Hi everyone, it’s CryptoSage here!
In this article, I’m going to show you what I would do if I had to start my whole Day Trading Journey over again. I’m self-taught, so I’ve made every single mistake in the book that cost me a tremendous amount of money but, most importantly, Wasted Years of my life.
So, if you’re coming with some experience or you have zero trading experience, this article is going to be a boiled-down checklist of all the most important things that you need to focus on to set yourself up for Success.
Table of Contents
Okay, we’re going to talk about software, tools, and custom spreadsheets that I’m going to share with you how to access Capital starting with a small amount of money to be able to take big positions. I’m going to show you tips and tricks along the way so that by the end of this article, you’re going to have a clear-cut path to start your day trading career without wasting unnecessary time and money.
Identifying the Common Trap for Beginner Traders
In order to figure out what we should be focusing on as a beginner Trader or someone who needs to revamp their trading, we first need to identify what we shouldn’t be focusing on. I’m going to identify a common trap that most beginner Traders run into; they will basically halt your progress and basically put you into what I call the spin cycle. So let’s talk about that trap and how to avoid it.
When people first start trading, the first thing that they’re going to do typically is get onto an exchange, maybe try to find a pattern online, and start trading it. Most of the time, because you don’t know the risk implied, you’re actually able to be braver than most people and you’re probably going to make some money off the Jump and think, “Wow, I’m actually getting really good at this whole trading thing. I should continue doing this, maybe with more money.”
The Three Phases of Trading Mistakes
The next phase is going to be when you take a position, and all of a sudden, it goes dramatically against you, and you’re like, “Oh wow, I’m down a lot of money. I can’t sell this position because I don’t want to realize a loss.” So you end up waiting for the position to come back; the position comes back to your entry, you take some profit off, and you reinforce that idea that says, “Oh, all I have to do is wait on my position; if it’s going against me, it will come back, and you’ll be able to make money and not realize a loss.”
Understanding the Math Behind Trading
Let’s get into the math behind trading. It’s really simple once you understand it. When we’re talking about trading, it comes down to two basic statistics: average risk reward and average winning percentage. So how many times are you winning trades versus losing trades and how much money are you making on the trades you do win versus how much you’re risking on the trade? That’s going to be your risk-reward calculation.
So say we have a $500 account, and we’re risking one percent of our account per trade, and we have a one to two-point-five risk-reward, meaning if we’re risking $100 in the trade, we’re making $250 when we’re winning the trade, and let’s say our winning percentage, let’s say it’s 35%. 35 is pretty low, but as you understand these stats, you’re going to realize that it actually doesn’t matter too much.
Position Sizing and Leverage in Day Trading
Starting with the $500 account over 100 trades with these statistics being wrong 65% of the time, we’ve increased our account by 37. This is why you need to understand these stats; it has nothing to do with being right all the time; it all comes down to the math behind this. Let’s understand risk factors.
Let’s say that we wanted to take a position in the market right at this level. If we are wrong and the market continues to push down into this level here, this is going to be our one unit of risk, meaning if this trade comes up and hits this level, we’re going to be making three risk factors, which is going to give us a $300 profit if we’re risking $100. That’s what we mean by risk-reward.
So if we know that this can happen 35% of the time, we can be wrong 65% of the time and still grow our account by 37. As humans, we’re wired from children to be taught that being wrong and losing money are two behaviors that need to be corrected. What we teach to our premium students is the fact that when you’re taking trades, the risk that you’re putting on the table, as long as it’s uniform and contained, is simply opportunity cost to get into the market to be able to exploit this exact Edge.
Using Leverage in Crypto Trading
So as you become a better Trader, say you’re 50% win rate, so you’re right about your trades half the time. Look at the profit potential that you can make even on a small account. Something that I always emphasize with my premium team is the fact that it’s really about generating a consistent process with a small amount of money. If we can make 156% with a $500 account, I’m going to show you this a little bit later in the article, but with leverage, we’re going to be able to use $50,000 pretty easily starting with a $500 account.
So if we’re confident in our process and we run this calculation over 100 trades, you can profit $65,000. Say we’re taking 100 trades over that period, say we can take two trades a day, that’s going to be 50 days. So if we divide that over 50 days, if we’re following the stats, we’re averaging $1,300 per trade. This is the exact concept that I deploy when I’m able to make $2,000, $3,000, $4,000 on each trade that I’m taking. It’s about mastering a small process and then figuring out how to scale that so that you’re following the same system with larger numbers.
Finding a Setup and Positioning in the Market
Okay, let’s go over finding a setup where we think the market is going to make a move. Let’s talk about positioning ourselves so that we have uniform risk when we’re doing that so that we can keep our risk rewards static, and then I’m going to show you a free resource for you to be able to review your own trades and improve your process.
The software that I’m using is called TradingView. I can put this in the description of the article if you’re not already using it, but basically, it’s very clean-cut, and with my main style of trading, I’m really not using any indicators. Alright, so there are areas on the chart where I can identify where we’re probably going to get reversals in the market, which are going to allow me to be able to use that risk-reward and winning percentage map, put myself in a high probability situation to get the reward that I want.
What I’m doing here is using Fibonacci analysis to be able to figure out where the tops of markets are going to be. We can see 161.8 is the exact top there. This is a process called A35A. I have plenty of articles on this that you can watch afterward. I’m not going to go into the details. I’m just going to kind of walk through what I’m doing to show you that it does work.
Calculating Position Size and Using Leverage
So then I’m basically taking a Fibonacci retracement off of this level here into this level, and then we’re going to be taking a short position off of here. I can basically set up my position so that now I’ll be figuring out how much profit I can be able to make and where I need to position myself to be able to take the proper size position.
