How to Survive A Choppy Crypto Market?

I have some notes on what my plan is in the near future regarding crypto trading. Have you read my “One Thing Weird from The Crypto Market These Days” article? My biggest concern was the low liquidity (resulting in extreme price swings.) Guess what? It’s getting worse these days — and most market participants started to feel it. (Back then I felt like I was the only one noticing while the others were celebrating the 30k Bitcoin pump.)

To quote a random post on Twitter (roughly), the Cartels have abandoned us; left us with our own devices. Without them, the market is lacking even more direction than before.

One of the factors why liquidity got worse, I strongly suspected, is because the crypto exchange Bybit has started implementing KYC. Bybit, the last frontier of true degenerates, has betrayed their privacy-conscious customers by requiring them to submit identity proofs. I was too — among the ones heartbroken by their decision.

So, what, then? Like an ideal trader accustomed to unpredictable market movements, there’s only one thing we know of to react to all these changes — or lack thereof. Our strategy is nothing else but to adapt.

Exercise great patience

This level of price is tricky for everybody regardless of bull/bear bias. The bull case would be: This could be the dip before we go higher past 31k (I’m using Bitcoin price as an anchor here.)

There were so many dumps and dips before, and BTC continues trending up regardless. This time may be the same case as before.

However, this is how usually the market tricks the late longer — the exit liquidity. We are given a certain condition that happened on repeat we think it’s the absolute pattern. X must happen. Thinking solely of this would be fatal if you are unlucky.

Meanwhile, bears also suffer the same doubt as well. In the past, they have repeatedly proven wrongs, so in their mind now is something along like, “What if the market bamboozles me again this time?” (This is also how the market attracts exit liquidity by converting bears to late bulls.)

See the dilemma?

The situation is too confusing right now that the best approach would be doing nothing if I happened to be sidelined in both directions (No positions at all/ already took profit) Be patient until there are more surefire entries.

But what if you have a position? This is my personal note as I am in this situation as well.

Take profits (If there are any), avoid the annoyance of roundtripping

I took profits on my positions on $ARB — the up-and-coming tokens with decent liquidity I recently love to trade. I took partial profit as well on some blue chip positions.

One thing that I learned from the dramatic swings of crypto these days is to never hesitate take profits. Some mental notes:

There will be another opportunity. Like who would have thought that $BTC went back to touching <$20k a couple of months ago?
Don’t be greedy, the market is actually generous if you know how to maneuver.
The most important focus right now is to keep profit rather than to gain as much as you can. Many people have been roundtripping their profits and sadly, some ended up in liquidation. Not only they lost their profits, but also their capital as well. Like roundtripping alone is not annoying enough.

For those who don’t know, roundtripping means you gain today, and lose the gain tomorrow just because the price reverse dramatically.

Let alone small retail traders, big whales with million dollars positions suffered from this roundtripping phenomenon as well. You only need to follow whale trading alerts like https://twitter.com/lookonchain to know how often this happened lately.

Stops at breakeven (or use a better strategy.)

Yesterday I was intrigued by this tweet below.

Rather than the tweet itself, the thing that intrigued me was a reply questioning Kwang’s decision to not set a stop loss, at least at a breakeven price.

Why did he let his position get liquidated instead?

Somehow I understand him, I kinda relate to that.

In a choppy market, stop loss gets hunted often, such as by random wicks. It‘s annoying to wake up one morning and find the BTC price hasn’t changed since before you sleep, but you no longer have any position open.

I have found a way to get around this sucky situation that proved to be working lately.

Stops at breakeven but just half of the position.

This principle is like taking profits (or, some profits.) About not being too greedy. We all want to max out the capital to churn out the potential profit. But in reality, it’s not bad too if we win with only half of the ammo.

Instead of waking up with no position open, you would wake up with a position still open although it’s slashed in half. In my experience that makes me less annoyed. Less annoyed = less emotional = better decision-making.

If you don’t set any stop loss, instead of waking up with no capital because you get liquidated, you would wake up with the half position that, although may be in loss, your liquidation level gets further than the previous one.

Both approaches give traders the necessary time to re-strategize and think about what’s next.

Also, don’t worry about the now-half position. You’ll likely have the chance to add up on that again whenever volatility happens. The same mindset with taking profits: That there’ll be other opportunities.

I mentioned “half” as just an example. You can replace it with “One third” “A quarter”, or “At least $1 million left” depending on your risk appetite and conviction toward the price action at the moment.

Typically I would use “Stop loss half at the breakeven price” and set the final stop loss at a price level where I finally accept my loss. (If things don’t work out in the end, so be it. That’s just business.)

Trading these days is all about two things

To find the perfect entry. The one that makes you confident that it will bring you profits. In a dramatically swinging market, entries are wonderful if you manage to nail the perfect ones.
To protect the existing profits and the capital itself after the entries are secured. To avoid roundtripping, because perfect entries nowadays don’t stay perfect for long.

The main trading principle

What to believe to reduce FOMO.

“As a trader, it doesn't matter if Ethereum is $800 or $2000 or $4500. What you should care about is the movement. The percentage. You are just here to ride the train, hopping on and off. Leave your investor hat at home.”

“You can always trade both ways. No pump is not followed by dump and vice versa. Again, exercise great patience.”

Don’t question why

Besides, aren’t you tired of asking?

Something funny I see about Crypto Twitter is how, after all these nonsensical price swings, people still like to gush, wonder, be intrigued, and discuss whatever it is that makes prices pump or dump that day although there’s nothing of substance happening. Some people really like to make up reasons.

The quote from Hsaka is enough to explain it all.

Often my best trades happened when I don’t look at opinions on Twitter at all. Just the charts and news alerts for truly important market-moving stuff are enough.

Technical analysis

I don’t know if anyone is still using them beyond some — maybe useful — basics like support and resistance lines. I don’t know but I don’t use it and survive and thrive without it.

Pick the most comfortable asset to trade

There’s a reason why I often mention $ARB lately. Altcoins are perfect to trade, but the ones with decent liquidity like $ARB are a godsend. I have become comfortable with it, and for some time I think I would play around with this asset until the hype dies down and liquidity moves somewhere else shinier — such is the life in altcoins-verse.

The point is, everyone has their favorite asset to trade, based on their own preference — liquidity, knowledge of the project, potential, etc. It’s best to stick with what we know that anything else.

For me, for example, in no way, I would join the hype train of $PEPE. I just heard about it some time ago. Unfamiliar assets like this will only steal my money.

Be nimble, be versatile

One thing that I learned being in crypto this long is that the market will train you in a certain way of thinking/bias before things completely change.

For example, in late 2021 it feels like crypto assets price will go up forever. Once everyone thought so, the situation reverse. We got 2022 where prices felt like they would go down forever.

The same goes also with a choppy market, or sideways market. One piece of advice I often gave myself is to not get too comfortable. A strategy may work in X situation, but the situation often won’t be X for long.

It’s important to be agile. Adjust the strategy, neutral and unbiased, and protect the profits + the capital.

That’s all I can think of as of now about how to best handle the current market. Maybe I’ll add more notes in the future if there’s anything that I forgot to add today.

PS: This article’s context is strictly around trading. Leave the investor hat at home.