The following text is organized from the Twitter Space series #DialogueTrader, hosted by FC, founding partner of SevenX Ventures, Twitter @FC_0X0.
Guest for this episode: Raxy, independent trader, Twitter @Raxy2001.
About Raxy: From Primary Investor to Independent Trader
In January 2021, when platform tokens were being speculated on various exchanges, Raxy entered the crypto industry. After working on GameFi projects, he transitioned into the VC industry, working at Jsquare and DFG.
During his two-plus years in VC, Raxy reviewed hundreds of projects. At the beginning of this year, he left VC to systematically learn trading and engage in trading, transitioning from a primary investor to an independent trader.
The progress in trading began with losing money…
At the beginning of the year, after a significant rise in BTC, altcoins also saw some movement. Raxy continued to trade altcoins using the "valuation nesting" logic from 2021: for example, if the primary market believed a certain sector would thrive and had a rough valuation, he would look for fully circulated, similarly backgrounded/sectored, reasonably valued targets in the secondary market to buy into.
Using this method, Raxy made some money, but starting in March, the market underwent strange changes.
By comparing the market shares of BTC and USDT, Raxy discovered that making profits with altcoins was too difficult; either there was news, or one had to have a very deep understanding of the asset, able to read daily and weekly charts and buy at the left-side bottom. He later re-evaluated his trading strategy and ultimately concluded:
In the crypto market, Bitcoin is the most suitable asset for full speculation. Therefore, he gradually shifted his trading focus to Bitcoin.
Currently, Raxy's capital scale is about two million dollars. His position allocation is clear:
1) 80%-90% of funds are invested in the spot market, using the turtle trading method combined with key moving average indicators to capture market trends.
2) The remaining 10%-20% is used for contract trading, relying mainly on traditional chart pattern analysis and some minor technical indicators to assist in decision-making.
By observing others' practical experiences and combining them with his own market exploration, Raxy has gradually formed a trading style that aligns with his personality and goals, allowing him to flexibly respond to market changes.
How to Trade with High Win Rates Using Moving Averages?
Raxy believes that market conditions can be divided into two structures: ranging and trending, which constantly switch back and forth. However, each person's understanding of the levels of ranging and trending may differ; for instance, a daily range might be a one-sided trend on an hourly chart.
Raxy employs a moving average system primarily based on EMA, which reflects the average price over time.
Raxy particularly focuses on the EMA20 and EMA200 moving averages, supplemented by common technical indicators like MACD, RSI, and SRSI to confirm trends. His specific operational rules are very clear:
1) When EMA20 crosses above EMA200, it is considered a buy signal, and he executes a buy operation;
2) When EMA20 crosses below EMA200, it issues a sell signal, and he executes a sell operation.
Through this method, he ensures: when there is a significant rise, you are definitely in, and when there is a significant drop, you are certainly out.
However, moving average trading is not without flaws. It actually lags behind market reactions, and in ranging markets, due to frequent price fluctuations, moving averages will cross back and forth, leading to significant wear and tear. This means that during ranging periods, there may be multiple false signals, resulting in unnecessary trading losses.
But Raxy emphasizes that the greatest advantage of this trading strategy lies in its simplicity; it does not require complex analysis or subjective judgment, which can help avoid interference from market noise and emotional fluctuations. Therefore, it is suitable for those whose mindset is easily affected and who have weaker emotional control. As long as one strictly adheres to the rules, it can reduce the impact of subjective judgment and avoid making erroneous decisions due to emotional fluctuations.
Can Moving Averages Guide Trading for Altcoins?
Raxy believes that trading altcoins can reference moving average strategies, but the effectiveness is relatively lower.
The characteristics of altcoins include high Sharpe ratios and extreme volatility, often accompanied by significant rises and falls. In practice, Raxy considers the daily EM20 as an important reference indicator:
1) If an altcoin fails to stay above the daily EM20, he typically will not engage in large operations;
2) Only when the daily EM20 is rising or has been broken through does he believe the market may have genuine buying power, accumulation, or price-pushing tendencies. At this point, he can trade according to the moving average rules, buying when it stays above and selling when it falls below.
