Le guidebook 2018
3rd edition 20180824
Le guidebook 2018
youtube + twitter: @cryptocartel
cryptocartel.cc/discord
cryptocartel.cc
twitch.tv/cryptocartel
Thanks to the fam founders:
Flood @thinkingusd
Cane @caneofc
Zabbs @joezabbs
also Aurelius, Bandito, Ezbrah, Hodam, Koda, k maybe Turnip as well, Cred.
If anyone is missing thanks to you too okay.
thanks to admins, honchos, contributors, distinguished and special guests
thanks to discord mods Tadleer, MastermindCam,
and everyone who contributed to #Classroom and #Knowledgebase
thank you le tru degens Ike, ActualG and Towelle also our 3rd world trooper Ninja
Logo design by
Edit, spelling errors and layout by @Mammon and Pampendoomp/@drpampndoomp
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
INTRODUCTION:
Why Sucking at Trading Means You Suck at Life (And How to Change This) Pt. 1
There is a fixation for every new trader. It’s this idea that there is some single,
magical thing to learn that will provide endless, positive results. We spend countless
hours, and sometimes countless dollars to find this thing. We lose trade after trade,
blame the latest thing we believed was the last thing we would need to learn, and then
go back to looking for another one. Through trial and error, accumulated learning and at
times sheer dumb fucking luck — you have some winning trades. On the whole— worse off
equity wise from when you started. The cycle repeats.
Some of you are here now. I remember this time for myself, when I was blaming trading
inadequacies on technical, trading related variables. All the while completely ignoring
ME. Ignoring that there might be a core issue with ME, not trading. It’s easy for us as
humans to shy away from self-reflection, and especially a self-audit. It’s hard, and
oftentimes painful to take a look at yourself in mirror. The hardest things to do are
usually the things most beneficial for us, and I fully believe that trading will bring to
the surface the weakest parts of us as a person. Your personal paradigms are the things
actually governing how you perceive and act in every aspect of your life — not just
trading.
3 Core things you must address:
1. You don’t believe you are worthy of success
2. You believe there is an ‘X-factor” type difference between you and successful traders
around you
3. You believe and act within absolutes — not probabilities
#1: You don’t believe you are worthy of success
Hitting this one hard right out of the gate. Many people don’t A.) have the fucking self
awareness and/or B.) the stomach to fully explore what this means. This is why many of
you, or your friends/family/co-workers are (and will stay) fucking average and in the
constant emotional limbo of ‘chasing their dreams’. People can SAY the want to do X, or
be Y, but it doesn’t mean dick until you take the actions that move you in that direction.
Why don’t most people take action?
Because deep down they don’t believe they could do/be whatever it is they talk about.
This has deep, painful implications for most, reaching out over all aspects of their life
because it means that YOU are responsible for all the things you have wanted to attain,
yet haven’t. Has it occured to you that you might not be making progress in your trading
because you don’t truly believe you could ever be successful at it and therefore you
actually self-sabotage? Do you find it hard or pointless to spend daily time learning and
practicing to master the basics? Can you look at other areas of your life and find other
occasions where you started something with zeal and then slowly lost the fire for it? A
college class, a sport, a relationship, a fresh business idea — the what doesn’t
matter — it’s the why that does. Why is there a pattern of failure in things that started
out passionately?
How to address
you are worthy
life and audit
have to make a
this: You must first, above all, indoctrinate yourself in the belief that
of the goal. You must sit down with yourself and look back through your
the times you may have been guilty of this. Then you have to decide — you
definitive choice to believe that, in all of your life, you ARE worthy of
Cane medium blog post Dec 22, 2017 page 3
the things you strive to attain. The belief in this is what will generate the action in
line with that goal. Without this belief you are doomed to loss, or worse — constantly
being stuck at average — in everything.
Thank you to everyone that has found any value so far in anything that I have posted. Even
though I still consider myself new to trading, the core principles required are things
that are universal to success in many things, and that is something I have been a student
of for a long time. It means a lot to me to have finally found a thing I am passionate
about to be able to share ideas and help others through.
Sharing this with others would mean a lot to me. Alternatively if anyone would prefer to
support in a financial way — as creating content is a cost on time — I decided to add a
tip jar address.
Cheers everyone,
cane @caneofc
Mistakes Risk Management
Bitmex Basics, Futures and
3.
Hedging Futures Part 2
5.
Price Action part 1
7.
Price Action part 2
10. 13. 20. 27. 30. 33. 35. Trendlines
42. 44. 50. 60. 63. 67.
Volume
TABLE OF CONTENT:
Magic Rectangles
How not to be shaken out
(Stronk Hends) Market
Introduction
The Pleb in Me - How I got Making
REKT Investor Psychology
Slippage
101
Trading With Guppy
Indicator
Top 5 Technical Analysis
The Pleb in Me: How I got REKT at the start of my crypto trading journey — Pt.1
Leverage is like a Ferrari. If you know how to handle it it’s a fucking great ride. But
you don’t. Fuck, you’re brand new, you don’t even know how to drive a car to begin with.
Trade spot positions first.
If you at all believe that you don’t need to read through this, to hear and understand
someones mistakes — if you feel that you will be the expectation to the statistics — you
are 100% on a path to get completely fucking washed out. Pride comes before a fall. Here
Mistake #2: Repeating Mistake #1 after taking a big loss
are some of the mistakes I made and how you can make them too, just hopefully with loss
I’m not kidding.
than I sustained:
Mistake #3: Taking trades off of charts from people on crypto twitter Oh this random
fuck with a [insert random animal/anime/gaming character/Jedi Master] profile pic said
100% of first and 85% of second account blown out.
_____ is a buy. Well he’s (it?) has a lot of followers so he MUST know what he is
doing!”
Mistake #1: Trading on leverage
My first exchange was BitMEX. That is honestly all that needs to be said. Don’t do that.
I did it. You have done it.
And it’s stupid as fuck.
Yes I made money from this. Yes you could make money from this. But you can also get REKT
in many ways. News flash — no one is posting a chart until AFTER they have bought what
they are posting. Little do you know (because you might not know shit about trading) that
their ‘safe entry’ is actually where they are taking profit and you are getting fucked.
Is this cynical and not usually the case? Yeah. But trading is a zero sum game, meaning
for you to win, someone else is losing. As such, trading only off of someone else’s calls
is like playing poker and you always have your cards available for the other person to
see. You’re someone else’s bitch.
Don’t be someone’s bitch. Use respected traders charts to compare and contrast against
your own. Use them to learn new aspects of TA. If you see something you don’t understand
or disagree with fucking google that shit and study up.
Mistake #4: Not having a trading plan
You should not be in a trade unless you know at least these 3 BASIC things
crypto twitter traders that have put out fantastic amounts of information. A few are
mentioned here, which is also a resource I made in itself. There will be more of these in
the future.
Mistake #5: Chasing price
This goes right along with Mistake #4. If you don’t have a plan you will be emotionally
swayed to enter into a trade anytime you see price moving. You don’t really know yet if
this is the right trade to take (because you have no plan) so you market buy in. It’s ok
though, because price continues to go up. You’re a new god, the young money that has it
all figured out.
They the MM slams price down past your entry and then support breaks (do you even know if
that was support?) and all the sudden price is in free-fall. Oh and you’re on leverage.
And cross margin. (Your whole account is used as margin and could get liquidated). Oh
and you don’t understand risk management so your position was already like 35% of your
account. You get liquidated for your whole account by just $2 before price turns around
and goes up and up for days.
Don’t chase price.
(This was how I blew out my first entire account by the way)
Your risk
Your target
Your stop loss
If you don’t know all 3 you have no business being a trade. No discussion on
Trading is a battle between against yourself more than anything. You have to master YOU.
Each of these mistakes so far comes down to you as a person. They are, at their core,
mistakes of ego.
this. “But how do you know those things?!?”
Check that shit at the door.
You fucking google ‘how to trade’ or some shit and you teach yourself. There are many
@caneofc
Cane medium article Dec 22, 2017 page 5
The Pleb in Me: How I got REKT at the start of my crypto trading journey — Pt.2
Writing pt.1 of this was a funny — and partially fucking morbid — trip down memory lane
for me. If you haven’t read it yet, it’s here. Reasons for REKT vary from person to
person, but having been very active over the past year I have noticed new people making
the same mistakes I did. I was completely new to trading, so these mistakes may seem very
pleb-ish to those who already have experience.
Mistake #6: Staying glued to lower time frames
This is a big one that I see many new people guilty of. Especially with alt coins in the
past, with the lower liquidity. Trading is hard, do not let anyone else tell you
otherwise, ever. There is a misconception that the ‘busyness’ of the lower time frame is
important information. Other people will simply try to trade the small fast moves to feel
something, a rush, a high, like they know what is going on. This is bullshit. Higher time
frames show you the bigger, less noisy picture.
That ‘flash crash’ on the 5min you just saw that made you sell was actually just the 4hr
candle retesting it’s previous breakout zone to stop out noobs like you. It’s going to go
do 500% now over the next few days. You fucked yourself.
Mistake #7: Not getting enough sleep (or any)
Let’s be real — most of you reading this are 18–35. You are for the most part ambitious
and intelligent enough to take risks. You’re probably in college or in a demanding tech or
engineering based job.
That means there is like a 99% chance you like drugs too and are possibly barred out, high
as fuck, or rolling on a vyvanse — RIGHT NOW — . I won’t lie, the only thing better than
taking an addy and grinding out charts for hours is sex.
“But you’re supposed to tell me that is wrong”
I ain’t your fucking mom. I know how the world works. I will say this though:
My biggest fuck-up trades have _A L L_ happened in the wake of sleep deprivation from
drug use. Every single one. I don’t care what you choose to do — I am telling you from
experience that choosing to ‘grind it out’ instead of sleep with cost you money.
PERIOD.
Mistake #8: New day, new indicator
First off, if you can’t understand how to trade JUST price action — GTFO.
Beyond that, indicators can be amazing tools to use at certain times to check against a
trading opportunity you find. They are meant to augment your choice, not be the
decider.
