I wrote about trading around the Perpetual Futures Funding Rate on Binance last week and how some trading patterns revolve around these rates in futures. You can find that post here
As I said if there is a minus funding rate then you are paid to go long every 8 hours or so. In the case here in GMT it is at 3 times of day. The funding rates countdown timer ends at 12AM, 8AM AND 4PM so a flurry of activity is happeneing around these times. 12pm obviously is the most volatile at it the end of the day so it is the trickiest to navigate plus you have to have one eye on the Bitcoin market in case this decides to take a nosedive.
I said I would do a little trial in Futures to see if I could turn a small amount of money into a large amount of money. I have spent alot of time trading futures over the years and I have learnt some great tips using a widely known method used in Futures markets. Trial by liquidation. Yep I have been liquidated many times and you learn something new each time it happens. The mistake many people make is leaving the risk level at (x20) rather than lowering it to (x5).
Adjust your risk level before you go anywhere!!
This is the golden rule for me. Entering into a (x20) trade is very risky. So basically if you have $20 and you do a (20x) trade which is Binance's default risk, you are basically given $400 to trade with. If you have $50 then you have $1000 dollars to play with. But the truth of the matter is when things go south which they do in 1 in every ten trades, you are snookered. What about stop losses you say? With a 20x , you will need to keep your stop losses tight. So tight in fact that you could get triggered out by market movements before a big move in the direction you wanted the trade to go. So you end up losing your hard earned cash. Some mad bastards so 100X which is a type of all in form of trading and this is just mental. However I have always wanted to go 100x to see how I would get on. I may be worth a post in the New Year. I will do a $20 (100X) on an asset. Which brings to me to good old 5x the risk. This way your liquidation price is out of reach in case of price shocks. I would always make sure the liquidation level is well below the bottom bottom and in crypto it means the bottom bottom bottom as this has happened before as well. Granted you will make less profit but you surely won't be liquidated. ( not financial advice, if you are thick you will be anyway).
Now I transferred $20 dollars into my Futures account last week and decided I was going to become a millionaire over night from all my past failings. So as I said last week I decided on a couple of things. I was only going to trade around the funding rates so 3 times a day. 12am, 8am and 4pm. This is my golden rule. Historically I would trade at any time of day and this didn't help me. Get in and get out as quick as possible before a crypto exchange decides go bankrupt and crashes the market and bring the alt market with it.
So I explained last week that most of my income would be gained from the funding rate commission which happens every 8 hours. Now this had some success initially. I looked for the pairs that had a negative funding rate because Binance pay you commission on these to go long. Now the plan was to go long about ten minutes before the timer would reset. Earn the commission and then get the fuck out of dodge before shit hit the fan laughing with my loot in my Mustang while the Binance city burned behind me.
In reality once the countdown timer had counted down, every bot in the platform sold the token after the commission was given out. Which meant I was still Long and the token had plummeted which put me under water with the trade. So here I was with my $2 commission and my trade was losing me $2.50 while I scratched my chin feeling sorry for myself. Back to square one. Luckily after some volatile movements the currency came back up the the levels before like a dog that had run off after a fox only to return a few hours later to a weary eyed owner who was sick with the worry. I did this type of trade a few more times and the same thing happened on a few but it was not a good strategy. And I always go back to my Futures hero of Wile E. Coyote and ask what would he do in this situation. Concoct an even more elaborate plan to catch the roadrunner or in this case make a few tuppances. Knowing the fact that the bloody coin plummeted right after the funding rate commission count down, decided to come at it from a different angle. I would still go long like always but I would not take the bait of the commission. Traders would buy in like me to get the commission so the price would go up. But I decided to close the position a little while before the timer expired. This happened to be very successful. I did this for a few days and was winning but I was not making as much as I wanted to. So what I did next is a bit mental but I decided to short the asset before the timer expired. I would then be forced to pay Long positions the commission I was receiving all along. It did this in a hope that my short position was triggered at a high position and when things plummets then my short position would more than make up for the commission fees paid out. Now I am not doing this for every asset. I am using my TA as always. Sometimes going long and sometimes just going short. It is not an ideal science as the amount of anomalies in play are ridiculous.
Take last night for example I decided to go long on $DGB. The funding rate was over 1% so I said I would stay in the trade to grab the commission. It then took a nosedive before I could get out of the trade. But it slowly and gradually came back. I never sleep on an open position (another tip). 8am is a warzone in crypto so I was still under water in the region of $3. I stayed up a bit longer to see if it would increase but DGB or grandad as I like to call it is a sleepy old giant of crypto and does not do things quickly. So I took the hit annoyed with myself. Just literally seconds after I took the hit a big long green candle shot up and if I had not of closed the trade and waited until the morning I would say I was in for $20 profit. Those are the breaks.
So the results are in so far this week I am sitting on a 75% win rate which is nothing to be sniffed at. I also did a few trials this week to get myself right. The $20 to $100 is the hardest slog in crypto. I could put $100 in but I swore to myself last year that I would not spend a penny more on cryptocurrency and I was quitting while I was ahead.
So my returns on $20 is $7.93 in 4 days. Now I have more to trade so I will be making bigger returns and bigger losses but I hope to keep going in this direction and see where it gets me. It am aiming for a 2:1 profit losses ratio so hopefully after all this trial by error is out of the way now so I can start making some serious trades. I will post up again next week showing you all how I get on but it's a small step to trading normally, not having to watch the candles for too long and a little hobby of mine. Watch this space.