Existentially Fucked!

in LeoFinance5 months ago

Rule number 1 of scalping : Never use the entire amount in one single trade!

For example, if you're scalping with 5k hive, divide it into few different orders...1k + 2K + 2k...1.5 + 1.5 + 2...or any combination that suits you. But never in one single order.

Why?

Say you want to sell at 47 cents and buy back at 45 cents...and calculating a whooping $100 in that one single trade, you sell all 5k of your HIVE. With a drooling face and popping out eyes you wait for that $100 and the price of hive goes to 49 cents, 51 in a couple of minutes and before you know it some crazy Batshit (yes, yes, it's s stolen word) weed seeps in and HIVE is at 57 cents.

After a wick like that HIVE keeps hovering around 54-55 cents. Instead of that $100 profit, you are now looking at about $300-400 loss. All because you sold it all at 47 cents. Those long wicks are scary!

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Instead if you had broken down the order, your average sell would have been higher. You'd still be at a loss, but the loss would look much smaller with a bigger chance of getting into profit than you were at 47 cents.

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Now, continuing with the above "absolutely hypothetical" scenario as our example, we see after playing with your heart for a good couple of days, hive eventually does come down below the buy target of 45 cents and on paper, no loss was recorded. You have your "whooping" $100 profit.

Alas, life is not so simple sometimes.

In fact the potential loss of this trade was immense, with a diverse range of scenarios. As Dr. Strange would have said, you win in only 1 of these scenarios. You have incurred potential losses in all the remaining.

Scenario 1 : Instead of selling all at once, if you had averaged your sell price up to 51 cents for example, you would have profited $300 instead of 100. $200 potential loss.

Scenario 2 : When the price starts dancing, you decide to take a loss on the chin and buy at 50 cents (taking a loss of $150). You then recover this loss and sell at 57 cents and come out with a net profit of $200. There were at least 3 opportunities to play this out if you look at the charts, I'm not making this shit up.

Scenario 2A : You then play the patience game and buy the 5k hive back when it eventually came down to 45 cents, adding another $600 profit on your books.

You can play out as many scenarios as you like in your head, you end up with potential losses. This was an example of a very bad trade.

The one scenario where you win is, you have come out with a $100 actual profit even from this badly played trade.

The only reality that should matters is the one you've won!

Do you know which rule of scalping I break the most?

Rule number 1.

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I would like to learn to do this.
But I need more educations on scslping.
Thanks for the lesson on rule number one.