Pick ONE and learn it like your life depends on it.
THEN you can add others if you want.
Switching between them over and over again is like driving a new car each day. You are
constantly adjusted the seat and mirrors and the pedals feel different. You don’t allow
yourself to know and flow. Master one, then add.
Mistake #9: Not recording trades
If you don’t know where and how you suck shit, you can’t control that shit-sucking
variable.
Suck shit less each time by knowing where and how you suck shit. Record your fucking
trades.
Go back to them and learn from them.
Mistake #10: Making an analysis, but then not taking the trade
You will come to a point where you no longer take other peoples trades, when you have
studied enough that you starting charting out trades yourself. You will probably try to
Cane medium article Dec 22, 2017 page 6
find someone on twitter who charts out the same coin and who’s analysis validates yours.
You’ll take those trades. You’ll probably make profits on them as well.
There will be times that you will do that, and find no ‘OG’ to confirm and validate you.
You will skip this trade for lack of confidence. You will see later that it would have
worked in your favor.
Trade your fucking analysis. Trade your fucking setups. Have some fucking belief in
yourself.
If your risk/reward is correct and your position size is correct, and you OBEY your PRE
DETERMINED PLAN you will be fine.
This isn’t about being right 100% of the time. It’s about being profitable in the long
run.
Cheers
cane @caneofc
Sharing
support
tip jar
BTC tip
this with others would mean a lot to me. Alternatively if anyone would prefer to
in a financial way — as creating content is a cost on time — I decided to add a
address
jar: 3BMEX8SD2PjhSo2Zzmw9Fjkjs8iiCVThSU
LESSON:
PSYCHOLOGY 101
Instructor: Bandito
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
Bandito - 01/10/2018: Investor Psychology 101
.
Gday bros n hoes,
In todays lesson we will be looking at PSYCHOLOGY and EMOTION and why it is important to
understand how it can effect your trading, as well as how others trade the market.
Investor psychology is often an overlooked part of trading, especially in a market like crypto, because of how fast moving and how lucrative the market is. However
understanding and controlling it is a massive, massive part of managing risk, and ensuring that you are a profitable trader.
.
FEAR and GREED
.
The two main emotions you will feel while trading is fear (of loss) and greed. Fearing loss of capital or being too greedy for potential profit is a sure fire way to end up
en tering or exiting a trade too early or too late and losing out anyway. .
There are a number of ways you can control those emotions and in-turn understand the emo tions behind the market to take advantage of it.
.
Plan your trades, from start to finish BEFORE you enter the trade and then stick to the plan. Using tools like a stop-loss and sell orders can eliminate a large part of the
human factor in your trade (a lesson on stop-losses by my boy Flood is further up). .
You should be devising an exit strategy before you place your trade also. Look at previous hard resistances and volume indicators and use those to decide on a trades upside
poten tial, and then setting a stop-profit or a sell order to lock in that potential as profit.
A safe way to realise profits is to decide on a percentage gain (15-20%) you take on every single trade, or take profit in increments on the way up.
.
A rule you will hear often is to take 50% on a double. The reason for this rule is to eliminate greed. Greed will take your profits away from you just as quickly as fear,
and in some cases even more so. The illiquidty and volatilty in crypto allows for some MASSIVE gains on trades.
.
But what goes up must come down.
.
Everyones heard of "FOMO" (Fear Of Missing Out) and has been told not to chase pumps, and theres good reason for this;
.
Entering a trade in the middle of a pump heavily increases the downside potential, and risk of your trade. You may see some percantage of profits immediately, but if the
tide turns or a whale takes profit, the buy volume is generally not strong enough at the top to save your position from going underwater quickly.
Not taking profit yourself can be just as bad as FOMOing, trying to scrape every last tick out of a pump can end up in lost profits that could have been realised. .
EXPOSURE and DIVERSITY
.
A big part of mitigating the effect of emotions while trading is diversifying your portfo lio and managing your exposure of each trade.
Investor Psychology 101 by Bandito 2017
Exposure is the total % of an asset in your portfolio and diversity is the number of as sets you have in your portfolio. A good starting point for your portfolio is: 70% HIGH
CAP - LOW RISK
20% MID CAP - LOW - HIGH RISK
10% LOW CAP - HIGH RISK (SHIT)
.
The rule used to be a good 70% in BTC however holding some proven high market cap projects can work just as well.
.
As you can see you want the most exposure of your portfolio to be in the lowest risk posi tions, and the highest risk positions to have the least exposure. This allows you to
have the least amount of emotion needed to be controlled in your trades. This can be adjusted depending on your risk managment skills.
.
You have probably wondered to yourself, why wouldn't you just put 75% of your portfolio on a coin like TRX or XVG and cop that huge 300% gain? The reason you don't want to
be doing this is because reducing your exposure to a trade reduces the urge to make brash, emotion al decisions and hence, reducing the risk to your portfolio.
.
Compounding gains from multiple lower risk trades is a whole lot easier to manage than trying to get the most out of one large high risk/high reward trade.
page 8
TAKE ADVANTAGE or be TAKEN ADVANTAGE of
.
So knowing that we can put measures in place to control our emotions, how can we use this
knowledge to better read the market?
You can sleep well knowing that EVERY. SINGLE. TRADER. EVER. has either succumbed too or
used to their advantage the fear and greed market cycles.
.
Which side do you want to be on? Do you want to trade with or against the traders and in
vestors falling into the emotional traps?
.
It takes years upon years of trading experience to become a cold-hearted emotionless trad
er selling when everyones excited and buying when everyone is scared, but thankfully in
crypto we have a fast moving market that allows us to learn quickly and take advantage of
the cycle on smaller time scales
You can spot these moments in the cycle in almost every chart you look at, and identifying
those moments will allow you to decide at a glance whether to look further into taking the
trade or wait for a better opportunity.(edited)
.
It's human nature to fall into those traps, but understanding those feelings and using
them will allow you to go against the grain and profit where others lose. .
To recap; plan your trades, diversify your portfolio and reduce your exposure to risk and
you won't succumb to the big F&G. Remember to take it slow and don't overtrade and you'll
be profitable!
Investor Psychology 101 by Bandito 2017 page 9
LESSON:
TOP 5 TECHNICAL ANALYSIS
MISTAKES
Instructor: Cred
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
Top 5 Technical Analysis Mistakes Beginners Make
itable) moves.
Technical analysis is hard.
For beginners, it is especially daunting seeing technical analysis (henceforth “TA”) done
in so many different ways on Twitter and other platforms where analysts share their work.
There’s no single ‘right’ way to do TA. Nor is there a simple magic trick or indicator
that’s missing from your arsenal that’s precluding you from being profitable. Discussing
where someone wanting to learn TA from scratch should start is beyond the scope of this
article, and most likely warrants an article of its own.
This article is aimed at those who’ve started learning TA and consistently practice their
charting.
The list is not exhaustive and I’m sure I’ve missed out on many important
things. But it’s a start.
These are 5 things — in no particular order — that I wish someone had told me to avoid
when I started out.
1. Not using bigger time frames
Relying exclusively on low time frames is akin to tunnel vision.
It may seem obvious, but the amount of DMs I get and charts I see which are based solely
on the 1H time frame and below (often far below) suggests this isn’t as obvious as it may
seem.Start big and zoom out. Opening a chart and switching to 1D or even 1W time frame and
getting an idea of the price history and current trend of an asset is invaluable informa
tion.It becomes much easier to see long-term trendlines, key swing points, levels, and so
on when using high time frames.
If you’re a fan of using indicators, higher time frames will typically give more acccurate
and powerful signals e.g. a 1D MA Death Cross is a much stronger indication of a change in
the trend than a 1H> MA Death Cross. The same logic can be applied to TK crosses, oscilla
tor divergences, and so on.
If you’re a fan of using chart patterns, patterns which are identifiable on higher time
frames are typically more reliable and, if they play out, give bigger (and thus more prof
The list goes on. Whatever your trade identification system may be, I am confident that at
the very least starting with higher time frames will confer some benefits. In short, too
many beginners use only low time frames and miss the bigger picture. They miss the overall
trend, the pivots, the higher time frame patterns, and a whole lot more.
Start big, zoom out, map out the chart, and then you can reduce the time frame to plan
your entry and/or for other short-term plays.
2. Treating support and resistance lines as specific points
Support and resistance are zones where buyers/sellers might step in, not fine line points.
Thus, when mapping out your support and resistance lines on a chart, it’s best to think of
them as general areas of buying/selling interest as opposed to do-or-die explicit price
points.
You’re very unlikely to be drawing your lines the same as everyone else. Additionally, re
tail traders aren’t all going to be placing their asks and bids with pinpoint precision.
A fortiori, if you treat your lines as make or break zones, you render yourself an easy
target for whales/market makers. What does this mean? Simply, they’ll make price dip mar
ginally below support/above resistance, trigger your stop loss, and then push price back
inside the range having shaken you out of your position.
Not fun. Not profitable. The take home point can be easily summarised: be strict when
drawing your lines, be flexible when price begins interacting with them. You can also use
higher time frame charts to filter out the noise as price interacts with your lines (a
great way of avoiding ‘fakeouts’).
3. Forcing the setup
If there’s a nice technical setup to be taken, you won’t need to force or bias any of your
lines.The simple fact is this: there will not always be a clearly identifiable asymmetri
cal risk:reward trade setup to be taken on every single asset you chart. Not having/not
taking a position is also trading.
Too many beginners open up a chart on a coin they like and feel that there’s a trade there
but they simply haven’t found it yet. This is not the case.Sure, you’ll miss some stuff as
a beginner, but your ability to identify trades will improve with more screen time. It’s
better to miss a trade and not make money than to force a trade and lose money.
In summary: if you don’t see a trade, or it doesn’t fit your criteria for trade identifi
cation, move on.
4. Misusing indicators
Too many beginners misuse indicators and use them as a crutch for their inability to chart
and trade using price action alone. In my mind, the logical order of learning is first
Top 5 Technical Analysis Mistakes Beginners Make by Cred 2017 page 11
Don’t get me started on the chartists who use Ichimoku Cloud for everything and wouldn’t
be able to draw support and resistance lines themselves even if they had a gun to their
head.
