover impact on anti-inflationary hedges such as bitcoin ?
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Trade Your Way To Freedom
If only I bought more bitcoin in 2017 ?Sound familiar?
It’s something many people in the space think about. However, what they fail to realize is that entry is such a small part of trading. Even if you bought bitcoin in 2017, without the right trading strategy, there’s no way you would have held through the bear market ❌
In Trade Your Way to FInancial Freedom, Van Tharp goes so far as to argue that only 10% of a trading system is entry ? The majority is: personal fitting, risk/reward and exit strategy, among other factors. Let’s take a look at a few of his concepts today ✅
A good trading strategy is that which is tailored to suit you. Not your neighbour, not your cat, not your favourite crypto influencer but you ? That means, it needs to factor for:
The amount of money you have ?
The amount of time you have ⏰
The amount of money you will need to have for your desired lifestyle ✈️
By way of example, you can’t be a scalper if you can only trade a few hours here or there. Or, if you are already extremely wealthy, your risk tolerance may be far lower than someone who is just getting started ?
? For as long as you copy other people’s trading strategies, you won’t be successful. If the market turns against you and you can’t truly resonate with the reasons you are in the trade, you will be very quick to abandon it.
? Know what you want out of the market, before you go in ?
We need to define our Risk, or R, before we enter a trade. In general, we want to define R such that we cut our losses short and let winners run ✂️ Let’s take a closer look ? at the concept of R, particularly because we hear it mentioned a lot in the space:
If you enter a long position at $2,000 and set a stop-loss at $1,900, assuming you stick to your stop-loss, you have predefined your risk as $100. Barring some slippage costs, the most you stand to lose, or risk is $100. And so, 1R (your risk) is $100.
Now, let’s say you set your take-profit at $2,400. Well, assuming you get lucky, you can potentially make $400. Or, to use our cool new lingo: 4R.
In terms of a ratio, your risk/reward (R:R) is 1:4. You’re risking $100 to make $400.
?When you hear of R:R being ‘good’ or ‘bad’ it’s simply an assessment of how much you stand to gain compared to have much you are risking. As a rule of thumb, you should stand to gain more than what is at risk ? In other words, a 1:1 risk/reward ratio is probably not the best use of your time.
? A good trader will know their risk/reward ratio before they enter a trade. This, of course, would have meant predefining a stop-loss and take-profit level, which is also good practise ? Two birds, one calculation ?
When you start making a habit of calculating R, you will quickly be able to decide which of your trading strategies is the best use of your time. Because remember, time is money and lost opportunities ⏰
If you want to take things a step further by adding in expectancy and risk of ruin, be sure to check out our ? Risk to Reward Ratio Video Guide ?
Your exit strategy is far more important than your entry. As we discussed earlier, it must suit your personality. Some people have very successful trading strategies whereby they take 10 small losses in a row and then one big win ?
? Do you think you would be able to handle 10 small losses in a row? It takes a lot of willpower and mental stability.
Maybe you can and maybe you can’t ? As long as you know the answer when you are setting your strategy, then we are all good ✅ Whether it is based on a percentage % a timeframe ⏰ or a certain degree of volatility ? be sure you set a stop-loss level that you will be able to commit to based on your personal fitting.
And there you have it. Entry is not everything ? There are many different components to becoming a successful trader and investor. However, tick them off one by one and soon you’ll reap the benefits ? As part of the Market Meditations community, you’ll receive plenty of free resources to help you ?
? If you’re serious about building financial freedom, consider joining our community and gaining access to the full range of insights and analysis ?
India Crypto Ban
According to a senior government official, India ?? announced earlier this week that they are considering a law that would ban the trading or holding of cryptocurrencies. Is this FUD? Is this to be taken seriously?
? The proposed bill is one of the strictest. It would make it illegal to hold, issue, mine, trade, or transfer all cryptocurrency, giving Indians up to 6 months to dispose of their current crypto before being penalized. A few have suggested that the move to ban is to ensure that India’s own digital asset ? they are currently building is not overpowered. In fact, one government official states, “We don’t have a problem with [the] technology” ⚙️
Is this cause for panic? So far, data remains positive:
✅ Despite the announcement, user registrations and money inflows at “Bitbns,” one of India’s oldest exchanges, continues to increase, seeing 20,000+ users added in 2021 alone.
✅ ZebPay, another popular exchange for Indians, saw the same daily volume in February 2021 as the February 2020 monthly volume. ?
☎️ Remember: It is irresponsible ❌to take on a short position based solely on negative news alone. It is just as irresponsible to take on a long position based on positive news alone. When reading an article or headline, it’s important to combine what you read with data before acting.
TWEET OF THE DAY
It was only recently that the KoroushAK ? twitter account was temporarily blocked for no reason. Now, whilst it was a positive in the sense that KoroushAK-47 emerged from the ashes ? we do encourage everyone to follow TheCryptoDog’s new account while he is temporarily locked out:
CRYPTO NEWS AND ANALYSIS
BlockFi Raises $350 Million
BlockFi, a U.S. based company that offers users an opportunity to earn up to ? 8.6% APY on their crypto holdings as well as other lending and trading products, just announced that they have ? raised $350 million at a $3 billion valuation.
According to TechCrunch, BlockFi’s reached ?$15 billion worth of AUM and has increased its monthly revenue to over $50M from $1.5M last year. The fact that BlockFi continues raising money to build and release high quality products fast suggests ? demand is present. The crypto industry now more than ever is poised to take market share from ?️ traditional banks that offer 0.01% APY on your fiat by leveraging centralised platforms like BlockFi ✅
? Did you know that I’m currently making the equivalent of a decent salary through multiple passive crypto income sources using centralised and decentralised platforms? With the right knowledge, you can outperform every single traditional savings account in crypto and Build Wealth ✅ However with so many options to choose from, finding that knowledge can be incredibly difficult ? Don’t worry, we’ve made it simple.
Check out our ?FREE passive income guide ?to see where you can earn crypto interest, what risks you need to be aware of, and how to get started.
Overcoming Adversity with David De Vriesere
David De Vriesere (@DVriesere) is a social entrepreneur currently involved in 5 charities ? He also works to educate people on the power of Bitcoin and blockchain technology ?
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Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision.