Loe raamatut: «The journey of a Cryptocurrency Trader. Trading on futures markets»

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Acknowledgements

I would like to thank Anna Safonova, my favourite and reliable life partner, for her invaluable help in working on this book. For her patience, kind criticism and faith in our projects, the success of which is largely due to her.

I thank Arseniy, my son and trusted colleague, for his trust, openness and calmness during any market fluctuations. And for his successes, which as a father I am as proud of as I am of my own.

I am sure that his journey as a cryptocurrency trader is just beginning, and the skills and personal qualities he has developed over the years will ensure his success at every stage of his growth.

From the author

One of the hallmarks of our time is the availability of education. Today's students are taught skills in school that their parents could only acquire after college. Thanks to advanced technologies, we can learn at any age and study several disciplines at the same time in different educational institutions without leaving home. The duration of study has also been shortened, and specialization has become narrower. You can acquire the necessary knowledge and choose the best teachers in a specific field within a year or two. This means that after a few months of training, the knowledge can already be turned into income: earning money in a new career field and gaining experience.

However, there is a problem: we are not changing as fast as the technologies around us. A schoolchild can learn several professions and earn a living even before entering a university, but he is still a teenager with a fragile mental state, little life experience, and a great desire to succeed. That's why schoolchildren need the help of adults, especially their parents, during their studies and choosing a future career.

My goal is for my son Arseniy to grow up being a self-sufficient and independent person with universal life skills, independent of employers, politics, and government, so that he will have a job that will feed him from anywhere in the world with Internet access and a computer. That is why we chose crypto trading – a skill that is easy to monetize.

But it's not all about the money. Studying trading involves gaining knowledge in various fields – analytics, programming, and statistics. During training, a lot of attention is paid to the development of relevant psychological qualities – endurance and speed of decision-making, professional hygiene, and self-control.

Today I can sum up the progress we achieved. Arseniy is 17 years old, he is still in high school but has already become financially independent, i.e., he supports himself by trading. Three years ago, I would have called him a newcomer to the cryptocurrency market. Two years ago, he was quite a successful trader but kept learning. A year ago, he mastered scalping, the toughest and most lucrative specialization in trading.

At the same time, he began to host his own training programmes and streams from trades in English. Now Arseniy manages clients' funds through CopyTrading exchange instruments, practices scalping and other trading strategies, works remotely and face-to-face in the dealing center, teaches beginners and continuously develops his professionalism. Let me remind you that he is only 17 years old and still studying at school.

When I decided to write this book, I set two goals for myself. First, as a father and mentor with extensive experience, I want to help everyone who chooses a career for themselves or their children. Step by step, Arseniy and I have come a long way, and now, together, we will tell you how to learn crypto trading, what dangers you need to avoid, and how to maintain a healthy mind in such a turbulent market.

Secondly, I would like to talk separately about scalping – the most exciting trading strategy in a relatively stable market. To truly understand the beauty of scalping, we must know how the cryptocurrency market works and how to cultivate the necessary emphasis-willed qualities of a trader.

1. Concept of Trading

The one thing worse than being wrong is staying wrong. Lose your opinion, not your money.

Steve Nison. “Japanese Candlesticks Charting Techniques”

A famous chess legend says that one day two adventurers put the great Alekhin in a difficult position. They convinced him to play two simultaneous games – one with the black pieces, and one with the white. A draw or loss by the world champion on either board would mean paying out a large sum to his opponents. At the beginning of the game, it became clear that Alekhin was playing against himself – his moves with the white pieces on the first board were repeated by his opponent on the second, and his countermoves with the black on the second board were repeated on the first.

The situation seemed hopeless. Then the world champion deliberately made a gross chess mistake that seemed to lead to an inevitable defeat. His opponents consulted with each other and decided not to repeat the obviously wrong move and try to win both games. In the end, of course, Alekhin beat both.

The great chess player came out of that difficult situation with honor, but let's look at it from the point of view of his unfortunate opponents. All they had to do was follow their great plan. If they, as initially intended, had repeated all Alekhin's moves, including the most serious mistakes, they would have walked away with the money. But they lacked an essential ingredient for success: discipline.