In short: get comfortable with price action first, then start gradually introducing indi
cators and ‘mastering them’ (using them to their full capacity) one by one.
5. Marrying an approach
It’s an exhilerating feeling as a beginner when your TA style ‘works’ and results in prof
itable trades, but that alone shouldn’t preclude you from experimenting with other methods
to see what works for you. It’s especially tempting to emulate the style of those traders
you see on Twitter with a big follower count and (seemingly) insanely consistent and prof
itable calls.
I believe that once you get comfortable with the basics of ‘naked’ trading and you’re gen
erally able to accurately map out support and resistance on a chart, you should experiment
and mix and match different styles to see what works best for you.
I personally thought Ichimoku Cloud and chart patterns were the absolute best until I
started trading using levels and swing highs/lows, which I now use a lot more frequently.
Now I am comfortable with all 4 and can look at all of them to check for confluence, or
just out of interest to see how they match up.
This is another benefit of experimenting with different styles: not only do you get to
discover what works best for you, but having learned another style, you can ‘see’ what
other traders are looking at and what they’d be looking for in a trade setup. It gives you
more perspective.
In short: once you’ve got the basics, play around with different styles. Doing so can
help you discover your own personal strategy, while also exposing you to how other traders
think and what they’re looking for in a chart.
Thanks for making it this far.
Follow me on Twitter where I post charts more or less every day.
Happy charting!
Cred @cryptocred
.
getting comfortable charting ‘naked’ i.e. without any indicators, and then adding indica
tors for confluence and/or to get an idea of how price will behave upon interacting with
your lines. The amount of ways in which indicators are misused warrants an article of its
own.
Using too many, piling them on without knowing what they mean, misinterpreting them, not
using them to their full capacity, using them as crutches, and so on and so forth. Did you
know RSI alone can be used for 70/30 entry/exit signals, midpoint value crosses, diver
gences, trendlines, failure swings, and more? Perhaps you did, but if you look at a lot of
TA on crypto Twitter, you’ll mostly see that “RSI oversold pointing up/overbought pointing
down” is often the full extent of RSI analysis. Wasteful.
Top 5 Technical Analysis Mistakes Beginners Make by Cred 2017 page 12
LESSON:
RISK MANAGEMENT
Instructor: Flood
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
Flood of bitmex 01/04/2018: Risk Management
they are focused on the long term game. Traders typically do not like averaging down on a
trade because it increases their risk.
I think one of the most overlooked areas of trading is the concept of risk
management Trading is different from investing
This is why a very popular method to reduce risk, which hopefully you all have heard of
Investors typically do not care about the short term value of their investment, since they
and use is called a stop loss
believe their asset will rise over a typically longer period of time
Stop losses are set points to which you will exit your position
Traders however, typically enter trades for the sole purpose of profit, and usually do not
automatically
You can also manually "stop your loss" but I advise against
intend to hold an asset for an extended period of time
this
Traders are looking to sell in profit, whereas investors are looking to generate wealth by
https://www.tradingview.com/x/gmQtDC5n/
holding a particular asset
Due to this difference, investors are typically okay with averaging down on an asset, as
Risk Management by Flood 2017
Here is a chart of the SPY or S&P500
I factor my stop losses based on a number of factors, but from this chart it’s fairly easy
to see where you “should” place your stoploss
Now I wouldn’t take a trade with it being as a high as it is, but if someone put a gun to
my head and forced me to long it... I would place my stop loss here:
https://www.tradingview.com/x/yV3aO2Cn/
page 14
This is due to a number of factors
https://www.tradingview.com/x/qAt4VNJk/
Risk Management by Flood 2017 page 15
Risk Management by Flood 2017 page 16
and not only has sentiment potentially changed, but I need to get out of my trade
Support is not Support due to some random line we drew
Support is support due to a clear demand vs supply imbalance at that level It may seem
obvious, but support is where there are more buyers than sellers So your stop losses
should be placed accordingly to where you have been able to identify there zones
What sticks out to me is the obvious “gap” in the VPVR (Volume
profile) With a clear indication of support around the 207.2 area
I’ll show you a recent trade I made on bitcoin where I used this
method Also for those of you asking what indicators i’m using
People have the misconception that stop losses are simply a way to stop your loss at a
certain percent so you don’t lose too much
VPVR, Volume, SuperGuppy, On Balance Volume, Willy21MA13
You’ll also notice the line is roughly the same as the bottom of the Super Guppy investor
But I look at stop losses as a point to where you trading hypothesis is disproven
lines, giving further evidence as to why that level is important
If price falls below 207 on the SPY I would assume that the support is no longer there,
In recent months we see two clear bounces off of the support line
Where a move below the line was “rejected” and the price continued on the
uptrend https://www.tradingview.com/x/aKq5HaRt/
Here’s a trade i’m in currently
I’m long from around 14883, with about 400k contracts(edited)
I already took some profit above 15k, but I am still bullish overall on
bitcoin I have placed my stoploss at 14,449.5
This is because it is:
A) Under key established support
Risk Management by Flood 2017 page 17
B) Would give confirmation of a “Double Top” pattern, so many retail traders would want to
short
C) Very little support in the VPVR compared to 14800-149500 range
Note that I am not using diagonal lines are support, this is due to the fact that 99% of
diagonal trend lines are ARBITRARY and do not represent anything meaningful other than a
linear representation of a trend
https://www.tradingview.com/x/tZqBbTGP/
Risk Management by Flood 2017 page 18
When we zoom out and identify our resistance and support lines they seem to make a lot
There is no magic percentage that you should set your stoploss at
more sense :)
The first thing I do before entering a potential trade is identify WHERE I am going to
place my stoploss, that way you are able to roughly gauge the risk vs reward ratio on your
So as you can see, there is obviously a supply imbalance at
15,500 and there is a demand imbalance at 14500
trade
So you can expect that if bitcoin breaks either of those two levels
Thanks for listening
Flood out
There will be a massive move coming
@thinkingusd
So final thoughts, this is how I set my stop losses
Risk Management by Flood 2017 page 19
LESSON:
BITMEX BASICS, FUTURES AND
HEDGING
Bitmex Basics by Flood 2018
Instructor: Flood
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
In today’s lesson I will be going over the basics of bitmex, futures contracts, and a very
simple hedge example.
We’ll start with bitmex
For those of you who have made a bitmex account, here is what it will look like
Bitmex Basics by Flood 2018
page 21
Currently we are under the “Bitcoin” Section, where we will be able to trade 3 types of
bitcoin contracts
Perpetual swap is an infinite contract, which you can hold for an amount of time you
want Note: There is no limit to how long you MUST hold a contract, meaning that you can
exit your position at any time, but there is a limit on how long you are able to hold
futures contracts.
These three types of contracts are Perpetual Swap, March contracts, and June contracts.
This is the orderbook (below), I have grouped it in 50 dollar increments The red are
“asks” meaning these orders are people who want to short bitcoin, or are clos ing their
long position
The Green are “Bids” meaning these orders are people who want to long bitcoin, or are cov
ering their short positions
Those dates are when the contracts will expire and you position will be settled
Bitmex Basics by Flood 2018
These three prices are very important
The price on top is bitmex’s trading price
The price on the bottom right is the “Mark” Price
The price on the bottom left is the “Index” Price
The “mark” Price is a combination of GDAX and Bitstamps current prices This is
what’s used to liquidate orders
The “Index” Price is .BXBT or the Bitcoin’s price spot
Taken from bitmex’s website
This index is composite, which means the price is built from multiple sources. See
the “Composite Index Breakdown” below for information on the constituents. If an
exchange is to lose service and no trades are printed for over 15 minutes, BitMEX
services may auto matically remove that constituent from the index until trading
resumes. The reason why bitmex uses mark price to liquidate orders, is so that
someone cannot come on bitmex and manipulate prices
Theoretically they could manipulate GDAX and Bitstamp’s prices, but this would
take a lot of capital and would not be terrible efficient.
page 22
Now we’ll revisit Perpetual swap in a bit but let’s get into futures
Bitmex Basics by Flood 2018
page 23
Futures are essentially the same, expect as you can see there is much less liquidity Futures mark price’s are calculated a bit different than Perpetual Swaps Mark price Here
is how it works
So now that you’ve gotten a basic idea of how bitcoin’s derivative market works it’s time
your liquidation price at the optimal
spot for your leverage. But if you get
liquidated, you will lose your entire
Since bitmex trades derivatives, meaning
you’re not actually trading REAL bitcoin,
you’re trading contracts, it offers
leverage. You can go anywhere from 1x
Leverage to 100x leverage.
Cross margin means you put your whole
acount as collateral, and it will position
to make our first trade
account, as opposed to ISOLATED margin
where you will only lose the amount of
margin you put up.
Alright boys So lets say we’re entering a trade of 300,000 contracts. 1 contract on bitmex = 1 USD. This is my standard position size
As you can see we are on 3x Leverage
This means that we need to put up 100,000
USD in bitcoin, in order to trade a posi
tion size of 300,000 USD
Bitmex Basics by Flood 2018 page 24
As you can see our risk/reward ratio is 2.0, which is good, the higher the ratio the
better Here would be our profit and loss breakdown
Our margin is 7.1543 BTC
And our profit would be 1.1250 BTC if we
close at 15000.
This is not likely to happen with an
order of this size, as you will encounter
slippage, but for the sake of round
numbers we will assume you close it all
at 15000.
Here would be our liquidation price
And here is our loss if we get stopped
out
Our stoploss is at 13500, and as you can
see our loss is 1.0950 BTC
In order to protect against this loss,
In order to hedge my position, I will
take up a 150,000 contract “Short
position” at 3x leverage at the same
price of 150,000
you would take up a hedge
I will personally use 2:1 Long to short
ratio in this example, but it is not
always optimal
In order to “Hedge” our long position we would take up a short position. Now you may be
asking yourself “why would this idiot take up an opposite order when he thinks the price
will go up?”
