Crypto Trading Insights | #1 - Trading Coins vs. Trading Futures

Trading cryptocurrency can be immensely stressful and demanding. I'm not referring to the necessity to find a strategy that works, or the self-development that goes into efficient and reliable trading - all of that is important. I am referring to the mere fact that - as a swing trader - you always worry about where your coins are at and how the market is looking at any given moment. That is because you have chosen a spot to go long and buy, and are now waiting for the increase in price in order to sell for profit.

If you flip coins - be it BTC or any Alt - you are dependent upon a good entry and a higher exit in order to make gains. There is no other way to increase your bottom line in terms of dollar valuation.

Now granted, as swing traders we do have stops in place, but then we know that with break-even stops we are super likely to get stopped out for zero win only to find later in the day that there could have been many chances to at least get out with a small win... Because of the volatile nature of Alts, there really is no efficient way to utilize stops other than to hope that one time out of 50 you will not be stopped out before you hit your far-off target.

But that brings us right back to the point: You can only flip a coin, i.e. sell it, after you had previously bought it some place lower.

You need to forecast a potential top long before it happens in order to get in somewhere earlier. You need to eat red or get stopped out at break-even continously only to find that one trade where you actually have a coin to sell when it reaches a toppy turning point or a good-looking sell setup.

How often have I sat there seeing major sell setups - wishing I only had the coin in question in my wallet. How can I sell what I don't have?

I realized then that the selling was never the stressful part - it was always the buying and holding in order to even get to a place where selling makes sense later on. And in the meantime you are a sitting duck without the luxury to take days off or concentrate on other things in your life, unless you want to risk major losses.

The stress this put on my life was at times unbearable. Not that I didn't like plowing over charts all day and nerding it out on the screen, but the emotional cost for staying in the market was high. Never being completely "here" when I was somewhere else, never fully present with what I was doing because "market might tank - GREAT CHANCE TO BUY IN, IN ORDER TO SELL LATER" or "market might tank - huge danger of destroying value". An open position is a constant attention whore.

It's easy for this whole affair to turn into an obsession - out of sheer necessity to turn a profit and to not blow up. The thing is: Literally anyone in the crypto space trades this way - buying coins hoping they go up, sitting there with the dangerous bag in the meantime.

The more I thought about it and realized what I was doing the more it seemed unappealing and undesireable. There must be a better way to approach these wild markets... There must be a solution right?

Well there is as far as I am concerned - futures trading!

Why futures?

The idea with futures trading is quite simple: You are not trading coins, you are trading bets on coins - financial contracts that are more or less pegged to the original value of the actual asset underlying them.

This brings several massive advantages in my book: For one, you can always sell a future, even if you had not bought it before. It sounds weird at first but since you are betting on a contract you can take any sell setup you see and never have to worry about "having to be in it" long before you want to sell it - like you would with coins.

The sense of freedom is quite amazing actually. Because you don't ever need to hold anything to sell it later you are free to jump in anywhere and anytime you see fit. Same with buying, you can technically buy at any point you would the normal asset and then sell again at a higher price.

Now you have to remember that in futures there is no inherent value - you don't hold actual BTC when you buy BTC futures. BUT... You can be ultra flexible in your trading approach because with these contracts you never really have to care what the market is doing while you are away from the screen.

If BTC dumps 50% tomorrow, you as a BTC holder would be in great pain or be stopped out somewhere. As a futures trader who trades short-term you really don't care what btc has been doing lately, other than to help you make good entry and exit decisions. You can approach every day with a new mindset, looking only for short-term setups and be out before the day is over. You can easily take days off at a time because on short time frames there will always be setups for buying or selling - whether we are ranging from 30k to 40k or from 5k to 11k. It really doesn't matter.

So you couple the advantage of being able to sell at any time with a carefree approach to the longterm price action and you got yourself a mighty & stress-free approach to trading the markets without the classic obsessions most crypto traders are hung up on.

If you want to be a hodler for the longterm - that is one thing. But if you want to trade crypto day by day - there really is no substitute for being unshackled from price action and having the opportunity to take any and all setups you encounter.

I am not a financial advisor and this is not financial advice

To be continued...

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