While chess is complex game, the cryptocurrency market is infinitely more complicated. It involves dozens of trading strategies, hundreds of combinations of factors and many thousands of participants. And I have seen many novice traders who had an excellent trading strategy, a perfect market situation, clear work instructions, but lost their deposits because they could not follow the plan. And the market is smarter than any genius alone, even one like Alekhin, and does not forgive mistakes.

Arseniy was not at all intimidated by the complexity of the cryptocurrency market. At 12 years old, he was passionate about everything related to analytics, graphics, and programming. From the age of four or five, Arseniy would ask for gifts like complex LEGO Technic construction sets; from the age of nine he became interested in programming, and a little later, 3D modeling. All this gave him the skills to understand the structure of complex systems, to build models, and complete tasks instead of abandoning them halfway.

I found what I was looking for in trading. Everything related to IT is my hobby and part of the required modules at school. In our classes we study 3D modeling and programming; even our English course is based on IT terms. Crypto trading and programming have obvious interdisciplinary relationships. For example, if you need to use the built-in language to write your indicator for operation in the TradingView program, you need to get familiar with it. It means you trade and make money, but at the same time you program.

(Arseniy, 17 years old, five years of experience)

As a father and a teacher, it has always been clear to me that learning is always much better under the guidance of experienced teachers. That is why Arseniy got tutors when he first became interested in programming, and trading coaches a little later – we will discuss them later. Self-study would have never produced such results. But before turning to teachers, we both had to figure out how the cryptocurrency market works, what opportunities and careers there are, and what is worth learning. Which of them is suitable for a 12-year-old boy?

To the casual observer, the cryptocurrency market may seem like one big hot pot where everyone is doing everything and making money somehow. But even at first glance, it is clear that there are divisions and specializations within it. For example, the rapid growth of the cryptocurrency market has largely been driven by hodlers – those who invest for the long term. Hodlers buy and hold promising coins for months or even years, betting on their future growth. It's a fairly easy task if you can afford to freeze a certain amount of money for several years and have a lot of patience. Between 2017 and 2023, Bitcoin managed to rise in price to $20,000, fall to $4,000, rise again to $60,000, and then sink again. But in any case, this is not a way to make money for a young man – the pace of trading is too slow.

With the development of the cryptocurrency market, more and more exchanges have appeared where you can buy or sell certain coins or make money by changing their rates. Crypto exchanges usually operate independently of each other, so, from time to time, arbitrage situations arise – when quotes for the same currency pair on different trading platforms differ significantly. Therefore, you can buy a coin on one exchange, sell it simultaneously on another, and make a profit without any exchange rate risk.

You can also resell funds deposited on the exchange – a practice called P2P arbitrage. Unfortunately, in real life, everything is more complicated than in theory: you can easily lose money during the technical stages.

When I came back from the military, my friend told me about crypto and suggested getting into arbitrage. I didn't understand what kind of work it really was at the time, but I agreed. In short, it involves buying, say, a dollar for a cryptocurrency cheaper on one website and selling it for a higher price on another. The difference is your profit. Technically, it is not trading, but a routine – transfers, processing payments, withdrawing, and depositing funds on exchanges, unfreezing blocked funds, and checking for erroneous payments. This kind of work is exhausting, although it gives an excellent understanding of how exchanges and payment systems work. I quit arbitrage when I lost almost all my earnings to scammers. I understand it was inevitable in such a business, but it was morally and financially challenging.

(Kirill, 21 years old, less than one year of experience)

Another way to make relatively easy money in the cryptocurrency market is called ambassadorship. In simple terms, this is an attempt to take advantage of the promotional efforts of new projects. When a new coin enters the market, its organizers try to maximize the number of users literally handing out free coins to everyone under certain conditions. Some people monitor announcements of new projects, collect coins, and try to sell them later. In some ways, such a business is like collecting samples in perfume stores – it's free, but with a lot of fuss and little benefit.

