There is a myth that 95% of traders trade at a loss. The reality is worse: according to a study by finance professor Brad Barber, 99% трейдеров lose money on intraday trading.
ForkLog continues the series of interviews with traders on the derivatives exchange FTX. The aim of the materials is to learn how successful traders make money when the rest lose.
Professional trader and ForkLog Hub resident Pavel Gromov discusses the rules of profitable trading, the harm of others’ analysis and the need to learn from mistakes.
ForkLog: How long have you been trading cryptocurrency?
Pavel Gromov: More than four years. I bought my first bitcoins in autumn 2016 at $600, and in December began trading on the crypto exchange BTC-e. Later moved to Binance and Bitmex; now I trade on FTX and Binance.
ForkLog: What percentage of your deposit do you earn per month?
Pavel Gromov: Since 2017 I have earned, on average, 11% per month.
ForkLog: When did you become interested in trading?
Pavel Gromov: I began trading stocks in the early 2000s when money was available. I also bought real estate, while learning to trade on the forex market.
ForkLog: How did you learn to trade: from books, from another trader, at a bank or another organization?
Pavel Gromov: I studied independently. In 2003 I took free TeleTrade broker courses. Then I looked for answers to difficult questions, built hypotheses and tested them in practice.
After the courses I earned 182% of the initial deposit in 38 months. On average earned 4.8% per month. For a while I managed money for friends.
A couple of years later I joined a forex broker dealing desk. Dealing desks trade against the crowd, so I had to study its behavior well. I watched the same mistakes traders make every day, and now I try not to repeat them.
ForkLog: Why did you switch from forex to cryptocurrency?
Pavel Gromov: In 2015 government regulation hit traders: forex brokers reduced leverage, disabled popular instruments and prohibited opening accounts without the client’s personal visit to an office.
At the same time, traders learned about cryptocurrency. The volatile, unregulated cryptocurrency market offered them substantial opportunities to earn.
In 2016 I switched from forex to cryptocurrency. I think many Russian traders did the same.
ForkLog: Why did you start trading on the FTX exchange?
Pavel Gromov: In March 2020 Binance announced the delisting of leveraged tokens BULL and BEAR. The exchange also stated that users could transfer these tokens to FTX.
I transferred the leveraged tokens to FTX, saw many interesting instruments and stayed to trade on this exchange. Currently, the majority of my trading volume comes from FTX. The rest of the volumes are on Binance and Deribit.
ForkLog: Which instruments do you trade currently?
Pavel Gromov: On FTX I trade leveraged tokens BULL and BEAR, volatility instruments BVOL and IBVOL, and I keep an eye on futures contracts.
On Binance I trade on the spot and futures markets. In addition, I trade options on Deribit.
ForkLog: What trading strategies do you use?
Pavel Gromov: I buy cheap and sell dear. It is a truism, but hard to stick to.
Usually traders buy an asset during a rally and hope it continues. If a pullback occurs and the position is in the red, the trader fears holding it. The same happens with selling in a falling market: selling, pullback, paper loss and fear. As a result, the trader takes a loss.
Fear also hinders traders from buying during pullbacks and selling during rallies — the price may continue moving and the position may end up in the red.
I use these rules to combat fear:
- I buy assets that lag the market when prices are generally rising, and sell assets that outpace the market;
- During price declines, I buy assets that have fallen the most;
- I do not sell assets in a down market and I never close spot positions at a loss;
- I never enter positions with market orders—only limit orders;
- When trading the trend, I buy only on price pullbacks;
- I sell with leverage very cautiously. I believe short positions are riskier than long on the cryptocurrency market;
- I use stops only when necessary. The majority of my trades I execute without stops;
- I use technical analysis only to identify entry points in the market. I think forecasting the market’s future from a chart is as foolish as diagnosing a patient from a chart of their temperature.
I apply these rules only to trading cryptocurrencies in the top 30 by market capitalization. These rules do not apply to trading coins with low liquidity such as 0x or SUSHI.
ForkLog: Do you read analyses from other traders?
Pavel Gromov: I do not read them: I analyze markets on my own. I recommend doing so to everyone who wants to earn from trading.
When you make a mistake you incur a loss and gain experience. And when you follow others’ tips you simply lose money.
ForkLog: Which analytics tools do you use?
Pavel Gromov: Support and resistance levels, trends, trading volumes. I sometimes analyze order books on large exchanges, especially those without USDT trading pairs.
ForkLog: What is your average position size? How long do you hold a position?
Pavel Gromov: I enter and exit positions with a grid of orders. Position size per instrument is 1–10% of the deposit. I hold positions from several days to several months.
ForkLog: How often does the market take your stops?
Pavel Gromov: Not often, in one of 10–12 trades. I never place stop orders on the spot market, only on short positions in futures contracts and hedging trades with BEAR leveraged tokens.
ForkLog: What do you do in case of losses?
Pavel Gromov: In my view, you should take a loss only to prevent an even bigger loss. Situations like “you lose $500 now or $1,000 tomorrow” often occur with short selling and margin trading.
ForkLog: How would you advise handling losses?
Pavel Gromov: I recommend analysing the mistakes that led to the loss and moving on. Learn from mistakes, and over time you will reduce their number to a minimum.
Keeping a trader’s diary will help analyse mistakes. Record trades and their results, analyse the reasons for entering each trade. Before opening a position, check that you are not repeating past mistakes.
ForkLog: What would you advise beginners who want to earn on a crypto exchange?
Pavel Gromov: First, make sure that you really want to trade, and that your profitability expectations align with reality. Beginners believe they can double their deposit every day, but that is not how it works.
Secondly, determine your attitude to financial risk. If a paper loss makes you panic, it is better not to start trading.
Third, avoid trader stereotypes. For example, mandatory stops, prohibition on averaging, and strict risk-to-reward ratios. These stereotypes may have been useful 100 years ago in wheat trading, but in crypto trading they often lead to losses.
Fourth, always expect the unexpected. Surprises happen every day in the crypto market. For example, from 21 to 24 November 2020 XRP rose 150%, from $0.30 to $0.75. In the same period ETH rose 17%, Bitcoin rose 5%.
Earlier, ForkLog published an interview with trader Alexander Orlov about scalping without leverage and trading against the news.
Subscribe to ForkLog news on Facebook!