I’m writing this article for my future self. I started trading with leverage 4 ~ 6 months ago. My motivation was to try trading while farming airdrops. I listed all the on-chain perp dexes I used and my PnL for each wallet in the screen below. As we can see, blood everywhere. Hope the airdrops will make up for the losses1. I did not use TA or trading systems except for 1 wallet where I algo-traded in Python on Hyperliquid. So I view the results as a baseline that only reflects my psychology and execution and luck.
Moving forward, I want to learn and experiment with trading systems and methods. The goal is to beat the baseline. But before doing that, if I can reduce loss aversion and get better at closing positions, I think I can turn negative PnLs into positive ones. So I came up with 5 rules, based on my two biggest losing trades. If I religiously follow these rules, I will never repeat the same mistakes again. Let there be no more big losses in any single trade again.
Rules I Will Follow
I will act according to the following rules faithfully under all market conditions and without any exceptions.
Never use more than 5x leverage. Use 3x leverage for 7 out of 10 trades.
Set stop loss at -30% PnL at entrance and strictly enforce it2. Oh price dumps hard and is approaching your stop loss point. Are you really gonna move your stop loss from -30% to -50% again? Have you forgotten how you got liquidated? Have you forgotten how you lost 61%? No, you haven’t forgotten and you remember the pain, so embrace the 30% loss and exit without a blink.
Never increase collateral when price dumps. So you open a levered-long and price keeps dumping. Are you really gonna buy more? You think the last dump is the bottom and price will pump from there, but that’s just your wish. It’s very likely that price will keep dumping. Have you forgotten how you lost $1500 because you kept buying as Matic price fell? Let the following charts remind you of that painful loss.
Never keep a position open for more than 1 day. Close your position at least 2 hours before bed time regardless if it’s down or up. Have you forgotten the funding $$$ you paid for your levered longs? You can set up an entry and let price come to it overnight, but never leave any position open while you sleep.
Start taking profit as soon as PnL hits 2%. The following exit schedule combined with rule 4 will leave a lot of money on the table when price is on a tear. But I think it’s prudent to focus on risk management at this stage of my trading journey because I first need to beat my baseline PnL of -$1886. I believe if I follow these rules, I can at least achieve 0 PnL. And if I can get 0 PnL consistently over all market conditions, that’s already a big improvement.
Referrals
Below is a list of perp dexes I like. Links contain my refs. If you use them, you’ll get 4% ~ 10% discount when trading.
Hyperliquid: probably the best perp dex and easily many people’s favorite. They will airdrop a token soon.
Merkle Trade on Aptos. I primarily traded on merkle for the past several months because I like the product and I want to farm both the merkle airdrop (details) and potential Aptos ecosystem airdrop. I think Aptos is under-farmed and here’s an article to get started.
GRVT: the perp dex to be launched on zkSync. It has been talked about a lot on X. If you want to join, you will need an invite code. And I have a bunch: J8ONJBE,
TA08CW8, SF2G8GE, ZGQWJW2, ZZTW7AY, XOP64GU, J8ONJBE, 8V5B8IL,
TSR3830, 2SAGHRH, TA08CW8, CR57SYJ, E0D0K00. If a code doesn’t work, try another or try the same code after a week.
While I was working on this article, I got $3422 worth of $PURR from hyperliquid. It’s their meme coin, not the airdrop token. And it alone erased all my losses. In hindsight, I should’ve farmed hyperliquid hard. Oh well, there’s always the next opportunity.
-30% stop loss is probably not optimal, but is definitely the limit for me. I’m not willing to lose more than 30% for any single trade. Actually, losing 20% per trade is already a lot to me, but I worry that a 20% stop loss will keep stopping me out and not get me enough wins. I will experiment and should arrive at an ideal number over time.