Tradingriot Finding high probability trades in Cryptocurrency derivatives tradingriot.com Tradingriot Table of contents Before we begi Trading resource Tradingriot Blog reading orde How I find market opportunities - Main tools to us TLDR in key term Using open interes Funding rate Liquidation Basket trade Conclusion Tradingriot Before we begin In this short guide, I will share with tools and strategies I use to find great trading opportunities in the market. One thing that is important to emphasize is that this is different from a trading strategy. It is more of a way to tell you where you should put your focus on. Execution is the most important in trading, I won't be sharing a guide to execution in this guide, but on the next slide, you will find links on my blog and YouTube that can improve your trading execution. Trading resources Tradingriot Bootcamp covers the exact way I execute trades; there are over 10 hours of video content , access to a private discord channel, weekly market updates and additional educational content. This is for a one-time fee without monthly subscriptions or other payments. https://tradingriot.com/bootcamp Tradingriot Crash Course covering Market Microstructure, Auction Market Theory, Order flow and Risk Management https://www.youtube.com/playlist?list=PL6YoBMVXnNKrNHtrjf4oNFngBVZl9bWuI An article about cryptocurrency derivatives is essential to understand the data you are watching. https://tradingriot.com/cryptocurrency-derivatives/ The rest of the blog where I shared many methods, strategies and guides surrounding trading over the last few years. See next slide from blog reading order. https://tradingriot.com/ Blog reading order I have been asked about this many times, there is no 100% given order and you can read the blog in any way you want, this is just a list I recommend to beginners. https://tradingriot.com/futures-options-and-derivatives/ https://tradingriot.com/market-microstructure/ https://tradingriot.com/technical-analysis-course/ https://tradingriot.com/smart-money-concepts-ict/ https://tradingriot.com/supply-and-demand-trading/ https://tradingriot.com/auction-market-theory/ https://tradingriot.com/market-profile/ https://tradingriot.com/volume-profile/ https://tradingriot.com/volume-trading-analysis/ https://tradingriot.com/vwap-trading-strategy/ https://tradingriot.com/orderflow-trading/ https://tradingriot.com/swing-trading-vs-day-trading/ https://tradingriot.com/best-futures-markets-to-trade/ https://tradingriot.com/using-orderflow-and-market-profile-for-swing-trading/ https://tradingriot.com/trading-style/ https://tradingriot.com/cryptocurrency-derivatives/ https://tradingriot.com/risk-management/ https://tradingriot.com/trade-management/ https://tradingriot.com/profitable-trading-strategy/ + the rest of the articles. Tradingriot How I find market opportunities You might hear the term “narrative” trading in crypto. What it is is essentially buying and selling coins that are currently hot right now surrounded by some fundamental event. ETH 2.0, Football world cup coins, AI coins, Doge rally on Elon Musk buying Twitter and many more are some of the narratives, we could see in the past few months. Sometimes they surround only one coin, sometimes a whole basket of coins. The most popular way of finding narratives is on Twitter, Discord servers or Telegram. The downside is that it requires a lot of time and scrolling through a lot of useless noise. Because of that, I tried to develop a smarter approach to finding narratives using order flow. Read this thread, where I share some tips for trading altcoins. https://twitter.com/abetrade/status/1633551731647717391 Tradingriot TLDR on key terms You need to understand terms such as Open Interest, Funding, Cumulative Volume Delta and Liquidations. As I mentioned, they are all covered in this blog post https://tradingriot.com/cryptocurrency-derivatives/. But to make this guide more complete I try to give short explanation of each terms here as well. Your key platform to use that provides all the data such as OI, CVDs, Funding rates and liquidations will be Coinalyze - https://coinalyze.net/ Open Interest Cumulative volume delta Open interest measures the number of outstanding contracts that exist for a given market. In other words, the positions people still have open that have not yet been closed. Cumulative volume delta (CVD) plots a running indicator showing a total of finalized executions at the bid and ask. People often say that there are “more in a given market , but this is not true. buyers” or “more sellers” Open interest changes because there are more directional traders, compared to delta neutral positions. In other words, the market orders. We can use cumulative volume delta to spot divergences and watch relationship between spot and perp market. Funding rates Liquidations The funding rate is a crypto unique mechanism that incentivizes traders to open longs and short positions to ensure that the value of the underlying perpetual swap remains close to the spot market price Forceful close of leveraged positions by the trading exchange. Liquidations are often met with systematic buying or selling betting on mean reversion. If funding is positive, longs pay a fee to shorts If funding is negative, shorts pay a fee to longs. Tradingriot Why open interest is the most important thing The cryptocurrency market is highly correlated. Most moves in coins happen due to arbitrage, market making and other delta-neutral strategies that keep the correlation together. When a new “narrative” happens, it drives a large amount of retail participation into a given market. We can observe this by rapid changes in the open interest (i.e. more directional bets taking place). If you know how to analyze open interest changes, you will be able to keep up with all the popular coins without spending too much time trying to debunk what is driving the price. Tradingriot Laevitas Laevitas is my go-to tool to analyze changes in open interest. Significant % changes in the open interest signal the increase in participation in a given market. This will give you a quick watchlist of projects you should focus on. Once you find coins with the most significant changes in OI, implement your trading strategy to execute trades. Here are two links to follow on Laevitas: https://app.laevitas.ch/altsderivs/aggregate/perpetualswaps https://app.laevitas.ch/altsderivs/aggregate/charts Above, you can see an example of using open interest in trading. The price of INJ was going down with a large increase in open interest that was significant enough to pop up in Laevitas dashboard. These are directional shorts betting on the market to go down; as we all know, retail traders often tend to be wrong and once the market started to show signs of bullishness, we could enter into the long position to bet on a short squeeze. Tradingriot Funding extremes As mentioned, funding tells us if a perpetual swap trades at a premium or discount compared to the spot price. Negative or positive doesn't have to mean that there are more directional shorts or longs; it can be caused by large orders in either spot or perpetual market that can diverge prices, especially in less liquid coins. The only time you should be paying attention to funding is when it is in extremes. For that, you can use Laevitas dashboard or Coinglass. https://www.coinglass.com/FundingRate https://app.laevitas.ch/altsderivs/aggregate/perpetualswaps Extreme funding example on KAVA. At extremes shorts were paying 0.5% every 8 hours to carry short positions. This led to short squeeze and price rallied higher. Tradingriot Liquidations Tracking liquidations is tricky because there is no website that provides % liquidation change in relation to coin actual volume. Nonetheless, liquidations are a great tool for trending and mean reverting markets. When markets are trending, you want to see pullbacks paired with liquidations so you are not jumping into crowded trades, and if you are looking for mean reversion trades, liquidations are a great signal telling you that one side is out of the picture. For liquidations, you can use Coinglass and their dashboard that shows the highest $ liquidations for the selected time periods. https://www.coinglass.com/LiquidationData Aptos has been in a clear uptrend in January, of course in times like these, you want to be long as well and not miss out on profits, but buying when everyone else is long can get tricky. Because of that, it is much smarter to wait for a pullback that is paired with large liquidations of overleveraged longs before buying. Tradingriot Basket trades The last handy tool is “basket” trading, in other words, looking at coins in the same categories. This requires a little more knowledge of crypto fundamentals and current narratives that are driving the price and so on. But since markets are highly correlated, if there is one AI coin largely outperforming, other AI coins will likely follow as well. You can also create more complex strategies by shorting baskets that are weak and longing baskets that are strong. Coin categories can be accessed at Coinmarketcap or Coingecko; I prefer to use Coingecko. https://www.coingecko.com/en/categories Tradingriot Conclusion This concludes our guide. Remember that all the tools I showed you are here to give you heads up about what is going on in the market. If you see large negative funding, it doesn't always mean you should immediately jump to longs, the large increase in open interest with price trending up won't always mean betting in the opposite direction. Always use your trading system with well-defined risk parameters before entering any trades. Happy trading tradingriot.com
