Finally after 2 weeks of very profitable trade, I am now experiencing my first major losses, and it was awful.
I am learning my lesson now that greed will make you lose money! And trading without market research is always a bad idea!
Bad call on Ripple trading
This was started when I try to do margin trading on cryptocurrency called ripple. I saw its value rise up 100% in only 24 hours! At that moment I was thinking, “..Hey, this is probably its peak point, I should put a short positions and wait for the price to drop, easy money…” (Which I believe will happen, without doing any research). So I put 0.2 BTC in my margin account, leverage it 2.5 times and put short position at 0.00002000 BTC per 1 Ripple ($XRP).
This is the chart looks like :
As you can see, the price went up a bit after I put my short position, and then went down to 0.00001800 which net me a nice 10% pofiit if I stop at that position, but greed get in my way.
What if the price continue to drop?
What if it hit 0.00001000, that will net me 50% profit!
What I didn’t know at that time is, this thing happen :
“…The Bank of Tokyo-Mitsubishi UFJ (BTMU), the banking arm of the Mitsubishi UFJ Financial Group (MUFG) has joined Ripple in its endeavor to establish an international blockchain payments network of global banks…”
The importance of Market research
That was HUGE news for ripple, it basically establish ripple as the cryptocurrency of choice for large bank in an initiative to replace current practice in network of payments!! This can reduce the bookkeeping cost for up to 30%, and 30% translate to BILLIONS saved for Bank of Tokyo. In addition, human error can be reduced since nothing can change the data in a blockchain, it’s immutable, cannot be edited, cannot be deleted.
If I spent 2 minute of my times to do market research by simply put “Latest Ripple news” on google, none of this would’ve happened.
And now let’s see how is my short position now :
When I realized my noobish mistake, it was already too late to put stop-loss position, my margin account got liquidated and I lost 0.14 BTC (about $140), and boy does it hurts.
But looking at the whole 3 week picture, my account still “In the green” because of the accumulated profit for the past 2 weeks, I already break even on my initial investment plus some nice profit. I already withdrew all of my initial investment to my bank account so from now on I trade only with profit from the 2 weeks profit. This way, even for some reason if I lost it all, I still keep my initial investment back.
So in conclusion, I think trading is all about risk management and how discipline you are with your trading style. If, for example, you set that your goal in trading is to get at least 10% profit, then do it and always follow it, don’t ever break your own rule/goal, I think in longer term you will be much much more profitable that way.