CHALLENGE: Trading with only $20!

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KryptoNodes

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3 years ago

Topics: Defi, Altcoins, Litecoin, Bitcoin, Ethereum, ...

I have a challenge for all of you.

The other day I was talking with a friend discussing Bitcoin, and trading crypto in general.

I was urging him to take action and start doing something with his Fiat, rather than let it be sitting in the bank all the time.

He told me that he’ll start trading once he saves at least $1,000 so he can have at least a decent amount to start.

One of the main excuses that you’ll hear when you urge people to start trading or investing in crypto is they need a lot of money to start.

The truth is you don't need a lot of money to start trading crypto.

He told me that but the only thing I heard was “I’m going to lose $1,000 dollars”.

When you start trading, all the money that you spend on it has to be considered like a “Training fee”. You're NOT expected to make thousands and millions in your first months; it's like pretending to go to the Olympics with just 8-10 months of learning a new sport. It's not going to happen.

You’ll lose money trading all the time, especially when you’re beginning your journey.

In fact, losing is a very important part of trading. One of the characteristics to be a successful trader is to properly manage your losses.

This challenge is designed to show newcomers they can place positions with very low amounts, manage trades properly, and still be profitable.

Fast profits will lead to fast losses. There are no shortcuts in trading. You have to remember the old saying: "Rome wasn't built in one day."

Don't try to build your empire in one week.

If you’ve never traded or invested in crypto before, you must start with very low amounts and few positions. Gains will be low but losses will be even lower.

Our main goal is to learn how the market moves, familiarize ourselves with the price action, understand how volume affects the charts and other important elements of every trading strategy.

Please remind that this challenge is not about scaling $20 to $10,000 in X amount of days.

Remember, This is a SURVIVAL GAME and our primary objective is not to lose our funds.

Again, we are going to lose (assume it and let it go!) but we’ll cut our losses and make sure that when we win, we make more profit than losses.

Trading without a stop loss is reckless and you will lose all your funds. As simple as that. I don't know a single successful trader that doesn't place stop loss and target with every trade.

Needless to say, we're always going to set a Stop Loss with every trade. This is basically our parachute in case the trade goes wrong, which is always a possibility.

We’ll also use larger timeframe candles to enter our positions and set our targets and stop losses. This means that you won’t have to be in front of a screen since we’ll be taking swing positions for several days/weeks.

Before we start…

If you want to make money trading, you need to be disciplined. This means, control yourself and your emotions. If you determine a specific level for an SL, don’t move it unless it’s in your favorable direction.

Our trades (the ones we’ll take) can end in one of these four scenarios:

Huge win
Small win
Breakeven
Small loss

Notice how I didn’t include HUGE LOSSES. That’s a scenario that we are going to avoid at all costs.

We’ll avoid huge losses by predetermining our risk (how much are we willing to lose) before entering every position and we’ll only enter those positions that offer a good risk-to-reward ratio (how much are you willing to lose vs. how much are you trying can you win) even if we have to wait 1 or 2 days to execute the order.

We must have patience and discipline.

Again, you need to avoid huge losses at all costs, especially in this trading challenge. A 20% or 50% loss could mean the end of your account.

What are we going to need?

$20 bucks
A Binance Futures account* (click here to create an account)
A spreadsheet to track our trades
Patience. You’re going to open a position and wait. Time is one of the three principal elements of trading besides price and volume. Never FOMO (Fear of missing out) in any trade.
Proper expectation! This is very important always and especially with this amount of funds since you'll be earning very little. Focus on % gained and not on $.
Do Your Own Research (DYOR) and Don't follow signals blindly or suggestions you read on the comment section of a meme! Be serious about this and you'll get serious earnings!
And last but not least, BRASS BALLS (or ovaries! :P)! If you're not confident about opening a position, don't do it. Scare money = Loss of money! Don't sell just because you're in red or vice versa. Set your targets before the trade and avoid headaches!

*: Spot and Futures accounts are different. If you create a Futures account, you'll need to activate the Spot account in order to buy and sell crypto or vice versa.

What crypto we’ll be trading?

We’ll be trading USDT Futures with leverage on Binance.

Binance offers very low fees, a huge variety of trading pairs, and support for most countries. It is also the exchange with the most liquidity and volume according to CMC with more than $4B in average volume traded each day.

Whenever you're trading you have to look where the money is; don't trade markets without liquidity.

Also, we won’t be “marrying” a specific token but rather scan all available pairs on the platform to select our pick (more about that later).

If this is your first time trading, this is like learning how to drive in a manual car instead of an automatic. Why? Because trading with leverage is very risky and if you don’t follow rules, you’re done very fast.

You’ll be surprised how fast your account will bleed out if you’re not careful.

