GammaX DeFined: How to create a cryptocurrency trading plan

Category: Bear Market, Traders, Uncategorized

We had an insightful Twitter Spaces session with Charlie BTC, a trader and analyst. During the session he shared his journey as a cryptocurrency trader and emphasized on the importance of planning long-term to succeed as a trader. 

Below is the recap of the session with BTC Charlie:

GammaX presents DeFined – the ultimate guide to Crypto Trading, DeFi, and emerging Crypto Projects. My name is Lucie and I am the head of community at GammaX. Joining us today is BTC Charlie, trader, and analyst and a co-founder of the Paragon Group – a trading education group.

Q: Let’s kick off with a short introduction

A: I’m Charlie a crypto trader and I’ve probably done it for about three and a half years and gambled a lot for about a year before that. 

Q: When did you begin trading crypto? And did you have any previous experience in trading?

A: No, before trading in crypto, I was an accountant and trading was very different, but I always had an interest in financial markets.

I got into crypto in 2017. I bought some Bitcoin because some friends kept talking about the gains that they were making on Altcoin and they weren’t that impressive compared to what I was about to witness when I joined. I pumped some money I had as I had just exited a company.

I thought this looks interesting … digital money, digital cash, and that kind of stuff. And I have since not looked back, it’s been fascinating. 

Q: Did you stick to one trading strategy when you started? Walk us through your journey. 

A: My initial path, I guess, or my initial thought process around trading was pretty awful. I didn’t have a plan. It scares me that I was mentally incapable of thinking things through. And that was way back in 2017 when the market was wild and to be honest, you could actually get away with it because it was very, very forgiving.

 It was my first experience with a bull market. I’m sure there are quite a few people who’ve seen that kind of scenario in 2021 where they were carried along by the market perhaps with a trading or investment thesis that had no real backing. 

It took quite a while for me to develop my own trading style. It was 2017’s list of things not-to-do and riding money up in the bull run and then crashing some of it down in early 2018 to realize that I need to take this seriously. That’s when I started working on strategies and looked up things like EMA crosses, Ichimoku, Renko. You know loads of different ways of basically viewing the same data to come up with different strategies that suit me and my style for both low timeframe trading and high timeframe, swing trading or actually just investing and holding positions.

People glamorize the ups without necessarily recognizing the downs.”

Q: All well-known successful traders have experience failures. Did you as well? How did you motivate yourself to not give up?

A: When you get into the crypto space, you have the infinite potential of limitless money. I think that crypto as a whole has such a strong value proposition in like the future of the global economy. Whether it fulfills that or not remains to be seen. I am a long-term believer in crypto, but I just think that doesn’t have to affect my short-term view.

So I can be bullish about things that we’re building and parts of it in particular that, you know, are really interesting to me. But I don’t have to necessarily be 100x long on my entire net worth at any point in time. I think for me the motivation kind of came from the fascination with all the things that were evolving here.

Before I was an accountant and I really thought I wanted to be an accountant to understand money and to understand business, and actually the way that you understand the global monetary system and just how messed up money in general really is. You know, crypto’s a great example of that and a great introduction to how markets work. So I think I was motivated by one – being able to see the sort of larger scale picture of crypto and two – the potential financial returns from crypto that you could make. I’ve just been through a cycle where you know if this happens again much more prepared. And three, just that kind of fascination with this is how, you know, money works and value is accrued outside of normal, boring accounting kind of standards.

Related: Why decentralized exchanges like GammaX are the future of trading

Q: Did you change your strategy drastically since we entered this bear market? 

A: Yeah, definitely. So, I mean, I was very lucky I cashed out largely at the right time for my birthday. It was a lucky coincidence, and it was near the top. Ever since we’ve been in a downtrend like I haven’t invested particularly in alts or anything. I don’t want to hold positions, my strategy now is very in and out of the market. I’m on low-timeframe alt rotations. I’ve only bought five to ten NFTs in the last year. A large reason for that is that they’re relatively illiquid.

I think you’ve always gotta be open to changing your trading strategies based on the environment and the context that you’re trading in. And you’ll never get it perfectly right. So, you know, don’t beat yourself up too much, but as long as you’ve got. I guess ways of saying, Okay, if Bitcoin breaks out of this range that has been in for the last three months, then I’m gonna risk on with Alts. And if you’re wrong, you know, make sure you’re not losing too much in that scenario.

