How to beat the market: self-knowledge (1)

“Know the enemy and know yourself: then in a thousand battles

you will not be defeated. " © Sun Tzu

 Hello! We arewe continue a series of articles from the Bitinsure team abouthow to keep your deposit and succeed in trading using simple mathematics. As we discussed in the previous article, the quote above reflects the basic principles of competent risk management (competent = which protects the deposit and allows you to increase it). Do you want to earn 20% instead of the current 2%? Then you are on the right track!

The first part of the quote “know the enemy” tells us aboutthat you should know in detail the details of your losses in order to effectively deal with them and, most importantly, succeed in the battle. If you don't want to lose millions (and we're sure you don't), read about the importance of risk management in building a solid trading strategy and learn how you can stay in the market and have a chance to make money even after 100 failures in a row.

However, in addition to the basic things that protectdeposit, other strategies should be applied to increase the profitability of trading in the long term. It is with this that a well-coordinated and multilateral trading SYSTEM begins (that is why it is a system). Let's start studying it with the second part of the quote - "know yourself"

 

"Know yourself"

It turns out that one of the steps to victory isself-knowledge. Are you surprised? In fact, knowing your personality traits, boring statistics and psychology can bring us closer to more money. The point is that each strategy can be winning or losing, depending on the trader's characteristics, the market and other factors. Everything is individual. The better you know the specifics, the more adaptable and profitable your strategy is. That is why we need a lot of information about ourselves, trading history, losses and the smallest details of transactions. This may not be the most exciting job that many find difficult, but it is the basis of successful trading, which is often overshadowed by advertisements for trading signals or indicators that are, in fact, only a complement to the strategy. That is, you should start with the basics. In order to build a solid foundation for a trading strategy and a foundation of competent risk management, three elements are required:

1. Self-knowledge (especially your personality, financial situation, goals and risk tolerance),

2. Experience (experiments in trading, own observations and trade statistics),

3. Analysis and optimization of the strategy.

 

Let's start with the first point - self-knowledge.

So, the first thing to look out for is yourself. What you already have, your goals, deadlines, opportunities. The topic is extensive, but there are things that are required to understand for every trader.

 

First, trade with a deposit that you can afford

Think about how much you willuse as an initial deposit. The main advice is that the amount should not affect your daily life. You don't have to sell your home to start trading: start small! Of course, there are dizzying success stories, but let's be realistic.

 

Secondly, the insignificance of the initial deposit amount

That is, do not worry that the originalthe trading deposit is small. Consider this an advantage! The idea is that to make money on the cryptocurrency market, both $ 2000, $ 200 and $ 20 are enough. In any case, you will earn (for example, 20% monthly from any amount) and ultimately operate in significant amounts.

Let's look at a simple example. Ivan is a simple student who can afford to trade with a $ 100 deposit. Over time, he improves his skills and is already able to earn 10% weekly ($ 10 in the first trade).

 

But Ivan is growing. He is no longer a student and can trade with a $ 10,000 deposit. At this point, he already has a $ 100 proven trading system. With such a deposit, the first 10% is already equal to $ 1,000 weekly. The percentage of earnings remains the same, but the amounts grow. Thus, starting with a small amount, you, firstly, approach large amounts, and secondly, you test the basics of a trading strategy and experiment (losing small amounts is much easier, you must admit) in order to gain experience and work confidently with a significantly large deposit.

 

 

Ivan's deposit and earnings

 

So, choose a deposit according to your strength and gradually increase it by testing trading strategies, and remember: small victories are often the first step to big ones - practice and make efforts!

 

Time vs Earnings: Choose the Right Strategies!

Another important question is the time you havethere are for the trade, and the goals that you would like to achieve during this time. Depending on this, you should choose a trading strategy: trend, swing, counter-trend, scalping. There are many of them, and among them there is not the most “correct”, profitable one (they can all bring excellent results). The right strategy is the one that's right for you. For example, if you have a little time to trade, but at the same time you have large amounts, obviously, trend trading is closer to you. If you have more time, but the deposit is small, then it is better to start with scalping in order to "accelerate" the deposit. Study the question (this is a separate broad topic) and find a strategy that will work for you!

 

Reinvestment is an easy way to increase earnings

You have chosen a trading deposit and a strategy, yourearnings are gradually increasing - great! But there is a way to improve the result - reinvest the profits. In this case, you are referring to the simplest rules of mathematics. Consider the example again:

Ivan has a deposit of $ 1,000 (let's call himx). On the first day of trading, he earned 50% of the initial deposit, that is, $ 500, and immediately added profit to the deposit. So now he has $ 1,500 (i.e. 1.5x). This means that having earned the same percentage of money on the second day as on the first (50%), Ivan already receives $ 750, which is 2.25 times more than the initial amount. And you can do this every time, gradually increasing your earnings. The rule is simple, the result is tangible.

 
 

Ivan's trading deposit. Reinvestment

Thus, in trading, one should first of allunderstand your capabilities and needs, choose a trading deposit, a strategy and establish simple initial rules - for example, a share of reinvestments. Everything is based on personal characteristics and the simplest mathematics, you just have to put everything into a single picture and start earning.

These rules are the basis for building a strategy. It is much easier to achieve goals when they are defined, when there is a general directive and tools for achieving goals. Incidentally, these are the very things that are the foundation of a trading plan that leads traders to success step by step (and these are the very actions that underlie hedge fund strategies). It's a system, remember?

However, the system is not that simple. Much more is worth doing to achieve outstanding results. We'll talk about the next step in building a winning trading strategy in the next article.

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