Raxy also mentions that trading altcoins requires higher precision in profit-taking and position management:
Profit-taking requires precise judgment, and buying in batches must be strictly controlled, with detailed mathematical calculations; otherwise, the overall profit-loss ratio can easily become unbalanced.
Although moving average trading can effectively reduce wear during ranging periods on a daily level, the situation becomes much more complicated at smaller levels, such as the 1-hour or 4-hour levels.
Therefore, Raxy prefers to use the daily level to guide his operations.
What Exactly is the Turtle Trading Method?
The turtle trading method is a strategy suitable for trend trading, characterized by its effectiveness in markets with clear trends and less noise. This method relies on clear buy and sell signals, confirming market trend direction by breaking through key points (such as recent highs or lows).
In practice, Raxy looks at the turtle trading method alongside moving averages, primarily focusing on moving averages. The turtle trading method can essentially ensure that trends are maintained, while smaller moving averages can help identify when short-term trends are ending, such as adjusting the time frame to 1 hour or 4 hours, which can likely indicate an exit position, including using some MACD and other indicators.
"I have seen too many indicators; I have looked at almost all methods and strategies in the market, and I have genuinely lost money with them. So in the end, I chose indicators that everyone has heard of, like MACD and volume, which are very simple."
Raxy also mentions that the logic behind choosing the turtle trading method and moving averages is the same: to judge price movements, there are too many factors to consider, which can be difficult to understand and easy to misinterpret. It is better to choose a simple and clear system to avoid chaotic thinking.
What Indicators to Use to "Escape the Top"?
SRSI is an indicator that Raxy places great importance on; SRSI is based on a dynamic strength RSI overlay algorithm.
1) When SRSI shows a death cross, Raxy will adopt a defensive strategy to reduce positions.
2) When SRSI shows a golden cross, he will consider re-establishing positions.
Although SRSI can effectively reflect market buying power and trends for the near future, accurately judging the top in rapidly changing trend markets remains challenging.
Raxy also looks for clues from the behavior logic of large players. For example, when large players no longer make large-scale purchases through the spot market and begin to use other methods to gain profits, it may indicate a weakening willingness for further price increases, suggesting that the market's upward momentum may be nearing its end.
Overall, however, determining market peaks remains a highly challenging task, and no single method can predict it with complete accuracy.
"Stop Doing List" Summarized from Two Major Losses
Raxy mentions that the core of the Stop Doing List is to avoid erroneous trading behaviors caused by mindset issues.
First, one should not set unrealistic integer target levels for profits.
"When you make a lot of money in a short time, exceeding your expectations, you are likely to set a target at a certain integer level. Once this target is established, that day is almost certainly the beginning of your losses—there are 100% no exceptions."
Additionally, one should always respect the signals of the trading system and allocate positions reasonably. Avoid potential losses caused by subjective blind confidence.
Moreover, one must absolutely not run two strategies in the same account, as this will lead to chaos.
Six Essential Mindsets for Successful Trading
In his conversation with Raxy, he also shared some mindsets he learned during his transition to becoming a trader, encouraging everyone:
Trading is like a hell-level dungeon in a life game; clearing this dungeon will lead to a deeper understanding of various other things.
Investing in projects in the primary market is essentially investing in people and their character, while the secondary market ultimately revolves around position management.
There is no perfect trading strategy; one must learn to judge whether the market is in a trend or ranging phase and hedge accordingly in different market stages.
The realization in trading is to start simplifying: no longer fantasizing about getting rich quickly because you know that profits outside of your understanding will eventually return to the market over time; and you need not worry about the serious consequences of continuous losses because losses are within your plan.
Go with the trend; the certainty is higher.
Opportunities are always present; the important thing is whether you are still in the game.
Final Thoughts
After talking to so many traders, I found that everyone is ultimately searching for themselves.
What is my relationship with this market? Where do I fit in, and how can I operate comfortably and profitably? Finding a trading strategy that matches one's personality and continuously adjusting the relationship between personality and trading strategy is fundamentally important for traders.
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