DueDEX: Hi everybody and welcome back to DueDEX Connect!
Tonight we are hosting Greeny Joe to talk about smooth position management, fees, and more.
Thank you very much for joining us Greeny Joe!
Greeny Joe: It is my pleasure, thank you for having me here!
Q: Perfect, let’s roll! To begin with, could you please tell us what are the main factors you consider when looking at entering a position?
A: Sure. Usually, I open a position when I see significant move potential. For example, tonight when we dumped to $10,000. I try to patiently wait for this kind of situation and avoid trading beforehand. There are different factors to take into account - such as trend reversals, bounce probability, and so on.
But the main factor, I think, is your own intuition!
Q: Ask any trader and they will give you a different number of elements to watch out for. Indicators. Patterns. Time frame analysis. Yet, it is widely accepted in the industry that too many factors can overcomplicate trading, leading to poor decision-making. Where do you draw the line? How many indicators/patterns do you look for when entering an order?
A: Yes, too many indicators and too much technical analysis in general can create conflicting trading ideas and confuse you.
As for patterns, I personally do not trade the classic ones. (Though sometimes I may see a very nice opportunity, for example, a V-shape or W-shape recovery.)
In general, I prefer to trade long positions. So I tend to wait until I can make a nice entry upon dumping and take a leveraged long position, one that would follow the market.
As far as indicators are concerned, I like to use the 4 hour RSI for oversold bounces.
Q: Thanks, the RSI is an old friend of many traders! At DueDEX we were also wondering about your risk management set-up. This is another essential element to consider when looking at a possible position. Do you have a fixed Risk/Reward Ratio or you modify your RRR depending on market conditions?
A: I do not stick to a fixed Risk/Reward ratio. You could say that for me every trade is like a different page or even a different book altogether. I am a musician, first of all, so for me, trading is more like art somehow.
I decide what leverage/risk to use for each specific case. If I see a great opportunity as we saw back in March I may decide to go all-in with high leverage.
But usually, we do not see this kind of opportunity too often, and by default, I use low leverage or even no leverage at all. This allows me to add more to my position slowly if the market goes down - without setting a stop loss - if my liquidation price is very far from the market price. And then when all my limit orders will be executed I put a stop loss.
Q: Exactly, always adapt to market conditions! Managing positions is not just about entering them though, but also exiting the market. Do you look for a pre-set take profit or you change your target as market conditions evolve once you have a position?
A: I usually use a pre-set stop loss, when entering with leverage more than 5x. But I prefer to exit my position by multiple orders. For example, if I have 1000 contracts, I will set 10 limit orders of 100 contracts in different take profit zones.
If some of them do not trigger and the price reverses, I can add to my position again at a cheaper price. That is what I call “smooth position strategy”. Also, I try to enter a position the same way, placing several limit orders. That makes me more comfortable with my average entry price.
Q: Awesome, thank you! If we look at order types, could you please tell us a bit when you use market and when you prefer to use limit orders?
A: Of course. This is a very important topic by the way. I prefer to use limit orders whenever possible. Market orders are useful only when you are in a rush.
I guess everyone knows that market orders are taking liquidity from the order book, while limit orders are providing liquidity, so you can even get some rebate if you use the latter.
Choosing market orders you always pay high fees and have a lot of slippage. So I like using limit orders to smoothly enter and exit my positions. But sometimes I quit my position by market order when I see very nice gains, or volatility is crazy and moves are fast.
Q: Indeed, especially for scalpers and traders who operate on short time frames in general, trading fees can make a big difference, since profits per trade tend to be small, while the number of trades is high. How would you suggest crypto traders go about it?
A: Personally, I do not like scalping, it is not my trading style. I would define it as a very “nervous” type of trading, while I like more mid- and long-term horizons.
But in certain regards, my smooth position strategy is kinda similar to scalping. For example, let’s imagine I open a low leverage trade and the market goes against me. I then increase my position. The market goes against me again and I increase more. At some point, I will find myself on high leverage with a comfortable average price - but this might last only for a short period of time, so I will exit most of my position as soon as I see at least a good bounce.
One should also look at the profit/fee ratio. It is obvious that if you use high leverage and pay, for example, a 0.075% fee for a market order, with 100x leverage you will pay 7.5%. So if you enter a 100x trade with a market order and then decide to jump back, even assuming the price does not move at all, you will pay 15%. That is way too high. And this explains why I am not a big fan of market trades with high leverage!
I do not like trading funding. I think it’s not so smart because price movement can be much more volatile than the funding fees. It is smart if you for example holding midterm 1x short when the price is too overvalued and getting this fee rebate for a few days or weeks plus lock you USD value on a drop.
But I do not do this usually. As a matter of fact, I do not like shorting crypto at all!
Q: Given price volatility, choosing an entry-exit point can be difficult when you target small profits and need to be extra accurate. This leads some traders to chase the entry point, adjusting it as the price moves in the hope to enter a trade and avoid fees. The problem, in turn, is that some end up chasing the price all the way where it does not make sense to enter the market anymore. How would you tackle this problem?
A: About adjusting the entry price - or even stop loss - there is no one correct answer. Some times you should do that, but at some point, you need to make a decision and take some risks to enter, or you will just look at the charts. But then again, sometimes that is exactly what you ought to do - just stay on the sidelines. (Remember, you do not need to be in a position every minute. Not even every day!)
A trader must watch his position size and liquidation price very accurately, and always be prepared for some black swan events to strike. This is why I believe that leverage can be a very good option in some situations, but not by default. It is like a weapon that may kill you if you do not know how to use it. But if you know how to deal with it, it will help you to kill your enemies. That is why I choose to slowly enter and exit my mid-term positions. So if the market goes against me I can adjust using leverage. But if I enter with high leverage at once - I may be scared even by small adverse moves and quit at a big loss. Or even get liquidated. I do not like this style of rushed trading - I was trading that way back in 2017-2018, then I learned that being out of position sometimes is much better than being in a trade every day.