Crypto Thoughts 02-28-24

Let’s talk about when a good set up gets wrecked by over leveraging. I’m writing this as my public journal entry in order to learn where I messed up and how I can avoid this scenario in the future. Let’s take a look at JASMY, shall we.

I had my HTF key levels marked. I was watching for the S/R level, that had held as support all the way back in April and May of 22’, to get flipped.

Zooming in here we see a 4H close above the marked S/R level which is also a break of structure. I was looking for the turquoise line to get held as support.

Fast forward here we see another 4H close and a higher high. At this point I feel confident in the previous resistance level being held as support and I set my entry as shown above.

Instead of waiting for my marked level to get hit, I market buy.

The exchange auto set my leverage to 20x. I usually trade 10x, but when I saw that my trade was immediately going my way, I didn’t mind. The picture below shows where I entered (yellow and grey long) vs. where my planned entry was (red and green long). You can see that my market entry was almost immediately in profit. I saw my unrealized P/L jump to almost $500 in a matter of seconds.

Unfortunately, because of the position size I took and the leverage of 20x, my liquidation price was very close to my entry and I had to think quick. I manually adjusted margin and added an additional $497 in margin to move my liquidation price to protect the trade. This moved my liquidation price down to where you see the stop set in the yellow and grey set up.

The next thing that happened was a wick down just past my liquidation price. Just like that, $997 wiped away. Had I stuck with my plan that wick would have entered me into the trade instead of wiped me out of it. My stop could have sat comfortably below where the price ended up going.

Looking at the image below you can see I would have just escaped liquidation, but that’s without adding any margin. The trade as of this minute is sitting in profit, but I’m going to miss out on all of it because of a couple important mistakes.

So to finalize, I’m going to highlight what I think were my biggest mistakes.

1. Using leverage, but not implementing risk management. I blindly took a gamble on my conviction in the trade and didn’t calculate my R/R. I just placed a trade for 50% of my whole account balance. This was not following my 1% risk per trade. This was playing with a hypothetical account balance of $100K of which I definitely do not have. My position size was waaaay too big.
2. Not letting the trade come to me.
   • I got impatient and needed to get in, so I placed a market order to get into the position. This impatience costed me the trade. Had I waited for price to come to my planned trade, the wick that liquidated me would have instead entered me into a very good trade.
3. Adding margin on the fly.
   • This wouldn’t have been that bad if my original position size was appropriate because I would have had plenty of margin left to add, but in this particular instance I added margin in a panic which ended up costing me a significant portion of my account.
   • In hindsight I should have let the trade stop me out and then jumped back in when price action deemed it a good place to jump in.

Moving forward I’m going to stick to leverage no higher than 10x and/or ALWAYS implement risk management accordingly. Position size does matter if we want to stay in the game.
If the trade stops me out, but I feel I have the right set up, I will let it stop me out and jump back in no more than 3 times. If I get stopped out 3x I will move on from the trade.

I missed out on a 500% gain which sucks, but I guess sometimes lessons learned the hard way stick a little better.

via GIPHY