Risk proportionately to your account size. Never risk more than 5% of your capital on each trade.
Trade only high-probability setups. Conduct a strategic analysis of risk-to-reward and trade fundamentals before entering a position.
Compound your profits. Abstain from withdrawing profits and reinvest them in order to snowball your capital to a point where it could fuel your income or even replace it.
If you’re familiar with buying cryptocurrencies in the spot market but are tired of volatile swings followed by periods of slow growth, crypto futures trading might be for you!
You may think, “Don’t traders need to have millions in the bank to do what they do?”, or “Don’t you need to know everything about the market to participate?” and so on.
But fear not, starting out as a crypto futures trader is becoming more accessible to anybody.
Today we will be looking at some tips that could help your futures trading aspirations launch in the right direction. Before we set off, these tips are not financial advice but are rather useful philosophies to consider before committing to trading.
1. Set Realistic Expectations
First and foremost, it is crucial to set out goals and expectations in reality. Trading is very difficult for anybody. It’s a game with massive potential for wins and losses. Even the legendary traders of Wall Street have experienced major losses in their careers, and they are supposed to have their finger on the pulse of trade.
It is important to set realistic profit targets. Remember that even successful hedge funds and fund managers struggle to make more than, say, a couple of per cent a month on a consistent basis. Novice traders with a small capital base of $5,000 shouldn’t expect to make $5,000 per month or even cover living expenses. Instead of aiming for 100% returns per month, a more realistic target is to grow 1-2% per month on a consistent basis.
By setting a realistic profit target or expectation, you will be less pressured by the outcome of every trade, and this should help reduce trading stress and have a corresponding positive impact on your long-term results. Calculate your profit target using Binance Futures Calculator.
Prolonged success demands a strategy, and being proportionate with funds is a key piece of strategy. Done properly, slowly growing a small account into one that can sustain you, and that you can sustain, is a worthy achievement.
The best place to start with any endeavor is to honestly evaluate your current capabilities. With trading, we’re primarily talking about your account size.
2. Risk Proportionately to Your Account Size
Readjust the perspective you have on your funds. Each dollar should be treated as if it is worth 100x its actual value. So if you have an account worth $1,000, you should be averse to losing anything more than $10 (or 1% of your account value). In fact, professional traders generally keep the rule of not risking more than 5% of their account value per trade. A professional trader with a $1M account value would never risk more than $50k on a trade.
This is a long-term strategy that demands you to approach each trade with a prepared strategy. The strategy maintains values that protect your funds, i.e., cutting off losses early, sets realistic expectations, and protects your emotions.
Finances often become associated with self-esteem, optimism, fear, even mental health, and to some extent, physical health. Remember, it isn’t important how large someone else’s account is or how much they trade, win, or lose. Your trades are only personal to you, and you should focus on building for yourself rather than in competition.
An approach that values each dollar (or any smaller denomination respective to your budget) as a precious piece of your portfolio will lead to conservative emotions and focused strategies that guide entries and exits. Crypto futures are great for this since investors can trade with fractions of a dollar, or whichever unit of currency they have.
3. Don’t Withdraw Funds Out of Your Account
A seemingly simple tip when starting out is to leave your funds absolutely alone. Do not take them out of your account. Since you’re trying to build your wealth, you will need every brick you have so that you can slowly introduce larger and larger risks per trade. As your funds snowball, you’ll be able to, at some point, fuel your income, or maybe replace it (given you’ve stuck to your strategies and values).
Also, taking any money out of your account disregards the value you place onto each unit of account, and then devalues the other ethics you would apply to your trading. Trading is a long-term game and should be respected well beyond instant gratification wins. In fact, adding funds to your account whenever possible is a great idea.
Of course, life can have surprises and the value of trading can easily be replaced by something else that may occur such as emergencies or other urgent demands. Let’s hope this never happens!
4. Trade Only High-Probability Trade Setups
A key feature that is coupled to trading at low volumes (and trading with appropriate leverage) is only trading with high-probability trade setups. This can be determined through a strategic analysis of the fundamentals you rely on. Following support and resistance levels, trendlines, volume in the market, Wyckoff schematics for shape and timing, recent market movements, etc. When the analysis agrees with your inclinations, applying more confidence to a trade is more reasonable. The analysis process should help you further rank risk probabilities in the future as you learn how patterns affect market psychology, institutional influences, and much more.
Only apply high risk to incredibly certain scenarios, but even then be weary of your fundamental values. If for some reason the trade goes wrong and you lose on high leverage will it be worth it? If the answer is yes, then go for it.
5. Compound Your Profits
A technique that can help accelerate account growth is by compounding your profits. When you have successfully executed a trade based off of a high probability setup, then you can feel comfortable about continuing your streak. If you set up a further stop loss that favors the trend you followed in your initial trade, and place a high risk/reward ratio on it, you may be able to further expand your profits.
This should be a technique only used in absolute certainty, as applying more leverage to even a 2% investment at 10:1 can cost you 20% of your portfolio. Winning it could also land you a nice chunk to be encouraged about as well. Setting yourself up for high wins probabilities can set you up for continuations of that positive momentum too.
Conclusion
Starting up a small crypto futures trading is a task not unlike launching one with millions of dollars in it. The same values apply, and each bit of fund that you risk should be treated with care. Every investment should be based on a high-probability for winning, and should never be leveraged enough to take a significant chunk out of your account.
Trading can become intense. Emotions along with other things can easily become involved. But it’s important to remember where you started, learn from your mistakes, and think long-term. Even if you’re trading in order to build a legitimate career in futures trading, it’s healthy to remember that it’s only money, and that’s not everything life has to offer. Losing, or missing a trade isn’t important unless you learn from the mistake. Winning a trade is only important in that it helps you move toward your goal. In either scenario, practice of growth is more important than the growth itself. Practice makes perfect, and dedication to learning and appreciation for opportunities will guide you forward when trading.
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