The following text is compiled from the series Twitter Space #Conversations with Traders, hosted by FC, founding partner of SevenX Ventures, Twitter @FC_0X0.
This episode's guest: Raxy, independent trader, Twitter @Raxy2001.
About Raxy: From primary investor to independent trader.
In January 2021, when platform tokens were being speculated heavily across various exchanges, Raxy entered the crypto industry. After working on GameFi projects, he entered the VC industry, working at Jsquare and DFG.
In over two years in VC, Raxy has seen hundreds of projects. This year, he left VC to systematically learn and engage in trading, transitioning from a primary investor to an independent trader.
The progress in trading starts from losing money...
Earlier this year, after a significant rise in BTC, altcoins also had some movements, so Raxy still used the logic of "valuation nesting" from 2021 to trade altcoins: for instance, if the primary market thinks a certain sector will be hot and estimates the valuation, he looks for fully circulated, similarly backgrounded/sectored, reasonably valued targets in the secondary market to buy.
Using this method, Raxy made some money, but since March, the market has undergone strange changes.
By comparing the market shares of BTC and USDT, Raxy found that the profitability of altcoins is too challenging—either there must be news, or one must have a very deep understanding of the asset, being able to look at daily and weekly charts and buy at the left-side bottom. Later, he reassessed his trading strategy and ultimately concluded:
In the crypto market, Bitcoin is the asset most suitable for full speculation. Therefore, he gradually shifted his trading focus to Bitcoin.
Currently, Raxy's capital scale is about two million dollars. His position allocation is clear:
1) 80%-90% of funds are invested in the spot market, using the Turtle Trading Method combined with key moving average indicators to capture market trends.
2) The remaining 10%-20% is used for contract trading, primarily relying on traditional chart pattern analysis and some minor technical indicators to assist decision-making.
By observing others' practical experiences and combining them with his own market explorations, Raxy gradually formed a trading style that aligns with his personality and goals through continuous practice and adjustment, allowing him to flexibly respond to market changes.
How to trade with a high win rate using moving averages?
Raxy believes the market can be divided into two structures: consolidation and trends, which always alternate. It's just that everyone's understanding of the levels of consolidation and trends may differ from others; for example, a daily consolidation may just be a one-sided trend on the hourly chart.
Raxy uses a moving average system primarily based on EMA, which reflects the average price over time.
Raxy pays particular attention to EMA20 and EMA200 moving averages, supplemented by common technical indicators such as MACD, RSI, and SRSI to confirm trends. His specific operational rules are very clear:
1) When EMA20 crosses above EMA200, it is regarded as a buy signal, executing a buy operation;
2) When EMA20 crosses below EMA200, it sends a sell signal, executing a sell operation.
By this method, you can ensure: when the market is soaring, you are definitely in, and when it is plummeting, you are certainly out.
However, moving average trading is not without flaws. It actually lags in responding to market conditions, and during volatile markets, due to frequent price fluctuations, moving averages will cross back and forth, leading to significant whipsaw, which means multiple erroneous signals may occur during consolidation periods, causing unnecessary trading losses.
But Raxy emphasizes that the biggest advantage of this trading strategy lies in its simplicity; it does not require complex analysis or subjective judgment, helping to avoid distractions caused by market noise and emotional fluctuations. Therefore, it is suitable for those whose mindset is easily influenced or lacks emotional control; as long as one strictly follows through, it can reduce the impact of subjective judgment and avoid making erroneous decisions due to emotional fluctuations.
Can moving averages guide trading in altcoins?
Raxy believes that trading altcoins can refer to moving average strategies, but the effectiveness will be relatively lower.
The characteristics of altcoins are high Sharpe ratios and extreme volatility, often accompanied by large price swings. In operations, Raxy considers the daily EMA20 as an important reference indicator:
1) If an altcoin fails to stay above the daily EMA20, he usually will not carry out large transactions;
2) Only when the daily EMA20 is rising or is breached does he believe that the market may have genuine buying power, accumulation, or tendencies to push prices up; at this point, he can trade according to the moving average rules, meaning buy when it is above and sell when it falls below.