In 2018–2019, my friend and I set up a small 'farm' of a hundred accounts – we tried to make money off new projects. When a new cryptocurrency project comes out, the organizers recruit 'ambassadors', handing out coins for promotional purposes. We were about to become such ambassadors. But the income turned out to be law, and my friend and I had completely different views on this work – I took it more seriously, and he saw it as a hobby. We parted ways, but I remained interested in crypto. At the same time, I was biased towards traders – how do they make money? They look at their charts and do something, but what exactly? besides, there is a lot of advertising in the market for 'info gurus' who just pretend to make money and sell their products which they do not understand themselves. How do we understand where the honest profits are? And then I saw a vacancy for a 'trader', which means they would train me and hire me – why not try it?

(Igor, 23 years old, less than one year of experience)

We decided that cryptocurrency trading is the most suitable specialization for Arseniy. It closely resembles the operations of traditional exchanges – currency, stocks, or commodities – by combining psychology, analytics, and computer technologies. I believe the success and rapid growth of cryptocurrency platforms can be attributed to this similarity. What fundamentally distinguishes trading oil futures from trading bitcoin? In both cases, there is no actual supply, the price is determined by the balance of supply and demand. The timelines, tasks and profits are similar as well. It is also important to note that the skills required trade successfully in the cryptocurrency market are the same as those required of a trader in the stock market or Forex.

In other words, becoming a holder can make you rich but it won't give you a new career. By becoming a trader, you are learning one of the world's most exciting and highly paid professions, and you can eventually move on to trading securities or traditional futures.

Interestingly, there is also a reverse movement – many successful crypto traders came to this market from the traditional segments. They started their careers on Forex or stock exchanges, gradually accumulated knowledge of successful trading and understood how exchanges work and how to make money on global events. Then, they transferred their skills to a similar field – the cryptocurrency market.

Many market participants come from scientific and engineering backgrounds and tend to apply the methods of the 'exact' sciences. For example, they try to filter out market noise to get a clear signal about the beginning of a new trend. Such approaches can be helpful, but they cannot be used to build an automatic trading system since the market does not obey the laws of physics. Prices reflect the psychology of the crowd, which is subject to entirely different, much less precise laws.

Elder Alexander. “Trading with Dr. Elder. Encyclopedia of the stock exchange game”

A significant advantage of trading is its accessibility. To start trading, you don't need to invest much money, pass exams or get approval from any regulator. As in chess, knowing and following the rules is enough, but no one cares how you end up at the chessboard.

I came to the trading field probably like many others: through advertising. I saw an offer to buy a robot that would make money for you on Forex. My friend bought a working algorithm and convinced me to make a deposit. That meant, while we are engaged in other business, the algorithm would earn us money. And in the end, we lost everything for sure. As I watched the robot drain my deposit for three months, I began to wonder why it was happening. I thought about what needed to be reconfigured in the algorithm and what could be done differently. And I started to delve into this area, study the market, read books. And then I started trading myself.

(Nikolai, 30 years old, eight years of experience)

From the age of 12, Arseniy became interested in understanding the workings of exchanges. He browsed websites, analyzed charts, and tried to figure out how everything worked. By the age of 13, he already had his accounts on three exchanges – Binance¹, Bitfinex² and Bybit³. This was the start of Arseniy's trading career.

Enjoying one's job requires more than just a high-income. It is essential for a person, especially a young one, to pursue their passions: mathematics, physics, and programming (in Arseniy's case). It's worth noting that trading has had only a positive impact on his academic performance. And this is not surprising, since he's constantly applied his school knowledge while practicing exchange trading.

In any business you start, the most important thing is motivation. It must be there. For students, the motivation to take up trading usually consists of three parts. First, they have a favorite school subject – mathematics – and they love, say, mathematical analysis. Second, at this age there are usually no alternative sources of income, and this might become one if they are not lazy. And third, they get a new profession in which they can find themselves later.