In this situation, we’re going to be making a 3.56 risk-reward ratio, which means that if we risk $100 on this, we’re making $356 on the trade. The next thing that we’re going to do is figure out how to position size into this, how much money it’s going to take, and how many units we need to look at. So this is where we’re going to use a trade position calculator.
If our entry level is going to be at 1920, our Target is going to be at 1874, stop loss is going to be at 1933, hit enter, that’s going to automatically configure the number of units that we need to use on this trade. So we can see if we’re able to enter with 1.92 Ethereum, we can risk $25 on the trade to make $88 in potential profit using $3,692.
Now, you might be saying $3,692 is a lot of money to be used in a position. I don’t have that type of money. That’s exactly why crypto trading is beautiful because we have leveraged exchanges which allows us to keep the same dollar amount risk but use way more money with the position so that we don’t need to use that much of our own Capital to take these trades and be able to accelerate our trading process.
I’m going to show you exactly how that works. Okay, so we use FEMX, by the way. We’ve been using Bybit before, but they changed some of their restriction stuff. FEMX’s user experience is very similar to Bybit, and it has all the leverage capability, and coin selection that we need to take these types of Trades.
Okay, I’m going to show you exactly how this works. Now, all we have to do is go over and pull up our trade calculator here and input all of our orders. Okay, so we can put our limit price at 1920 here, we’re going to go with 1.92. Okay, and that’s going to show us that $3,688 is required for the position. The next thing that we’re going to do is put our take profit level here which is our Target price like that. We’re gonna place our stop loss here, 1933. Okay, so now we have our entire order input, and you can see this is still costing us $3,688 for the entire position size.
But if we look, we can change the amount of Leverage that we can use on the trade. So if I increase this to 50x leverage, we’re essentially dividing the capital requirement on the position by 50. We can see now this position went from costing us $3,600 to costing us $78. We’re still only risking $25 on this trade. Something
What’s really important is using this calculator right here and calculating something called liquidation price.
I’m going to go to sell. I’m going to put in the size of ETH that we were using, the entry price, okay, and I’m going to click calculate. This is going to show me the liquidation price on the chart for the amount of leverage that I’m using which is 19.48.
So I can go back over into my chart, and find 19.48, okay, so this is going to be my liquidation level. You can see my stop loss where we’re going to close the trade if we’re wrong is going to get triggered before our liquidation level which means our position is safe.
If we were to increase this to 100x leverage and we were to do that same exact calculation with 100x leverage, it’s going to give us 1929. So if we look at our liquidation level 1929 is inside the stop loss threshold which means that this is too much leverage to use so we could probably use 75.
Okay, so if I wanted to increase this to 75, this is only going to cost me $57 to take this position in my potential profit is still $88 and my risk is still $25. Okay, so that’s how you’re going to position size, and that’s how you can let your Edge shine through. The next step that’s really important for doing this is testing your system and inputting the criteria onto a backtesting sheet.
Testing Your System and Improving Your Process
This is where you study your own information and you look at what’s working, what’s not, and how you’re performing as a Trader. I set this sheet up; this is going to show you the date, the ticker whether it’s short or long, and the profit you make on the trade. So if I were to make $100 in profit, this is going to switch to green and it’s going to register it as a winner. If it’s negative, it’s going to be registered as a loser, and you can see this is going to give you your total account stats over here.
If we flip to Tab 2, this is going to show you all of your longing statistics including your average win, average loss, average trade p l the totals that you’re taking in each, the information that input is registering as shorts and showing us all of our data on that.
It’s important to note that as you add more trades just make sure you’re copying this cell if it’s a short and then putting it into here so that it works on the other sheet over here. And then basically just screenshot your charts and you’ll be able to test your own information.
Okay, something that’s really helpful is once you have a pattern that you’re trying to trade once you have your system that you’re testing okay you can go back in time and you can use this feature on trading view called bar replay and you can click at a random area where now you don’t remember what happened over here and you can play this forward and you can try trading your system without having to wait for it to happen in real-time so you can see whether what you’re doing is work.
We would go take a screenshot of this copy this over and then click over here and paste this into our back tester so you can see what your results would be over say taking 30 to 40 theoretical trades that way you’re not wasting your own time you’re not wasting your own money okay and you’re going to be able to know exactly where you stand very quickly.
Utilizing Back Testing to Improve Your Trading Strategy
The beauty of using backtesting is after you have all of your winners and losers you can aggregate all of the winning charts and all of the losing charts separately onto different pages take a look at all your wins take a look at all your losses and see all the similarities amongst the winners and all the similarities amongst losers you can tweak the way you’re approaching these trades not do certain things to increase your winning percentage.
So if you’re able to get from a 50 to a 65 win rate you can make a significant amount of money so in this instance it’s about a 97,000 gain in a hundred trades so doing this entire process is going to save you time and money and allow you to get where you need to go without getting confused and falling into traps. Alright, this is exactly what our private trading team members are doing, they’ve learned all these systems and they’re being able to deploy all these tactics.
We can see Jared the course teaches you how to hit profits like this 3.14 in a few hours 100% recommend it. Okay, so he’s already understood the risk-reward factors, and depending on how much money he was risking on this trade he was able to make 3x when he was risking like I mentioned earlier in the article the mindset is really really important and we can, but anyways guys I just wanted to make this article to put together a clean cut process to cut out all the BS on the internet prevent you from falling into those traps and wasting your own time and money and give you some resources to get started the right way.
Conclusion
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