It's a post about trading and some scribbles about margin trading. Another entry to my trading journal series where the future me revisiting this post would reminisce the feeling of having bad decisions leading to bad trades leading to bad outcomes leading to bad days.
The reason I started margin trading compared to spot trading was having the option to short tokens. There's plenty of tokens out there that are shorting material and this is a bear market. I've been a long trader and it's frustrating to browse the market with too few tokens to pick and some require a few more days to brew before they're ready to be bought into.
I just felt being comfy with spot trading wasn't going to get me any growth compared to taking more risks with margin then stepping up to futures trading. It's those leverage and added risks that makes great content bait over youtube that got me interested. But I'm not in a hurry to get liquidated as better risk management matters more than the pursuit of gains.
Margin Trading on Binance with the intention of doing some shorting while the token on a rally/pumping intraday isn't good because you're going to face liquidity issues from the funding pool. You have the capital but there's no tokens to borrow because either there's too many traders already calling dibs on some sell orders or my conspiracy version is that Binance has plenty of whale accounts manipulating the pool so using their large capital as collateral, they are able to hog the liquidity off the smaller traders making shorting the token unfeasible (because there's nothing left in the funding pool to borrow and sell). The latter is my biased belief compounded with smaller traders that got the sell order early when the token didn't shoot up.
The reliable times to borrow and shot a token is when there's not much market activity. You could try margin trading with Hive/USDT when Hive pumps up, then you'll see that no Hive is available for shorting during those times. That's not going to be a problem with Futures but that's different story as well.
Story:
I was trading WAXP/USDT and had a limit order on short position. The price went up and now I'm going 150$ on paper loss. My initial instinct was to add another short but the problem with Binance is the lack of liquidity during times when the token is Hot, therefore the only option is to buy back and take the loss or hope for the best that it drops (a less likely outcome) but thanks to chance it reached a high then pulled back allowing me to take a 150$ loss to a 40$ loss instead.
Best outcome I could've asked for but this wasn't really good practice. The right response was closing the position with a 150$ loss as soon as I realized it because it wasn't part of the system and it just luck in my favor (sort of) that the loss had been reduced. I was betting on reducing with a hedging move but this wasn't part of the original plan so this ended up me breaking my system.
In hindsight, there's not much that could be done when I was doing the margin trade as the execution of orders happened in a second and the price broke through several levels past my short order because I could've set a stop loss (not possible on margin to set stop loss and take profit in advance unlike Futures trading). I would have better risk management had I was trading the token under Futures Perpetual but WAXP has yet to be listed. This was a day when WAXP will be available on Futures and any token that is about to be be on futures has a habit of going moonshot intraday.
The frustrating part about this loss is that it wiped out a few days of progress since I started the month with a negative 40$ and slowly made a comeback with small 5-7$ small trade gains. Those were hours I'm never getting back but it's the process not the result. For someone who isn't into trading or think this amount isn't worth losing sleep, I hear you. I also don't think this amount is worth losing sleep, however, 1% win or loss matters in terms of performance.
1% can mean 10$ or 1$ depending on how much risk I'm betting on but it's the decisions involved and the result is the reaction to those decisions. I want to increase the challenge but if I can't even profit from a low budget account then I'm not ready for managing a bigger capital when trading. This loss is just zooming in the faults, I've already doubled my 1000$ capital since January to last month so this means I've already and probably should've stopped trading when it was a net 20% gain months ago.
There's a perspective I've learned from trading that I only learned once I faced a few gains and losses. It's hard to explain but it's sort of a state where you just say meh, ok when you see the consequences of your decisions in green or red in seconds to minutes in large numbers. Had I seen these gains or loss years back, I'd be losing sleep or space out thinking how much I fucked up or be in euphoria. Now it's just another day and result.
I recently had a chat with a friend who I just found out about their futures trading and in crypto, they mentioned about losing 50$ in a single trade and how much that impact it made. At the back of my head, I lost 150$ out of poor decisions and bad habits, and that event didn't get me to learn the lesson hard enough. It just goes to show each person has a different threshold for triggering the sense of loss I guess.
I don't have a big portfolio and this is just hobby trading on Binance. This is the mantra I constantly work with not to get too ahead of myself. I'm currently looking into futures trading with those 125x leverage (no, I'm not degenerate to try that but somewhere with a manageable levels maybe).
I think it's time to start Futures Trading and pay for more tuition. Despite what someone may think about my trading activity, it's just a hobby trying to learn the skill and not a means to a livelihood. If I get good at it, like confident to make a living out of it, I'd probably adapt a different mindset than having fun learning how to profit and take losses. But for now, it's just part of the financial literacy lessons I'm teaching myself.
There's still options trading that for some reason, seems more complicated for me than futures but I'll cross the bridge when I'm done with futures on the check list.
If you made it this far reading, thank you for your time.