And it’s just, for me, it’s about building up that playbook of, well, if I see this, then I’ll get bullish. Here’s how much I’m willing to bet on that at this point in time with my own validation. For me, the market right now isn’t in a swing or long position. There are various reasons for that –

Bitcoin, macro, recession, I don’t pretend to be a recessionary expert or anything, but we’ve got a lot of volatility and a lot of movement on alts and we get some really nice 10 – 20% rotations on Altcoins. Few people say this is untradeable but you’re just probably trading the wrong thing and looking at it the wrong way. 

Q: Are there any particular projects or coins you are watching closely right now?

A: Not particularly. I have a watch list of projects that I’m fundamentally bullish on, which I keep, I occasionally tweet about, and I keep a list offline. I keep a load of charts, sort of ready if I want to deploy capital in them. I have got some bags, I’ve got quite a few bags actually that are longer-term investments. 

Suppose I’m wrong on the market. For example, my current stance is that we are in a bear market rally but let’s say I’m wrong and we start trending up and I miss the first explosion of 10 – 20% up. I want to have some spot backs, I want to have some exposure to it. And part of those investments I’m willing to watch them go to zero. So my risk profile is very different from some other people.

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But I think having particular projects that you are kind of fanatical about is both a blessing and a curse because it can give you a conviction to ride things up to like 300 x! Or it can give you such  crippling addiction that you only wanna put money in it and you will bamboozle yourself with. You have a strong conviction that this is the future of finance but you know there are probably very few projects that are gonna go 100 x, 1000 x, or  2 million x that people dream of. 

“Treat trading like a business and journal everything.”

Q: If you had to give our audience top tools to analyze the crypto market. What would they be? 

A: Just at a very basic level, the trading view is absolutely phenomenal in terms of charting.  I use two types of charts, a standard candles stick chart, and an old comparison chart, which is often referred to as spaghetti. And what that does is it literally just compares the relative strength of particular altcoins that you can select and you can add to it. I’ve got a video somewhere on YouTube about it and I use that a lot to identify coins that are kind of in play and that are highly tradeable.

And that, to be honest with you, if you play strength, they’re a lot more forgiving if you’re looking for longs only and you are sort of doing what I’m doing at the moment. 

Q: When you do chart analysis, which studies do you mainly use? Elliott Waves, Gann, Harmonic patterns?

A: I tend to use a couple of price indicators, which are like Awesome Oscillator RSI to talk about or to just identify momentum divergencies. I use price action, just a simple candlestick chart. And then I use relative strength. So I’m looking for, uh, strong performing coins and I’m looking for  ones that stand.

So an example earlier today actually, I was down on the five-second relative strength chart and you know, it’s got 40 altcoins on there. They’re all kind of moving as one big wave, nothing really much going on, and then suddenly FTM just pokes its head up, and right up it goes and you’ve got a 1% gain on a literally one-second candle.

Now it’s got another 0.5% and now another 0.5%. Like it’s literally just flying up. Something is happening. So I switch over to the market in a little bit and see what’s happened. There’s been some news, let’s see how far this can go and, and ride that basically because it was such an outlier at the time.

It wasn’t my largest position, so I’m not gonna laugh about that. But it’s using tools like that and seeing anomalies in the market and either taking a chance or not really, and then managing the position appropriately. But that for me is the tool that I spend that gives me the conviction and most of my trades at the moment.

Q: BTC was always correlated with other assets, there is so much data tracked to try to predict its next price move. Do you correlate BTC with any other asset, and do you pay attention to Bitcoin’s on-chain data, hash rate, interest rates, etc?

A: I mark some levels on Bitcoin, and I’ll look at its momentum. I will use it to inform my positioning on alts. So if I’m playing rotation to the upside on a particular altcoin and Bitcoin is losing a sort of key level, I’m almost certainly gonna close that alt long and just move on to the next one and assume that we kind of get a break breakdown on BTC. If there is quite a consistent movement on BTC, I don’t really use any on-chain data because that’s always bullish. Exchanges are always moving supply about. I mean with on-chain you always see on-chain analysts never on-chain traders.

Q: You have developed your own indicators along your trading journey. How do you implement your own indicators in the way you trade? 

A: With my indicators and the way that I build them, I will have a thought process or I will see someone else using something and I try to develop it. And I’ll sit there for a couple of hours and I’ll knock something up and then I’ll back test it and check  if works in practice. Is it useful?  I might try and replicate something that’s interesting and think if this is just a visual thing or does it actually have some form of edge.

For me coding it from scratch and understanding the mathematics behind the calculation of rsi, for example, just gives a bit more of an understanding of when it’s useful and when it isn’t. Do you know what I mean?

Few traders can predict the market with their indicators but the reality is a lot of it is just moving averages and real trade trigger entry plus risk management…it doesn’t really come from indicators. An algo and an indicator are completely different and for me, it just gives me confluence to my trading and other ideas and ways to explore things. 

