Liquidation... liquidation... LIQUIDATION!!!! >:(
Have you ever had your investment liquidated? Maybe, more than once? Maybe, again, and then again, and then AGAIN. It SUCKS doesn't it?!?!?
There is a game, that is seldom played in some areas of the world anymore. The game is, however, frequently played in military and prison settings (funny --the correlation between these two, government-structured living formats).
The game that I am referring to, is, Pinochle. It is a card game which usually only uses the cards 10-Ace with four of each card, in each suit.
Have you ever seen a photo, or piece of art, depicting a group of people or an animals, sitting in a circle with a, 'mitt,' full of about 20 cards? That, is pinochle. It can be played with two, three, or four players and is a great game for passing time. Each game-type, has a different name (which varies between settings and country). In prison, we called four-player pinochle, 'partners,' and three-person pinochle, was called, 'Cut-throat.'
Cut-throat, game-play, is at the top-of-the-list for gambling, in prison. The game has a steep learning-curve and it is a common saying, "You pay to learn."
For me, trading has been the same way. Though, I have done some reading and studying on the subject, I have always been one who has learned better, from my mistakes, than anything else. This is a horrible way to live life and I DO NOT SUGGEST IT!!! If you are reading this article, then you just might, already, be taking yourself leaps and bounds forward and skipping out on all, or some, of the losses that one can amass by trading improperly.
I titled this article, Over-the-Hedge, because this article is about hedges. NO, not the ones that your grandmother asks you to trim for her, because she is getting too old and wants her yard to keep looking, as good, as it has for the last, 50 years....
...Although, your grandmother may have been very good at this in her youth. In fact, I'm sure she probably grew better at trimming her hedges with time and with more experience. Now, she is handing the torch to you.
Some years, the hedges were culled properly and they grew lushly and fully --they were beautiful. Other years, maybe she changed her fertilizer, or maybe she was stressed a lot that year, and the hedges were not trimmed often enough. The dilapidated plants suffered and were looking a little, under-the-weather?
I'm not here, writing this, to insult your grandmother's plants. There is a valid analogy coming, I promise. Now back to your grandmother...
In the beginning, when she was excited about her gardening, she may have spent a lot of time trying new things. Sometimes, her gardens would fail and she would be very disappointed. After the heartache, she would wonder what she could have done, differently.
Over time, she became more skilled and eventually she had to spend less and less time tending to the plants. She knew what made them grow, fully, and she knew what to cut and when. Her gardening became efficient. After that, her plants grew more and more beautifully with fullness each year. That, is our goal with investing and trading.
Have I veered too far away from the point?
...Are you still here? I hope that I have not lost you in my crazy analogy, because this is the part where I bring up one of the worst mistakes that a trader can make, and how to fix it.
Back to your grandmother, again, as she was very wise. Did she ever tell you, "don't put all your eggs in one basket, or none of them will hatch," in her grandmotherly-tone? Well, she was wise indeed. During the learning curve, that I went through while trading, I suffered from, what I might refer to as, 'put-all-your-eggs-in-one-basket,' disorder.
This tragic disorder, will have you hanging onto a single position, margin trading at high-leverage, staring at your computer screen or phone screen while your girlfriend yells at you. You will say, "Hang on a minute BAABYYY!!!" while you watch your investment dropping through the floor, only to be liquidated, screaming, "FUUUUCKKKKK!!!"
If you have experienced this or anything like it, then come with me, friend, into a better existence. This, is the much, wiser, decision to, hedge, one's investments against one another. This single tool, greatly diminishes risk and increases profitability, as well as free-time to spend with your significant other.
I don't know about you, but, I like margin-trading (leverage-trading.) This is incredible, considering the amount of loss that I have had in the past, using this tool. I was, however, doing it, SO, completely wrong. The idea of margin trading is to hold, for high profit and minimum exposure. You won't buy/sell into a position and hold for a week at 100X margin. This would be idiotic and unreasonable. You have to float-like-a-butterfly-sting-like-a-bee. You have to bob-and-weave and roll-with-the-punches. Get-in and Get-out.
A bunch of quick, one two's are what we are going for here, but in case we take some hits on the way back out, hedging, makes sure we don't get knocked out in the first round. Here are the important things to take note of when margin trading and how to implement them into your strategy:
STEPS To Profitable Margin Trading/Defeating 'put-all-your-eggs-in-one-basket' Disorder:
- First off, study Elliot Wave Theory. This is incredibly useful and though there are many variations, studying this material will dramatically improve your trading effectiveness. REMEMBER, the market is still the market and it has a mind of it's own, but these wave principles and wave theory are a must know.
- Secondly, once you have an understanding of wave theory, remember to spread out your investments to more than one currency and type. Take a look at many different charts. Evaluate where you think the market will go, in each currency, based on your knowledge of wave theory. It will be fairly easy, using wave theory, to make projections for some of the markets. Don't rush! Take note of the ones that you are fairly comfortable with projecting and remember them. When you have finished making your rounds across all your charts, then you can go back and prepare to place your trades.
- Thirdly, DON'T MAKE HUGE TRADES. Make sure that your account contains enough margin that you can survive liquidation if everything goes south for a while. If you have enough margin to survive liquidation, then the market will eventually come back your way (most likely as long as you are trading on a short time scale.)
- Lastly, and of paramount importance. Make sure to mix up your investments, so that they are, 'hedged,' against one another. This means, buy/sell into positions of a various list of currencies. After you have evaluated your charts, pick the currencies that you are most comfortable with and place small trades into these currencies, at the most optimal price that you think they will reach for profit. Base your target buys and sells on, your newly acquired knowledge, of wave theory. When you place each trade, make sure to set a realistic 'take-profit' order on it. I say, realistic, because our strategy is to get-in and get-out, quickly to avoid exposure to risk.
By buying/selling, into more than one market, when one of our trades is going the wrong way, the other is going the right way. This means, that the 'unrealized' loss of one trade is null. If the trades that are going in the right direction, reach the 'take-profit' price that we set, then good-golly-GEE we place another, hedged, buy/sell in place of the completed profit, AND WE STILL HAVE THE PROFITS FROM OUR PROFITABLE TRADE ADDED TO OUR ACCOUNTS BALANCE. Eventually, if all goes well, the trades that aren't doing as hot will swing around and come back our way so we can take a profit on them as well.
It is better, in my opinion, to make a lot of small trades at high margin, with your investments hedged against one another, than to make, one or two, big trades. The risk for liquidation, when doing the latter, is too great. Personally, I prefer trading on Prime XBT Platform when I margin trade. The reason for this, is that it allows me to hedge my investments, between cryptocurrency and fiat simultaneously. You can trade Forex and crypto at the same time, on the same account, at 100X margin (leverage parameters vary between currencies.) It is an effective tool and has a good interface. If you don't trade there, I would suggest it.
I hope this helps some of you, out there, that have had some of the same problems, that I have had in the past. Even if you already knew all this junk, I hope you enjoyed the read.
Disclaimer: The above are my own findings, experiences, and opinions on the subject of margin-trading. Any profits or losses that you may have, as a result of following these trading strategies, are not my responsibility and are solely, your, responsibility. I am NOT liable. All investing involves risk. Make sure you that you know those risks and have educated yourself extensively before trading and especially before margin-trading.
-Article by Jonathan Caleb Williams
Joey Image Source (photo from GIF)