(Arseniy, 17 years old, five years of experience)

Perhaps the interest for something like programming determined the choice of the first teacher – D⁴. In practice, trading cryptocurrencies the way D did meant using algorithms he developed, the basis of which he did not disclose. The training included working on Bitfinex, where we went through all stages of registration and transactions on the exchange platform.

Of course, many technical issues seem obvious to an experienced trader – they would not even consider it necessary to discuss them. However, everyone has been a beginner once and has gone a long way to their first trade, which is fraught with dangers and difficulties. You need to choose a trading platform without falling for scammers who prey on novice traders and regularly create clones of the largest exchanges. After that, you'll need to go through the stages of registration and identification, set up trading accounts, deposit funds into your exchange account, and finally get the opportunity to make your first trade.

In this book, for obvious reasons, I will use professional terms, but I will try to give everyone an explanation. An experienced reader knows all this, but a novice trader or someone who is just looking at cryptocurrencies will benefit from basic information. D helped Arseniy take the very first steps in trading, and he also gave him initial knowledge of stock exchange terminology:

A position is an open transaction in any direction. It can be long or short. For example, buying Bitcoin for digital dollars (USDt) is going long on BTC If the BTC rate rises against the dollar, you profit: if it falls, you lose.

Open a short position on BTC means selling bitcoins you do not yet have – in anticipation of a fall in the BTC price. This is one of the features of the exchange – you can sell what you still need to get if your deposit covers a potential loss.

To close a position means to make a reverse transaction and bring the previously opened position to zero. Closing a long position means selling previously purchased BTCs; closing a short position means buying previously sold ones. At this stage that the result, profit, or loss, is “locked in”.

A candlestick or Japanese candle is a method of displaying the price dynamics of a traded asset over a certain period. While a regular line chart only shows the price of BTC every minute, a candlestick chart gives some idea about the reasons for the change. (See img. 1, 2)

The body of the candlestick, i.e., the rectangle itself, is limited by the opening and closing prices. The longer the candlestick, the more actively the exchange rate has changed in each period. A rising candlestick, when the closing price is higher than the opening price, is usually green or blue. A falling candlestick is usually red.

If the price has changed little over the period, the candlestick is very short and is called a doji. The upper shadow and lower shadow of a candlestick are represented as its wicks at the top and at the bottom and show the maximum and minimum prices for the period. The longer the wick, the more active the price has been.

Liquidity is the ability of an asset to be sold quickly at a price close to the current market price. It is believed that the higher the capitalization of an investment, the more funds are invested in it on the website, and the higher its liquidity.

We quite quickly learned what limited liquidity means. Bitfinex is a relatively small exchange, so trading could have been more active for many coins. You can perfectly predict the movement of the exchange rate, calculate your future profit and rush to buy an interesting coin. But no one wants to sell it to you in the quantity you want: there is simply no such offer. And you can see a nice long candlestick on the chart.

One could say I saw my personal candlesticks there – I closed the position and immediately a long red candlestick appeared. Five to ten thousand dollars in a single lot would drive the price of the coin down or up, because the exchange had little liquidity. This is how I learned an important rule: in case the exchange has too little turnover in a particular coin, a beginner will lose money right at the start, if he wants to spend a hefty sum on coins at the market rate. It doesn't work that way. It seems obvious that if you want to open a position, you should write, for example, '10,000' and click the Buy button. But instead of the position you want, you will get a 'personal candlestick' – the rate will jump, and you will pay much more than expected. Experienced traders refer to this as 'liquidity gathering', where beginners effectively give their money to the market. Besides, you will draw the same candlestick in the opposite direction if you want to close the position in one lot and sell everything. Experienced traders enter and exit the market much more carefully.

(Arseniy, 17 years old, five years of experience)

The experience with personal candlesticks came in handy for Arseniy a few years later – when he became an experienced trader and started working with large deposits. Although the Binance exchange had sufficient turnover and good liquidity, entering a position with a single order of this size would have meant losing money immediately. Therefore, at the beginning of his career, Arseniy opened and closed positions gradually so as not to excite other participants too much.