The answer is simple, as you can see even
with a stop loss I will still take over
1 btc of losses. So in the event that my
trade goes against me, I’m able to make
up some of these losses and offset my
RISK by hedging my current position
As you can see if the trade does go
against me, I will make up a little over
50% of my losses if my long does get
stopped out
But I will not have to close my position
at 13500, so if we continue to drop after
my long position has closed, I will be
making my money back with this short
position.
And if the trade does go my way, I will
not make as much money, but I will have
protected my capital and made a much less
risky trade
Bitmex Basics by Flood 2018 page 25
The benefit of hedging is your flexibility.
Funding Rate, which will be paid out in 5 minutes is currently .01% meaning that shorts
If you enter the long trade first, and the
will get paid .01% of their contract size.
price begins to go up you can even enter your Funding rate has a maximum of .375%, meaning the maximum you will pay or get paid is
hedge at a better price. This is a bit riskier and doesn’t always work out, but when I see 1.125%. This may not seem like a lot, but if you hold a hedged position for 1 month at max
a good entry for a long I might wait a while to enter my hedged position so I can enter
funding(1.125%) you will have made over 30% for doing nothing :)
the short higher.
Your position will be underwater, so you may not be making money, but it will certainly
offset some losses
The other benefits of a hedged position are potentially getting paid Market Maker fees by
being able to use a limit order if the price is increasing, and being paid funding Funding
This is one advantage of my typical Long Futures, Short Perpetual Swap strategy during
is the percentage paid out to either longs or shorts depend on how the mark price has
Bull markets
deviated from the bitmex price on the PERPETUAL SWAP contracts. During bull markets longs
Now if you want to sign up for bitmex, please use this link
ALMOST always pay shorts every 8 hours, during bear markets shorts ALMOST always pay
Bitmex 10% off fees: https://www.bitmex.com/register/ir2Xqa
longs every 8 hours. Futures do not have funding.
If you would like to donate to our community fund, here is the
address(edited) 3BMEXQMFUuiHtBeua61uxmGBa3a7dPmd4t
If you want to optimize your hedging strategy during your hypothetical bull market, you
would want to short Perpetual Swap and long futures, since you would not have to pay
IF YOU LIVE IN THE UNITED STATES AND WOULD LIKE TO TRADE ON BITMEX, PLEASE DM ME FOR
funding on your long and you would get paid funding on your shorts.
DETAILS
Thanks guys!
AS ALWAYS PLEASE USE LOW LEVERAGE WHEN TRADING ON BITMEX AND PLEASE START WITH AN AMOUNT
YOU ARE COMFORTABLE WITH
Flood out
@thinkingusd
Bitmex Basics by Flood 2018 page 26
LESSON:
FUTURES PART 2
Instructor: Flood
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
Futures contracts are used by two categories of market participants: hedgers and speculators. Producers or purchasers of an underlying asset hedge or guarantee the price
which the commodity is sold or purchased, while portfolio managers or traders may also make a bet on the price movements of an underlying asset using futures.
at
Many different assets have futures contracts available. Futures contracts on dozens of different major stock market indices around the world are traded, as well as futures
on the major currency pairs and major interest rates. As for commodities, a large number of contracts are available for just about every commodity produced. For example,
industrial metals, precious metals, oil, natural gas and other energy products, oils, seeds, grains, livestock and even carbon credits all have tradable futures contracts
available. Futures in bitcoin are a bit different. Since bitcoin isn’t a tangible asset, like food or livestock, and is all speculation, futures are used for price discovery
and hedging. Since bitcoin has no call or put options, going long BTC/USD is the same as going short USD/BTC.
Many people don’t understand this.
Bitcoin is a
Futures Part
Whenever you
meaning that
call
2 by
take
your
option in a sense, meaning that it will be worth a lot, or zero.
Flood 2018
up a position on bitmex, you’re trading according to a: y = 1/x function
losses could potentially be infinite on longs, but gains are capped at 100%
This is due to the fact that everything is margined in bitcoin, and not USD. In order to
is selling when you are buying.
take up a position, someone is taking up the inverse position, meaning that someone
You may notice that bitcoin futures typically trade at a premium to perpetual swap This is due to something called contago
Contango is a situation where the futures price of a commodity is above the expected spot price. Contango refers to a situation where the future spot price is below the
current price, and people are willing to pay more for a commodity at some point in the future than the actual expected price of the commodity.
Contago in bitcoin’s case is due to counter party risk and unsecured USD Contango = Unsecured USD Rate + Counterparty Risk
Counterparty risk in this case being having money on a bitcoin exchange (bitmex) rather
than cold storage to either hedge or speculate on the future price of bitcoin
page 28
Here’s the March (XBTH18) premium vs Swap
XBTM18-XBTUSD
Counterparty risk on bitmex includes the fact that Derivatives are P2P. BitMEX does not
guarantee payout in the event of fraudulent trading, market manipulation or anything
that violates their ToS. Since bitmex does not have any KYC it has Limited liability,
you can’t have a negative account balance. There is also the risk that BitMEX early
assigns contracts if a liquidation cannot be filled in the market, Auto-Deleveraging
Auto-Deleveraging: If a liquidation cannot be filled in the market, ADL happens.
Traders are ranked according to leverage and profitability. Highly leveraged profitable
traders may have their positions closed early in profit. ADL is quite rare.
One thing to understand about futures is that they have an expiry date. Meaning that
you can only hold the contract to what’s called settlement. These contracts settle on
the 29th of each quarter, March expires on March 29th, June expires on June 29th.
Settlement: How and when the futures contract expires, or settles, is important for
traders to understand. BitMEX employs an averaging over a period of time prior to
settlement to avoid price manipulation. This time frame may vary from instrument to
instrument and traders should read the individual contract specifications to see when is
expiry and the individual settlement procedure.
Typically it’s settled based on the 30-minute TWAP on reference exchange(s).
Futures cash settled in Bitcoin, and Futures generally “roll” expensive. Bitmex has
said they plan to offer calendar spreads in the futures, but as of this time they do
not offer it.
This was a basic overview of futures inverse contracts.(edited)
I’ll be going over potential trade setups using this swap vs futures pricing, along with
having fully funded trades and arbitraging the funding rate. As of October the funding
rate was over 30.47%, so there’s a pretty good arb oppertunity if you have the capital.
Thanks for listening.
Futures Part 2 by Flood 2018 page 29
LESSON: PRICE ACTION PART 1
Instructor: Zabbs
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
Lesson: Price Action
Todays lesson is the first in a series of six lessons on Price Action, to begin we need
understand what price action is and how does it help you when looking at a chart. Price
action is the historically price data that gets printed onto a chart, and being able to
read what is happening with the price to understand what type of market you are in.
Price Action definition from Investipedia:
“Price action refers to the movement of a security’s price and is encompassed
in technical analysis. For example, a trader might say that a security’s
price action lends credibility to buyout rumors. Many short-term traders rely
exclusively on price action to make trading decisions. Technical analysis is
a derivative of price action since it uses past prices in calculations that
can then be used to inform trading decisions.”
When price action is broken down here it is simple to understand, while we progress
through these video lessons you’ll see how price action ties in to the rest of the other
indicators as well as the TA’s that I post to my Twitter.
To begin when looking at my TA I always begin by looking at the daily charts, especially
with alts but even on Bitcoin as well. The first thing I always do is to look through
price action and decide on whether we are in a bullish/bearish market or if we are just
ranging. This is what price action basically is, it helps you to understand what market
type you are in so that when you do move down to smaller time frames you can make better
decisions on entry and exit of a trade.
To set up my TA I will get rid of all additional indicators and change the chart into a
line graph as to not be biased, I can’t look at candlestick formations and I can only see
the bare-bones of what is happening in the market.
The three
1.)
2.)
3.)
types of markets are:
Bullish or Up-trending
Bearish or Down-trending
Ranging or Sideways
When looking at charts, a way of breaking down price action easier for yourself is to
understand that markets don’t just go up or down. They move in “waves” or “steps”, for
price action you need to know that there are both waves in bull and bear markets (Fig.
A). What the market is showing you is that price goes up, which is called a “push” and
price also goes down which is called a “pullback” or “retracement” (Fig. B).
Above is (Fig. A) as discussed in the video you can see the “waves” occur in both bull
and bear markets.
Price Action by Zabbs 2018 page 31
Below is (Fig. B) Here is an example of the “push” and “pullback” we see when price is
going up. In this example you can see that there are higher highs and higher lows, this
is an example of a bull market.
An easy way to see these waves, is to
draw horizontal lines marking out each
high and low. The way that you know
you’re in a bullish or up-trending
market is that each high would be higher
than the previous high, and each low
would also be higher than the previous
low (photo on left).
This trend also happens in a bear
market or down-trend, except you now
have lower lows and lower highs (photo
on right). By understanding this you’ll
know the overall trend that the market
is in.
Price Action by Zabbs 2018 page 32
If you look at the recent price action, you can see that a bottom was found and price
broke up. The lower high can be seen as the last high in the bear market, from the lower
low price begins to break upwards. When the market comes back up you have a new high
and a new low. As explained earlier this tells us we are now in a current bull market.
This is very important to understand because it will help you to identify the trend you
are in, and helps you to not get stuck in a place where the market catches you. Looking
at the charts above you can see the lower highs are a lot of times hype that is created
by people in a losing position and trying to get people to buy up that position so they
can dump their positions. This is something to be careful about, and when you see this
happening use these basic steps to find out what market we are in currently so you don’t
get swept up into the hype.
LESSON:
PRICE ACTION PART 2
Instructor: Zabbs
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
The set up for our chart is the same as in Lesson 1:
1.) Go to the daily chart
2.) Clear all indicators from chart
3.) Switch the TA into a line chart
The topic we will be discussing in this lesson is identifying and drawing horizontal
lines of support and resistance. We’ll also discuss how they help you understand price
action and how you can use them to get into good trades. To begin we need to set up our
chart correctly, if you want to follow along on your own chart here is the set up we will
be using.
