A little over a month ago, I started trading on various on-chain perp dexes for airdrops. I had the beginner’s luck and made consecutive wins right from the beginning. Some of the wins was larger than I could’ve imagined. But that didn’t last long. I started losing and ended up losing $1058 in total after a month of trading. The screen below shows the PnL of each of my wallets for each perp dex: only two accounts are green!
Lessons Learned
Loss aversion leads to ruin. I read Daniel Kahneman and Amos Tversky’s paper on loss version years ago. But this one month of trading gave me a visceral awareness of the strong hold it has on me. For example, take my first liquidation event. I was trading the 1-minute chart and watched the PnL drop from a tiny green number to a small red number to a large red number. There were multiple occasions where I wanted to close the position but I couldn’t do it because of loss aversion. In other words, once I close the position, I’d realize the loss, so to avoid the loss, I don’t close the position. And having two winning trades previously made things worse because I didn’t want to give back my winnings. In that short span of heading towards liquidation, I experienced two selves fighting. The emotional self kept praying, “give it a little more time. Remember those times where price turned around right after you close your position? You just made $111, if you close now, you gave it all back.” The rational self kept saying, “you’re having loss aversion. Close the position!” At the end, the rational self didn’t win and the position got liquidated.
Set stop loss immediately. In the above example, I didn’t set stop loss because I was watching the chart and confident that I could close the position whenever. After all, it’s only one click away. Oh boy, how wrong was I! Always set stop loss immediately after position is open. Some perp dex like merkle allows traders to set stop loss when submitting the trade, do that!
If you keep winnings in the trading account, you risk losing it all. I withdrew winnings from one account to pay down debt, as a result, that account has a positive 3-digit PnL while the other accounts are all red or break-even. Withdrew winnings is profit-pocketing so you risk of gambling them away.
It’s dangerous to use 20x leverage. Consecutive and large winnings make you bold so you start putting on 20x leverage. Then you discover at 20x leverage, it’s easy for the market to tap you out. Next you learn even 10x can be dangerous. So you settle with 7x or 5x or 3x.
Rules I Follow now
Set -30% stop loss immediately after a trade is opened. I will follow up with another post on the time frames I trade with chart patterns I observed.
Use 5x leverage. When market is puking, consider 3x if you think market is weak or 7x if you see signs of rebound.
Withdraw winnings whenever the amount exceeds $100. Only play with the initial deposit. For example, say you deposit $500 and make a good trade that put your account value to $601. Withdraw $101 to your wallet before you open another trade.
Perp Dex Airdrops and Referrals
Merkle Trade on Aptos. I find myself primarily trade on merkle because I like the product and the gamification. I funded it with $900. Traders earn pMKL that will convert to MKL token at the Token Generation Event (TGE) in Q1 2024. (See details here.) In addition, traders also earn APT. I’ve done $179.5K volume and the screen below shows the reward I earned for season 2.
Aevo on Arbitrum. Airdrop confirmed and you can read its tokenomics. This is my secondary account and I funded it with $500.
Drift on Solana just announced their point system today. They raised $23.5M! I was farming it with 5 wallets and got completely wiped out. So I’ll need to refund them.