The fact that most exchanges offer you leverage, which is basically a loan-to-reinvest, doesn’t mean you have to use it all.

This is one mistake that many beginners trader do: “Oh, they’re lending me $500 and I only have $20 in my account… Great! Let’s open a $300 dollars position.” WRONG!!!

You don’t "own" $500, you only have $20 in your account and every percentage that goes up or down on your position affects those bucks.

I use Token Metrics to find some great cryptos and validate my own entries. I suggest you check them out if you run out of ideas.

Where do we start?

First of all, you need to create a Binance account. After you successfully register your account, we can start placing our orders.

I'll recommend you download the Binance Desktop app to trade faster, more efficiently and it actually looks more professional than the web.

After logging in to your account, you need to deposit $20 in your account. To do this, go to the left panel and scroll over "Buy Crypto".

Once you scroll over, several options will appear, and select the most convenient for you. I prefer to use Bank Transfers since they don't charge a fee but other options have a decent fee in case you can't do it this way.

Depending on your deposit method, you should have the money instantly or in 1-2 days.

Now you need to convert your deposited Fiat to USDT in the Trade section. We mentioned above that you need to activate the Spot trading if you created a Futures account in order to buy Tether.

You can place a Market buy order to convert your Fiat since the percentage doesn't change a lot with this conversion (except if you have a low-value Fiat).

Many traders don't like Tether to trade but I believe that for newcomers it's better because it is more stable.

I personally trade BTC and ETH Coin-Margin Futures as the gains are made in those respective cryptos and I like to stack Sats and Vitz (that's how I call the units of Ethereum :P).

Placing a trade

After doing some research and consideration, we're going to open a long position on Polkadot ($DOT).

This is not us suggesting you invest in these two projects (although we do believe these are very promising projects), we're not going to suggest which token to invest but rather we'll show you how to properly place and execute an order.

Here are a few things to remember:

If you're late in the trade, ignore it and let it go! If you missed a train, you don't jump in the rails and chase it. Just wait, another trade will come.
Your job as a trader is to wait for a setup to develop and execute it. Sometimes there are no trading setups and the best thing to do is stay sideways just watching.
Always be cautious when using any leverage. Let's say that we're going to open a long position on BTC using 20x leverage with our $20 as following:

- $20 multiplied by 20x of leverage means that we'll have an available $400 as buying power.

- Of those $400, we're going to open a position using 3% of this amount which equals $12.

- $12 might not seem like much but this challenge is about placing orders, managing trades, cutting losses quickly, and taking profit on expected targets.

- Keep in mind that $12 equals 60% of our initial deposit. If we're trading on the Spot market, I would never place a trade using 60% of available capital but when trading Futures, you can benefit from leveraging your capital to achieve this.

- NEVER OPEN A POSITION USING MORE THAN 5% OF YOUR LEVERAGED CAPITAL!!! NEVER!!! THIS IS ABSOLUTE CRITICAL!!! The more leverage used the more risk of liquidation. If you're not cautious, you'll lose all your funds in a blink of an eye. This is extremely important for you to understand since Leverage will eat your whole account if you don't take the necessary precautions.

- Before entering the trade, you need to determine the risk (how much you're willing to lose) and reward (how much potential gain might have).

$DOT Trade

Funds available: $20 USDT
Leveraged funds (x20): $400 USDT
3% of leveraged funds: $12

We have to determine the $DOT size for a $12 buy order. Divide $12 for the entry price to find out the amount.

For ex: 12/16.524= 0.7250 -----> rounds to next decimal -----> 0.7 $DOT

Now we have the position size (0.7 $DOT) and entry price (16.524), it's time to determine our stop loss and target profits.

Our Stop Loss is placed where your idea stopped making sense. When you know it's f*cked! And it's ok, it's always a possibility of this. So make peace with the possibility of losing before entering...

For out Target Profits we have to consider several things but we'll focus on taking profits near resistance levels

Token: Polkadot
Position Size: 0.7 $DOT
Entry Price: $16.524 USDT
Fee: 0.004622
SL: 15.719 (-0.51 USDT)
TP: 18.114 (+1.12 USDT)
Risk-to-Reward: 2:1
Timeframe: 4H

Now it's time to record it in your journal! You can use any app (I like Notion) to organize your trades and record your emotions.

Trading can be profitable if you follow strict rules and it can be devastating if done incorrectly.

Follow your plan, A/B test different strategies, and most importantly, control yourself! Identify your emotions and learn from your mistakes. Every SL triggered has to be analyzed and don't get greedy as you approach your target profit. Be humble and you'll do great!

Congratulations! You've just started this incredible trading journey.

If you liked it, please share it with your friends to motivate them, and as Graham Stephan says: smash the like button!

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