The horizontal lines on the chart are meant to show you areas where there are major
zones of support and resistance. At the beginning, the lines that will be drawn are in
a neutral color so that they don’t cause any bias, then when we go through smaller time
frames we’ll start to change them and better understand what is happening with price.
The first line I’ll draw is from the left, this is done so that I can see what’s happened
historically at this level (I’ll use this information later on when I switch back to a
candlestick graph). First, I’ll begin by marking out the low and high ranges, then I’ll
mark out the areas where price has a strong reaction. Any area where this reaction
happens on a chart can be seen as either strong resistance or strong support. This is
especially true on higher time frames such as the daily, 12hr, 8hr, 6hr, 4hr. When price
moves into those areas it swings and those swings will generally represent strong support
or resistance levels. We then have the middle area between our lines of resistance and
support, in the middle of this zone I’ll place a horizontal line in a different color. I
do this help me see what’s going on with price when we switch to lower time frames.
Marking out the levels on the line graph beforehand is beneficial because we are less
biased and therefore less emotional to price action. When we change the chart back we can
see the daily candles and use this information to better understand price action. We’ll
now change the color of the lines to we drew earlier to represent the resistance and
support areas, when we move into lower time frames we can see just how price interacts
with these areas.
Starting at the top we can identify this area as a major resistance level because price
has only tested that area once and its the high. Moving down to the next horizontal line
we can see that price has been rejected here and when price did move up it didn’t act as
an area of support. The blue line is our pivot line and gives us an indication of what
way price is moving. The next two lines are both areas of support, although price did
wick down through these areas price did move back up. When we move to our 6hr chart we’ll
see in more detailed how price has reacted to these areas.
of strongest resistance and support.
Horizontal Lines in order from top: 1.
Strongest Resistance 2. Micro Resistance
3. Trend Line 4. Micro Support 5. Stron
gest Support
These two horizontal lines are the areas
Price Action by Zabbs 2018 page 34
LESSON:
TRENDLINES
Instructor: Zabbs
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
In today’s lesson we’re going to be discussing trend lines and how I use trend lines to
line. When constructing your trendline a lot of people will say that it needs to be from
get in and out of trades and what trend lines mean to me. To begin one thing about
wick to wick or body to body. Personally, I’m very subjective as long as it represents
trend lines is that I like drawing them on daily charts, this is because the higher the
the market that we’re currently in and the trend that we’re currently in.
timeframe the more significant that trend line support or resistance will be. You can
draw them on lower timeframes but your trades will be a lot shorter and this is because
those those trend lines will get violated quicker. The market does always bounce back or
go further down which is why I like drawing trend lines on much larger timeframes.
What Trend Lines Mean To Me
Trend lines are the visual representation of a trend in a market
They show just how weak or how strong that trend is.The more touches that the market has
on that trend line, and the longer that that trend line has been intact shows you how
strong or how weak that trend is.
Next, we’ll go over bullish and bearish trend lines and what the difference are between
them are. Then I’ll show you how to construct a channel and how to use the channel.
First of all let’s look at an example of a bull market right.
Looking at the example above you can see the trend line i’ve drawn. Personally, for me
there is nothing wrong with this placement (even though others may disagree). This is
because every single time the price has come close to that trend line it’s reacted to it.
What this shows me is that this line is supporting the trend, and it’s supporting the
price movement of higher highs and higher lows. Another thing that you need to know when
drawing your bullish trend line is to make sure that you link all your higher lows. When
you’re in a bull market the trend line needs to be underneath price, and it needs to be
connecting all the higher lows.
A bull market like I discussed in the first video is represented like this where you’ve
got highs and each high is higher than the previous high and you’ve got lows where each
low is higher than the previous low. If you’ve gone through the previous lessons then it
should go without any explaining on how to figure out how the market is trending.
Now that we know how the market is trending you can start to draw your bullish trend
Bullish Trend Line Requirements:
1. The line needs to represent the market trend that we are currently in (some
people prefer drawing the trend line wick to wick or body to body).
2. Link all your all your higher lows.
3. When in a bullish market the trend line needs to be underneath the price.
Price Action by Zabbs 2018 page 36
When looking at trends or drawing trend lines one thing to remember is that the longer
the trend has been going on for, and the more touches that you have on the trend line,
the stronger this trend becomes. So knowing this, what would happen if Bitcoin does come
back into this trend?
I could almost guarantee you that price
would go up, but having said that one big
thing about using trend lines is that when
price does violate the trend line it can
be a good indication that the trend is
changing (take a look at the example).
Next I’ll give you a little example from
where bitcoin went from a bearish market
into a bullish market.
Let’s look at a bear trend that turns into a bull trend, now all the same rules apply to
bearish trend lines except for one key difference which is how you draw your actual trend
line. Let’s briefly review how to identify a bear market, in a bearish market you’ve got
highs and all the highs are actually lower than each other (Lower Highs) then you also
have lower lows.
Bearish Trend Line Requirements:
1. The line needs to represent the market trend that we are currently in (some
people prefer drawing the trend line wick to wick or body to body).
2. Link all your all your lower highs.
3. When in a bearish market the trend line needs to be above the price.
So, currently the market is in a bearish trend. When you draw your trend lines in a bear
market the only difference to the rule is that the trend line is drawn above the price.
The reason for that is that you want to see how price reacts when the lower highs come
into contact with that resistance.
Looking at the example above you can see every single time the market tried making a
new high it came into resistance and got pushed back. Again, it tried to make another
high came into resistance got pushed back, tried to make another high and got pushed
back.
Price Action by Zabbs 2018 page 37
Bear vs Bull Trend Line Differences:
1. In a bear market the trend line is above the price connecting all the lower
highs 2. In a bull market the trend line is below the price connecting all the
higher lows
The significant thing about trend lines is that the market generally reacts to them and
even once like in the example below where we actually reversed into the first cycle of
a bull market you can actually see that price pushed away from the trendline and then it
did retest the trend before moving up into another higher high.
Channels are basically parallel lines, so looking at the example below we can see that in
the channel every single time price comes in to the bottom part of the channel it pushes
up and every time it reaches the top of the channel it then pushes down.
is a great overview of trend lines and how to incorporate them into your trading
strategy.
This
The next topic we’ll be going over during this lesson is Channels. Once you can establish a channel you can get a lot more trading in where you can change
your position. What I mean by that is you could go long when it reaches the bottom of the
channel and when it reaches the top of the channel you could go short.
Personally I’m not a big fan of this and I don’t really use it that often, I’d just
rather stick to the trend lines.
Price Action by Zabbs 2018 page 38
This lesson is going to be a recap of the last three videos and then I’m also just gonna
higher highs and we’ve got higher lows.
show you how I’ll get into positions and how I find my exits. So, to begin I’ll go
We can see that every single time price has come into contact with the top of the channel
through the ETH/USD chart today because there’s quite a nice channel forming and it’s a
price has actually broken down. Once we did have just a huge blow off of the top which
trade that I’ve been in for quite a while. I start from the three-day chart and I go
then put us into a consolidation zone. After doing all this that’s pretty much as far as
through a little bit of the price action by changing it to a line chart. As you can see
I get on the three day and will move to a lower time frame to get more detail on price
on the chart we’re definitely in a bull run, we’re starting to trend up and we’ve got
action.
That’s pretty much perfect but we need to start finding out where there’s resistance and
where to maybe get out of this trade and then look for a reentry. What I like doing is
setting up my channels with the trend lines and I always like putting a mean line in the
channel in another color to see areas of possible micro support. This doesn’t have to
be 100% accurate, remember I said that this is very subjective while you’re drawing the
chart but the way that I interpret this setup makes a lot of sense to me. What I then do
is put in my areas of support, now looking at the chart I believe this area would be a
very strong area of support and this trend line which is the bull trend line is a very
strong trend line. As you can see we’ve had a multiple amount of touches on it and
every single time price has moved into it we’ve pushed away and gone up. Remember when
Price Action by Zabbs 2018 page 39
you’re drawing your trend lines, you draw them on the higher lows. The top line
completes the channel, this gives me an indication of where this channel might be
going.
We’ve been looking at the 3 day chart but at this point I like going down into the daily
chart. On the daily chart we still have all of the same set up but you can now clearly
see that there’s probably is another support zone. The reason why I say that it’s a
support zone is because we have come into it and it was resistance, price came into that
zone then printed a another low which was higher than the previous low, this shows that
we’re still in the bull run. Price then broke through and retested this support and then
continued to move up higher.
Moving down to the 6H time frame you can see the same thing but what’s nice on the 6H is
when looking at the mean line you can see that we’re above the positive sentiment line
and at resistance. What I’m looking to do here at resistance is to close down a little
bit of the trade and take some profits on Ethereum, and let it come back down to test a
lower lower area. I’ll put in a demand zone (which is something I like doing), looking at
the chart you can see that in this area (~950s - 1100s) there is quite a lot of demand
for Ethereum so that’s where i’ll draw my demand box.
On the daily that’s about as much
information as I like to see before
moving to a lower time frame. I move
down to the 12H, and what’s nice
about the 12H is you can actually
start seeing that you’re kind of
looking choppy. It also looks
like a little bit of a double top
is forming, I start drawing in a
resistance line, which I like marking
in red. Now, obviously if we do break
through the resistance we are still
“toppy” because price is roughly at
the top of that channel. There is
a possibility that we might see a
blow off top, we could also break
back down to the support and find
consolidation around the support
level and then push back up (Looking
at the example below we can see what
happened).
Price Action by Zabbs 2018 page 40
Now price could come back into the demand zone and then keep ranging up but there are
other outcomes to consider:
• There is the double double top effect that’s forming, which also happened earlier
around the ~$830 area (most recent support).
• We’re almost at the top of the channel (which is why I might let some of my Ethereum
go) so price might come back down into an area of consolidation.
• We could just range till about mid Feb which then we could see a break higher
• Consolidation could even be shorter, the mean line could start being a little bit of
support (which happened in Sept) but it did break down lower and eventually found the
other side of that channel.