Raxy also mentioned that trading altcoins requires higher standards for profit-taking and position management.
Take profit requires precise judgment, and buying in batches must be strictly controlled, through detailed mathematical calculations, otherwise the overall profit-loss ratio can easily become unbalanced.
Although moving average trading can effectively reduce whipsaw damage at the daily level, the situation becomes much more complex at smaller time frames, such as 1 hour or 4 hours.
Therefore, Raxy tends to use the daily level to guide operations.
What exactly is the Turtle Trading Method?
The Turtle Trading Method is a strategy suitable for trend trading, characterized by its effectiveness in markets with clear trends and less noise. This method relies on clear buy and sell signals to confirm the market's trend direction by breaking through key levels (such as recent highs or lows).
In practice, Raxy uses the Turtle Trading Method alongside moving averages, primarily focusing on moving averages. The Turtle Trading Method can basically ensure that trends are intact, while smaller moving averages can help identify when short-term trends end—for instance, switching to 1 hour or 4 hours will likely indicate an exit position, including using some MACD and other indicators.
"I've seen too many indicators; I've reviewed almost all the methods and strategies in the market and have genuinely incurred losses from them. So in the end, I chose the indicators that everyone has heard of so often, like MACD and volume, which are very simple."
Raxy also mentioned that the logic behind choosing the Turtle Trading Method and moving averages is the same: to judge price movements, there are too many factors to consider—it's hard to think clearly, and it’s easy to think incorrectly. It’s better to choose a simple and clear system to avoid chaotic thinking.
What indicators to use to "escape the top"?
SRSI is an indicator that Raxy values highly, as it is based on a dynamic strength RSI overlay algorithm.
1) When SRSI shows a death cross, Raxy adopts a defensive strategy to reduce positions.
2) When SRSI shows a golden cross, he considers re-establishing a position.
Although SRSI can effectively reflect market buying power and trends for a period of time, accurately judging the top during rapidly changing trend conditions still poses challenges.
Raxy also looks for clues from the behavior logic of large players. For example, when large players no longer make large purchases through the spot market and start using other methods to obtain profits, it may indicate a weakening willingness for further price increases, suggesting that the market's upward momentum may be nearing its end.
But overall, determining the market peak is always a highly challenging task, and there is no single method that can predict it with complete accuracy.
The "Stop Doing List" summarized from two major losses.
Raxy mentioned that the core of the Stop Doing List is to avoid erroneous trading behaviors caused by mindset issues.
First, one should not set unrealistic integer level targets for profits.
"When you make a lot of money in a short time, exceeding your expectations, you are likely to set a target at a certain round number. Once this target is established, that day is almost certainly the beginning of your losses—100% without exception."
Additionally, one should always respect the signals of the trading system and allocate positions reasonably. Avoid potential losses caused by subjective blind confidence.
Also, you must never run two strategies in the same account, or it will become chaotic.
Six essential mindsets for successful trading.
During his conversation with Raxy, he also shared some mindsets he learned during his transition to being a trader, encouraging everyone.
1. Trading is like a hellish difficulty dungeon in a life game; clearing this dungeon leads to deeper understanding of various other aspects.
2. Investing in projects in the primary market is essentially about investing in people, investing in their character, while the secondary market ultimately revolves around position management.
3. There is no perfect trading strategy; one must learn to judge between trend cycles and consolidation cycles, and hedge during different market phases.
4. The realization in trading begins with simplification: no longer fantasizing about getting rich quickly, because you know that profits beyond your understanding will eventually return to the market over time; also, you don’t need to worry about the serious consequences of continuous losses because the losses are all within your plan.
5. Following the trend increases certainty.
6. Opportunities are always present; the important question is whether you are still in the game.
In conclusion.
After talking to so many traders, I found that everyone is ultimately searching for themselves.
What is my relationship with this market? Where do I fit in, and what do I need to do to feel comfortable and make money? Finding a trading strategy that matches my personality and continually adjusting the relationship between personality and trading strategy is fundamentally important for traders.