I am evidently one that does not have that knack for pairs trading, in particular, and that’s fine. You know, I’ve got plenty of other strength to my bow, and sometimes it’s about finding what suits you and what doesn’t. It doesn’t all have to work. 

If you think trading is a job, you’re not going to be financially free.”

Q: Trading is a job for a few and financial freedom for others. What are your thoughts?

A: If you are a terrible trader, it is not financial freedom, is it? It’s financial ruin. 

I think a lot of people idealize trading as financial freedom and as being free, but I think the people who ‘make it as traders’ are the ones that are obsessed with it and love it, and are passionate about it. So it’s never gonna be a job for them because you wake up every day and you want a trade, you’re kind of addicted to the market, but in a good way, in a constructive way.

Let’s see what I can do today. Or I’m gonna try this, I’m gonna do this. You know, it’s always evolving. So I guess I’d probably answer it in a weird way, and say that if you think trading is a job, you’re probably not going to be financially free. If you are super passionate about trading, then you probably are gonna be financially free.

But one thing about trading that I can guarantee is it’s not easy and it’s psychologically it can be very taxing. After my first year, it was tough getting that 60% drawdown but is it the easiest money I ever made? Yes, absolutely. 

But in the bull run, the psychological pain of losing 60% of it was nearly devastating to me. I think people glamorize the ups without necessarily recognizing the downs. 

Q: What’s the best advice you have received as a crypto trader, and what would be your advice to a beginner trader?

A: I’ve received a lot of advice and I’ve been lucky that I met some brilliant traders after 2018. And I shared ideas with them. And what’s the best piece of advice for beginners? It’s probably seeking out people who have done it all.

On Twitter, you don’t have to be an active participant, you can be a passive one. Try and filter out who is full of useless advice. Making your own decisions I think would be the best advice that I can give people to start with. But the best advice that I probably received, and I don’t like it because it’s really boring is to treat trading like a business and journal everything. Journal your trades, your emotions, journal everything, journal what you’re learning, journal your goals, and remind yourself why you’re doing it. Having a trading plan that says every year I’m gonna put this much in this and I’m gonna do this, completely changed my game personally. 

It might not work for everyone. Some people might just wanna come into the market with a thousand dollars and they might just wanna go, right, I’m putting this on 20 x leverage, I’m going for it. But I personally wanted this to just be right.

I think like having that written down and reminding yourself constantly why you’re doing it and reminding yourself that it’s real money. It’s not just internet Ponzi money really helps and going back to your plan, going back to your trades each month and going through your journal and your monthly review process and analyzing that it was a really bad trade. Or this strategy really isn’t working, like being honest with yourself because people have this habit of memorizing just the good bit.

Q: Can you emphasize the need for planning in crypto trading? 

A: People approach it with a two-minute timeline and they think that they’re gonna make this trade and it’s gonna be up 10% instantly but the reality is that you should be thinking 2, 3, 5 years in advance.

If my 10K portfolio is now at 100K, what am I doing? Okay, it’s now at 500K. Like, how am I allocating? Is it all in crypto or am I actually gonna start paying off mortgages? Am I gonna start investing in property? What am I going to do? Plan it out. How am I going to really account for the taxes? If you are gonna make half a million dollars, do you wanna pay 50% tax or 20% tax on that? 

It’s just quantifying things and I’m not saying that that’s a real goal for everybody but certainly having a plan really helps. 

Q: It was a pleasure talking to you today and I’m certain that our audience learned a lot. And  Charlie, how can the audience find your course?

A: I run a trading education group with one of the best traders in the space, Trader Magus, who has a very different approach to me. He’s focused on order flow and volume profile and various things that you would’ve potentially seen across Twitter.

So we’ve got two different approaches where I focus on altcoins and he focuses more on BTC order flow, etc. We’ve got a load of prerecorded content there. We do weekly live streams and have a fairly active community where we discuss the market pretty much every day. It’s all on my Twitter bio. 

Q: Well, thank you so much everyone for joining us today. It was a great podcast. We’ll see you next week for another episode of DeFined with another trader. And for everyone else, if you wanna join our Testnet list, you can go to Gammax.Exchange and don’t forget to join our Discord server to stay up to date with the latest community announcements and developments. 

Thank you so much, Charlie. Thank you, everyone!

About GammaX

GammaX is an order book-based decentralized derivatives exchange with an on-chain transaction settlement layer and an off-chain order book and matching engine to provide the best user experience. And to ensure Ethereum compatibility at a low cost, we’re partnering with StarkWare’s Layer 2 scaling solution.

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