That’s how I like setting things up, now when I get into trades I like looking at areas
where I see that we’ve found a channel. This is because you’re basically going in to the
trade already on trend support. Looking at the chart below I’ve drawn out what I saw as
possible entries into a trade, the first demand box would be a great entry because just
below the trend support you have a nice area of horizontal support as well. I marked out
where I started buying Ethereum, we did go sideways for quite a little bit of time but
what I did like was when price did come up to what was resistance at that time then came
back and tested the support and then pushed higher.
These are some of the small things I look for when entering or exiting trades.
-Zabbs
@joezabbs
Price Action by Zabbs 2018 page 41
LESSON:
VOLUME
Instructor: Zabbs
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
VOLUME LESSON:
increasing in price; declining volume is the total for all stocks decreasing in price.
To remove variability elements, it may be advisable to smooth this measure with a moving
average
Volume is the number of Coins or futures contracts traded over a designated period
(e.g.,hourly, daily, weekly, monthly). Advancing volume is the total volume for all coins
Volume reflects the intensity (strength) of a coin. Volume also provides an indication of
the quality of a price trend and the liquidity of the coin.
What volume reveals about the market’s strength
High volume means greater reliance can be placed on the movement in price than if there
was low volume, because heavy volume means many market participants.
High volume indicates an active market; in an active market, the spread between bid and
asked prices is usually closer.
High volume is often characteristic of the initial stage in a new trend, such as
a breakout in a trading range. Before a market bottom, investors panic selling, a
characteristic of which is high volume.
High volume is also attributable to a market top when there is a large interest in a coin.
Low volume often exists during an unsettled period, such as at a market bottom. Low
volume reflects a lack of confidence that is usually indicative of a consolidation period
when prices are within a sideways trading range.
probably not continue and a reversal may be imminent.
A strong uptrend usually has more volume on the upward legs; similarly, a strong downtrend
will have more volume on the downward legs. After the trend ends the corrective leg
usually has lower volume. A downtrend may nevertheless be extended whether average trading
volume increases, decreases, or just stabilises.
Volume is relative in that it usually is greater approaching the top of a bull market
than near the bottom of a bear market. Further, trading volume typically increases and
continues higher than average in an uptrend, but is below average during a downtrend.
Trading volume typically goes up as the price breaks out to the upside of a pattern or
formation. In this case, a significant increase in volume is a strong buy signal.
However, volume is an indicator of a trend reversal if it goes in a direction contrary
to a prevailing trend. This is why i always Watch volume when i do see a pattern forming
because Volume will give us clues if the pattern will play out
A sizable increase in volume may point to a breakout (start) or climax (culmination) of a
move, which may be temporary or final. Sometimes but not always it can be a shakeout.
Volume typically follows a trend, expanding on rallies and decreasing on reactions.
Volume is useful in ascertaining how strong a change in expectations really
is.(edited)
How volume and price moves reveal the market’s trend
Most important is the relationship between volume and price. A price move, up or down,
that is on higher volume is more significant. Therefore, an analysis of price and volume
allows the investor to better interpret the trends in price and any changes thereto. In
other words, volume gives an indication of the strength (momentum) of a move in price.
Current trading volume and average trading volume should be compared. Average trading
volume typically decreases when a coin is in a downtrend, because investors view
negatively a coin declining in price. An increasing price is typically coupled with
increased volume, but the price can decrease without an increase in volume if investors
lose interest in the issue. On the other hand, a declining coin price may be coupled with
higher volume when, for example, FUD.
The significance of a change in volume is related to the associated price trend or
pattern. For example, a good time to buy a coin is when there are strong price and volume
increases.
Volume should be evaluated in relation to a market strength or weakness or trend. If
volume is increasing, whether prices are going up or down, it is probable that prices will
continue their current trend. However, if volume is decreasing, the current trend will
Volume by Zabbs 2018 page 43
HOW TO SETUP THE AVERAGE VOLUME
SHEET
CHEAT
LESSON:
MAGIC RECTANGLES
Instructor: Cred
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
Okay lads & gals, let’s chat about magic rectangles.
Magic rectangles have been called many different things: order blocks/breakers, supply/ demand, clusters, pivots and so on.
This is my own personal take on magic rectangle structures – I do not profess to be giving some technical analysis encyclical on price action.
The premise behind looking for these structures is the following: one is looking for evidence in price action that a move was supported by big players. If price returns to
the origin of the move, one anticipates that the same area/levels will prove to be significant and provide a trading opportunity.
In short, the purpose of magic rectangles is identify the areas which the big players used for trading and to trade those same areas if price returns to them.
TIMEFRAME
Price is fractal. “Fractal” here does not mean muh 2014 Bitcoin but rather refers to the fact that the same price structures can be seen across all time frames and treated
in the same way.
As with most things in technical analysis, one’s higher time frame analysis usually ought to take precedence over lower time frame analysis.
I typically start my analysis with the 1W timeframe and work down (1D, 4H, 1H, 15M) but that is personal preference. There’s nothing wrong with, for example, only trading
this structure on a single time frame.
his also serves to refute that the notion that magic rectangles are too big to trade or to leave limit orders. They can always be refined using a lower timeframe e.g. 1H
rectangle inside a bigger 1D rectangle.
FRESHNESS
Freshness, the amount of times a level/magic
rectangle has been tested, is an important
consideration.
Generally, the fresher the level (meaning the fewer
times it has been tested from the same side) the
better.
The first test of a magic rectangle is your highest
probability bet.
The corollary of that is one ought to be cautious if
a magic rectangle is tested repeatedly from the same
side - the buyers/sellers are being absorbed each
time until they’re gone and price breaks through.
More and repeated touches from the same side = less
fresh = lower probability of holding.
DRAWING MAGIC RECTANGLES
Whether to draw the bodies, the full candle, the full
series of candles, and so on is mostly a red herring
(for our American readers, that means a distraction).
Most of the time I’ll use the whole candle as
my block. Sometimes I’ll block out an entire
consolidation.
A lot of the time it simply doesn’t matter. What does
matter is i) the price action as price revisits a
magic rectangle ii) whether you have a risk-defined
entry and know where you’re wrong. Play around with
it and see what you prefer.
IDENTIFYING MAGIC RECTANGLES
How does one look for evidence in price action that big players were buying at a certain
The ingredients are as follows:
level i.e. bullish magic rectangle?
I) Downmove/downcandles
II) Preceding/led to a move up
III) Move up shifted market structure to the upside i.e. made a higher high/broke a swing
This third element is crucial. The fact that the move up was potent enough to break market
the example below, where I’ve boxed out the downcandle. Simply apply the test:
I) Is there a downmove/downcandle - clearly
II) Did it precede/lead to a move up - clearly
III) Did the move up shift market structure to the upside - yes, as denoted by the red
high
structure is evidence that the move up was ‘sponsored’ by big players.(edited) See
swing highs to the left that were broken by the move
The break in market structure (alongside the other elements) proved that there was buying within that rectangle, and thus when price returns to it, one presumes that it will
be used for buying once again. Thus, long positions are taken when price returns to a bullish magic rectangle.
Magic Rectangles Lesson by Cred 2018 page 45
How does one look for evidence in price action that big players were selling at a certain
level i.e. bearish magic rectangle?
experience. I) ICT ‘Breaker’ Concept
Basically, the inverse.
II) Using the magic rectangle as a pivot or basic
support/resistance(edited) ICT Breaker Concept
I) Upmove/upcandles
II) Preceding/led to a move down
III) Move down shifted market structure to the downside i.e. made a lower low/broke a
swing low
The ingredients are as follows:
See the example below, where I’ve boxed out the upcandle. Simply apply the test as before.
I) A valid bullish/bearish magic rectangle forms
To reiterate, the most important element is the break in market structure. In the example
below, you can see how the move down broke market structure (through the red level in our
example) and thus provided resistance when price returned to the magic rectangle.
II) The bullish/bearish magic rectangle gets completely nuked on a move that breaks market
structure i.e. bullish rectangle provides zero support/bearish rectangle provides zero
resistance
I am not ICT. I am sure he’ll complain on social media about “blind leading the blind” and
rely on a whole host of other invidious marketing ploys, but let’s move on.
IF A MAGIC RECTANGLE FAILS TO PERFORM
This section will cover how to still make profitable trades when a magic rectangle fails
to provide support/resistance (depending on whether it was a bullish or bearish magic
rectangle).
There are two ways to trade such structures.
You can use both, neither, or be selective according to your preference and
The trade is taken in the opposite direction when price returns to the broken magic
rectangle i.e. you long the broken bearish rectangle/short the broken bullish
rectangle.
Magic Rectangles Lesson by Cred 2018 page 46
Here’s a good example of a breaker by Hsaka from our Discord: https://twitter.com/
HsakaTrades/status/1004672024776544256
Here’s also an example of a bearish breaker i.e. failed bullish magic rectangle on Bitcoin
4H. I’m sure some pedant can argue that the block wasn’t fully engulfed, but the example
is good enough for demonstrative purposes.
Magic Rectangles Lesson by Cred 2018 page 47
engulfed. For a pivot, the requirements are more lenient and the block simply has to
breakdown, even if it did provide some support/resistance.
This is fairly similar to the breaker concept, but the requirements aren’t as strict.
The breakdown of the pivot must be clean. This will usually be in the form of an impulsive
candle which closes through the pivot. A clean break of a pivot will necessarily break
For a valid breaker the magic rectangle must provide 0 support or resistance, whereas for
this method, there just needs to be a clean breakdown of the rectangle even if it has
market structure as well.
provided some support.
The trade is taken in the opposite direction once the magic rectangle breaks down and
price returns to retest it i.e. short if the pivot was providing support, long if the
To be clear: for a breaker, the rectangle must provide 0 support or resistance/be fully
Using the Magic Rectangle as a Pivot
pivot was providing resistance.
See the example below of ETHUSD.
