Exactly a week ago, I began testing a new “modified” strategy with the intention of increasing profitability. This simultaneously has exposed me to additional risk. However, I am following a strict stop-loss strategy. My normal strategy utilizes much lower leverage, and therefore allows a lot of forgiveness during the initial stages of the trade. If you are a trader, then you will be familiar with stop-loss hunting.
My main strategy is low leverage and therefore does not really fall victim to this practice. However, this new strategy requires fairly tight stops because the leverage is 10X. I usually only trade 1x to 3X at most, so it is quite a significant shift in regard to risk, and subsequently, potential loss.
As you will know, the market has been fairly flat for weeks. This has caused me to open trades I wouldn’t usually consider. However, I was keen to see how it faired in “real life”. A lot of ideas look good on paper and in theory. However, in practice, they can sometimes be just the opposite.
All Positions Closed
I closed my last open position this morning, which was a short on ChainLink. Interestingly, notorious Twitter influencer, Michael van de Poppe, was bullish and aiming at the $9 zone. I was simultaneously short. Over half a million followers… The best traders are not actually found on Twitter, by the way. It takes years, even decades to become highly effective. That doesn’t get handed out as a free lunch on social media…
So, after the first week, my trading account is up approximately 6%, which is not great, but fairly good given the current lack of volatility. I got stopped out twice if I remember correctly. What is important to note here is that this is an increase in the actual account and not an isolated trade. If I were to repeat this performance every week, it would amount to an increase of approximately 27% over a monthly time frame.
However, given better market conditions, I believe I will be able to outperform this performance quite considerably. That being said, compound 27% per month (0.9% per day) over a year and you have account growth of approximately 2600%. I have no open positions at this stage, and subsequently, no floating losses. Tomorrow is a big day for the markets, so I don’t want to get ahead of myself, prior to announcements.
Leverage can be incredibly powerful, provided you have a lot of experience and knowledge. However, you have to gain that somewhere, right? That is why traders looking to begin using leverage should start out with micro accounts and with the very bare minimum capital requirements and trade allocation. This should perhaps initially be tested on a demo account, together with some good training.
Anyway, keen to see how this plays out over a month, and even more importantly, over multiple months. One needs to actually observe and measure consistent performance. Happy trading, see you next time!