A valid bullish magic rectangle is formed, provides some support, and then breaks down
Risk
Magic Rectangles Lesson by Cred 2018 page 48
As a rule, your stop loss goes where you’re wrong i.e. where your idea for the setup has
been invalidated by price.
If the setup I’m trading is strictly based on a magic rectangle, I’ll normally base my
risk around it as well unless there’s a swing high/equal highs that I think the market
wants to reach for before reversing.
It is for this reason that I use the whole candle/multiple candles for my blocks, so I
cleanly. It thus becomes shortable on the retest.
Here all the concepts flow together as well, since a bearish magic rectangle forms within
the pivot; allowing you to have a more precise entry.
don’t get stopped out before that area of buying/selling has been invalidated.
Conclusion
Don’t @ me.
Bye, gfy.
Magic Rectangles Lesson by Cred 2018 page 49
LESSON:
HOW NOT TO BE SHAKEN OUT
Instructor: Flood
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
Hey everyone today’s lesson will be on targets and actually being in a trade, ITM and OTM
This will be specifically tailored to Bitmex, but this can be applied to any trade.
Here’s the chart I’ve been looking at for the past couple of days, it worked out pretty
well. I’ll go over my thought process from around 8400, which is when I had a huge
decision to make.
https://twitter.com/ThinkingUSD/status/975517885043888129
Stronk Hends Lesson by Flood 2018 page 51
I was already in a long, which I was already in from around 7940.
that’s quite a bit of profit, and the price was reject by the previous resistance almost
exactly. Naturally being the bull I am I anticipated a break upwards. I also noticed that
there were a TON of orders taken around the 8200 area.
This meant that if we had a significant break up or break down would result in a ton of
cascading liquidations.
Stronk Hends
page 52
A confluence
to add to my
I added some
the top, but
Lesson by Flood 2018
of bullish arguments and the HVN (High volume node) made this an easy place
long.
on the break and close above resistance, at first it looked like I had bought
I was confident in my trading plan and have been in this position many times.
I held onto my long and was looking to add more into the buy zone. Unfortunately we
got there, but no trade is perfect.
You will never be able to capture every move. There should never be a reason to
a trade, understand that if you have any bitcoin on bitmex then you are gaining
if the price moves up. No need to fomo since you’re still making money, just not
never
FOMO into
USD value
BTC.
Stronk Hends Lesson by Flood 2018
page 53
Here we see the price enter the resistance zone I had mapped out a couple days earlier.
Notice that I didn’t say Level, I said ZONE. This is important becuase you need to be
staggering your orders in order to give yourself the highest possible for being filled
and to minimize a bit of your risk. BTC is so volatile that it often wicks past resistance
levels than instantly reverses. I think that closes above resistance are more reliable.
Notice the price never CLOSED above (or even in) my resistance box.
Stronk Hends Lesson by Flood 2018
page 54
Now for the second part of the trade, coming down off the resistance level and after
printing a bearish pivot I moved up my stop losses on my long to around 8800. This is to
LOCK IN my profit so I never lose money. Currently since my strike rate on trades has
been a bit lower than usual i’ve been setting stop losses at break even to ensure that I
don’t lose money. If I’m exceptionally confident in a trade I’ll keep my stop loss where I
believe support/resistance is, but that has not been the norm recently
Stronk Hends Lesson by Flood 2018
page 55
This is my outlook on btc, I’ve moved up my stoploss on my shorts since their not a hedge
anymore, they are my main position.
THERE IS NO GREATER CRIMINAL ACTION THAN TURNING A WINNING TRADE INTO A LOSING ONE
so set stop losses in profit that way you never lose.
Stronk Hends Lesson by Flood 2018
page 56
This is my outlook on btc, I’ve moved up my stoploss on my shorts since their not a hedge
anymore, they are my main position.
THERE IS NO GREATER CRIMINAL ACTION THAN TURNING A WINNING TRADE INTO A LOSING
ONE so set stop losses in profit that way you never lose.
I select my entries and more importantly my exits/targets based off these break out and
breakdown levels. Once specific levels in bitcoin are violate, we typically see massive
moves in either direction.
This can be used in conjunction with other indicators, support and resistance, ect. I
like confirming these breakdown levels with the VPVR since you know that a lot of traders
will panic/be liquidated once the price moves significantly against them. You can take
advantage by watching these levels closely and making trades based off of them.
Stronk Hends Lesson by Flood 2018
the 8h guppy has been working really well for resistance lately, and since 9k was a
psychologically significant level I assumed that a stop run would happen but would
eventually fade out as people get trapped above 9k.
here are the levels on the daily timeframe, pretty standard.
page 57
Stronk Hends Lesson by Flood 2018
page 58
I think it’s pretty logical to assume that if we start trading below 8200, stop running
8000 is not out of the picture which will make the massive amount of trades taken around
the 8600-8200 range to panic/be liquidated and force us lower.Now that I’ve given you a
breakdown of my thought process for these trades I’ll talk a bit about my mentality
during these trades. For those of you who know me, I rarely trade. What I mean by that is
compared to scalpers or most traders in crypto land I don’t trade at all. Typically I’m
taking a maximum of 3-4 trades per week. Sometimes more but usually less. I spend a lot of
time either arbing funding or doing cash and carry in bull markets.
You do not have to be constantly be in position, no position is a position.
A few general rules I like to stick to that have helped me with controlling my emotions
while trading.
1. No FOMO
2. Whenever you’re looking at a trade and thinking “fuck me that’s a lot of profit” sell
some or hedge more
3. Have a plan and stick to it.
4. If you’re not confident about the trade, move up your stop loss.
5. Understand that losses are part of the game, do not move your stop loss in the opposite
direction from its original placement.
6. You will remain calm and unemotional. Fear is the profit killer, you will permit your
fear to wash over you and allow yourself to remain emotional and object. Even if you think
BTC is going to 40k this year.
Alright guys hope you enjoyed the lesson, hope this helps xoxo Flood
Stronk Hends Lesson by Flood 2018
page 59
LESSON:
MARKET MAKER
Instructor: Flood
Good evening everyone
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
I’m your friendly neighborhood bull and i’m going to be going over some basics of market making. There are a ton of idiots on twitter who believe that every single movement
of bitcoin is dictated by one single entity. While this could be true, this is not what a market maker is!
The process of quoting continuous passive buy and sell prices to provide liquidity. On BitMEX market makers post two-way quotes on various products. Market makers are delta
neutral, they don’t have an outright market view. Traders market make to earn rebates, currently 0.025%. Traders market make to earn their bid / ask spread. If done
correctly, can be a source of consistent trading income. Traders can also market take, where they will be paying a taker fee of .075% or 7.5 basis points. This means that
bitmex keeps the .05% difference, since there will be a market maker and market taker on every trade. https://github.com/BitMEX/sample-market-maker
Here is a very simple market making bot that you can use. ANYBODY can market make bitcoin,
Something I always wondered when I was first trading was “Why is there always somebody
where it can take months or even years to make a trade.
Lesson: Market Maker by Flood
whenever you get a bid “hit” or an ask “lifted” you are market making.
willing to trade with you?”. Markets are different than for example selling a house,
That is where market makers come in, market makers are the liquidity suppliers, they are
NOT DIRECTIONAL.
Now if bitcoin only goes up why would you market make? And how do they make their money if
they’re always short and long the same amount?
I’ll explain: Market making is way to provide consistent income by making money off people who want to pay for the priveledge to have their trade executed immedietely.
Market makers are either quoting prices a bit above the current market price or below the current market price. If we take an ASK side market maker who was market making
the ETH/BTC contract on
bitmex they would need:
- To calculate the fair price of the asset their trading
- An automated bot that would continous make the calculation
- Capital and a lack of testicles since real men take directional trades
Fair price (varies depending on what you’re measuring against) according to bitmex is based on where you as a trader can borrow and lend Bitcoin and USD and the rates given.
This is due to the fact that if you’re retarded enough to try and market make when you’re making less than you would just lending on poloneix, it’s not worth your time. You
used to have to calculate fair price by yourself, but now bitmex is nice enough to do it for you.
Basis is the expected premium the contracts will trade at (Futures - Spot = Basis) So if I wanted to market make the ETH contract I would determine my Spread(edited) Now the
spread is the most important part of market making
Your spread determines your potential profit, choose it wisely.
Spread = ETH/XBT Volatility + Hedging Costs
ETH/XBT Volatility = your estimation of how much the price could move before you hedge or receive a trade in the other direction
Hedging Costs = how much it costs in terms of bid / ask spread and commissions to trade ETH/XBT on Poloniex
page 61
Here’s the trade walk though
You quote a market on ETHM18, 1 contract on both the Bid and Offer, of 0.05 XBT / 0.1 XBT A trader lifts your offer, you are now short 1 ETHM18 contract. To hedge your delta,
you buy 1 ETH for BTC on Poloniex at 0.072 BTC. Your market remains 0.05 XBT / 0.1 XBT. A trader hits your bid, you are now flat on ETHM18. To hedge your delta (you are now
long 1 ETH on Poloniex), you sell 1 ETH for XBT at 0.072 XBT. Again this would all be automated by a bot but this is just to give you an idea of how people are market making
these altcoin contracts. Market making bitcoin is essentially the same practice, and with bitcoin being extremely volatile it makes it very attractive for market makers One
benefit of market making bitcoin (swaps) is you don’t have to worry about settlement, but since settlement fees were removed on altcoin contracts I imagine those contracts
will become a lot more liquid. The goal of market making is to buy low, sell high as quickly as possible, as much as possible. The more hedging you do, the less money you
make. To attract the other side, market makers will skew their quotes as they receive trades. General Rule: For each full size transacted, skew your quotes half your spread.
Skew Example:
You are quoting ETHM18 at 0.05 XBT / 0.1 XBT for 1,000 contracts a side You are lifted for 1,000 contracts, since your spread is 0.05 XBT, you move your quotes
XBT
Your new market is 0.075 XBT / 0.125 XBT
You are hit for 1,000 contracts, you now move your quotes down by 0.025 XBT Your new market is 0.05 XBT / 0.1 XBT
Remember on BitMEX you receive a 0.025% rebate as a market maker
BitMEX Trades:
Sell 1,000 ETHM18 @ 0.1 XBT, rebate 0.025 XBT
Buy 1,000 ETHM18 @ 0.075 XBT, rebate 0.01875 XBT
Market Making Profit: 2.5 XBT
Rebate: 0.04375
Total Profit: 2.9375 XBT
So what conditions do market makers like? What type of market is attractive to a market maker?
Optimal Conditions: Low volatility market, with very active two-way flow Bad Conditions: High volatility trending market, with one-way flow
Every Market Maker’s delta tolerance is different
The more sophisticated your bot, the better you can handle jump or gap risk QUOTING ASK SIDE
higher 0.025
Let’s say ADAM18 currently trades at a 10% outright premium with 6 days remaining You can borrow Bitcoin at 1% per week
Selling ADAM18 and buying ADA (spot) allows you to earn net 9% on the week As long as you are net short ADAM18, you don’t mind quoting a two-way price As soon as you become
flat ADAM18, you will only quote offers(edited) Just reverse it for when altcoin contracts are trading at a discount and quote the bid side(edited)
As you can see market makers have a netrual outlook on the market. They don’t care if it goes up or down only that it moves. They hate markets which trend in one direction
for an extended period of time. THEY HAVE NO INCENTIVE TO MOVE THE MARKET WITH MARKET ORDERS SINCE THAT WOULD CUT INTO THEIR PROFIT.
Market makers aim to take advantage of the volatilty of bitcoin by quoting prices above and below the current market price. A market maker that’s quoting a one cent spread
would get run over very quickly.
Hopefully this clears up a lot of misconceptions people have about market makers. Peace
Lesson: Market Maker by Flood page 62
LESSON:
SLIPPAGE
Instructor: Flood
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
What is ‘Slippage’?
And also for calculating potential losses and risk, when executing market orders For
those of you who trade on bitmex, you know that whenever you use a stoploss it needs to
Slippage refers to the difference between the expected price of a trade and the price at
which the trade is actually executed. Slippage often occurs during periods of higher
ALWAYS be a market stop order(edited)
volatility when market orders are used, and also when large orders are executed when there
may not be enough interest at the desired price level to maintain the expected price of
This is due to the market being volatile and moving so quickly, which means that there is
trade. CC: Investopedia
NO guarantee that your Limit Stop Order will be executed
This is why we see such insane squeezes on bitmex, due to the fact liquidations are
executed at market (with the insurance fund paying the difference in fees) and the
Now slippage is not just for massive orders and “whales”
cascading MARKET stop losses
Due to the inefficiencies of CryptoCurrency exchanges and the LACK of liquidity, whenever
you perform a market order, you may encounter slippage.
Here’s a recent example:
What is ‘Liquidity’?
Liquidity describes the degree to which an asset or security can be quickly bought or sold
in the market without affecting the asset’s price.
You’ll notice that the VPVR is exactly staggered in the same amount, this is because this
CC: Investopedia
is the bitmex liquidation engine executing orders on the books according to their formula
This is important for a multitude of reasons, it’s essentially for understanding the
market cap evaluations of Altcoins (and why I think they’re scams)
in equally sized orders.
Slippage Lesson by Flood 2018
page 64
The Liquidation engine gets more and more aggressive with the orders and eventually
executes them at market price if they stay on the books too long. So here is an
example of a trade I was helping my friend with:
He is long 5.3MM USD UNHEDGED and he is currently in profit, so good for him. Now the
problem with orders of this size, is the risk you incur from not only massive
volatility of bitcoin, but also the ability to close your order at market price.
Slippage Lesson by Flood 2018 page 65
Here’s a picture of the Bitmex orderbook with 25 dollar grouping
So from 11460(Current Market Price)-11450(First Order book Level) there is 744,827 USD in
bids. Since this is a long of 5.3MM if he wanted to close at 11460-11450 he wouldn’t be
able to, so he has to scale in and out of his orders. If he closed his long with a market
order (assuming there are no hidden buy walls) he would close at an average price of
11410. This may not seem significant but this would be .3% difference in profit
- .075% fee for market closing (being the market TAKER).
Now, I realize that the MAJORITY of you are not trading with 5.3MM contracts but this
scale in scale out trading is beneficial for positions of ANY size.
It also limits your risk and gives allows you to be more reactive to the market.
Going all in also has the inverse of going all out. This is why for trades you should set
take profit levels.
This not only allows you to be more reactive for the market, locks in profit, reduces
risk, allows you to receive Market Maker rebate from the FOMO’ers, and gives you MORE ammo
to buy the dip. If you’re not clear on what scaling in and out means, it’s essentially
this. If you’re buying $100,000 USD of an Altcoin you want to set buys a key support
levels in 25% incriments. This gives you not only some peace of mind incase the coin
drops below your initial buy, but also allows you to reduce your risk incase something
catastrophic happens with it.
Now that we’ve covered what scaling is I want to stress the importance of understanding
liquidity.If a literal SHITCOIN has a market evaluation of oh lets say 1.4Billion like
this hackercoin called Ethereum Classic:
You will NOT be able to sell millions of ETC at the current market price
This is why i’m a firm believer that 99.99% of altcoins will all trade to zero, not
because they will lose their market cap evaluation, but simply because there will be NO
ONE BUYING
There is ZERO over the counter volume on altcoins
You will not be able to sell except on an exchange
Hope this helps you guys understand liquidity and why it’s important for retail trades and
Market Makers!
Feel free to ask me questions in #classroom-discussion on discord
Thanks for being awesome guys
Slippage Lesson by Flood 2018 page 66
LESSON:
TRADING WITH GUPPY
INDICATOR
Instructor: FritzMurphy[Morpheus]
Disclaimer
All Information in this guide is for Educational Purposes and is not intended to provide any Financial Advice. All
Statements regarding profits or income, whether intended or implied does not represent a guarantee nor is it financial
advice.This guide is neither asolicitation nor an offer to Buy/Sell securities,futures or options. No representation is
being made that any information you received will or is likely to achieve profits or losses,similar to those discussed
in this guide. Get the advice of a professional financial advisor before investing your money into any financial
instrument. Also note that all advise given is not to be taken as trading advice and trading can result in losses.
FritzMurphy[Morpheus] - 02/20/2018
Guppy Lesson:
The Guppy Multiple Moving Average (GMMA) indicator tool is based on the relationships
between groups of moving averages. Each group of averages in the GMMA provides insight
into the behavior of the two dominant groups in the market – traders and investors.
THE INDICATOR ITSELF DOES NOT INITIATE AN ENTRY OR EXIT, TOP OR BOTTOM. It allows the
trader to understand the market relationships shown in the chart and so select the most
appropriate trading methodology and the best tools. The GMMA is designed to understand
the nature of trend activity. IF THERE IS NO TREND, THE TOOL CANNOT BE USEFULLY APPLIED.
Traders should not attempt to make it work in conditions to which it is unsuited. We
track the trader’s inferred activity by using a group of short term moving averages: 3,
5, 8, 10, 12 EMAs
The traders always lead the change in trend. Their buying pushes up prices in anticipation
of a trend change. The trend survives only if other buyers also come into the market.
Strong trends are supported by long-term investors. The investor takes more time to
recognize the change in a trend but he always follows the lead set by traders. We track
the investors’ inferred activity by using a group of long term moving averages: 30, 30, 40,
45, 50 EMAs
These EMAs make up the standard Guppy MMA (Multiple Moving Average.
The Super guppy uses more moving averages and the script I use for it has several alerts
that my standard guppy script does not. I’ve used both and have recently been enjoying
the standard more, however, the Super Guppy has some alerts in the script that the
standard doesn’t and, if this matters to you, looks better IMO.
I use and additional 300EMA on both the standard and Super Guppy but you can easily switch
this to whatever you prefer in the Indicator settings. I know everyone uses the 200, but
I’ve found the 300 to be more reliable.
Morpheus Guppy — indicator script by FritzMurphy / 2018-02-20
Standard guppy indicator for tradingview:
https://www.tradingview.com/script/sIQUXqf6-Morpheus-Guppy/
Super Guppy script
Super Guppy R1.0 by JustUncleL — indicator script by JustUncleL /
2018-01-05:
https://www.tradingview.com/script/Lj6d7UxQ-Super-Guppy-R1-0-by-JustUncleL/
This guy took the one I made and made it better. I just changed the 200EMA to 300 and
turned off the arrow signals
Last bit, watch from 18:30 and on:
Taking Profits in Today’s Market by Daryl Guppy, CEO Guppytraders
com https://www.youtube.com/watch?v=QInB6iExaxw&t=1118s
Example 1: Just a Dip or Trend Reversal?
page 68
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 69
Here BTC just fell from its ATH. We all know what happened next but using the guppy, you would have had an edge in determining what was going to follow the initial drop.
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
Same chart with the standard guppy
page 70
And with the Super guppy
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 71
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 72
The captions for these last two are the same. Just showing you examples of the standard vs the super. Read the captions then look back at the clean guppy charts and try to
see what I wrote for yourself without having to read my notes
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 73
Moving forward we see even more bearish signals that weren’t seen during the dips. This made me go short when a lot of the OGs were longing
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 74
Same chart but with super guppy for comparison
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 75
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 76
Something that I always do is view the Guppy alone, without the candles
This can be done by clicking show/hide on whatever asset you’re viewing
Seeing candles break above or below the Guppy can sway your bias,
when you should really be concentrating on what the EMAs themselves are doing
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 77
Moving forward, we see how the guppy alone might get you into some trouble
The guppy should be supplementary to your expanded trading knowledge. A tool to give you a better edge. It's not the end all be all.
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 78
The next screenshots are in the 1HR chart instead of the 4HR
Guppy Lesson by FritzMurphy[Morpheus] 2018
Example 1: Just a Dip or Trend Reversal?
page 79
Here you can see the 1HR gave you an exit signal and a short opportunity before the 4HR would have.
Guppy Lesson by FritzMurphy[Morpheus] 2018
page 80