The following text is organized from the Twitter Space series #DialogueTrader, hosted by FC, founding partner of SevenX Ventures, Twitter @FC_0X0
Guest for this issue: Raxy, independent trader, Twitter @Raxy2001
About Raxy: From Primary Investor to Independent Trader
In January 2021, when platform tokens were hotly traded across various exchanges, Raxy entered the crypto industry. After working on a GameFi project, he entered the VC industry, working at Jsquare and DFG.
In over two years of VC career, Raxy has seen hundreds of projects and, after leaving VC at the beginning of this year, systematically learned trading and engaged in it, transforming from a primary investor to an independent trader.
The progress of trading starts from losing money...
At the beginning of the year, after a significant rise in BTC, altcoins also had some movements, so Raxy still used the 'valuation nesting' logic from 2021 to trade altcoins: for instance, if the primary market believes a certain sector will be hot, and roughly estimates the valuation, find fully circulating, similar backgrounds/sectors, and reasonably valued targets in the secondary market to buy in.
Using this method, Raxy made some money, but strange changes began in the market from March.
Raxy found that trading altcoins has a high difficulty of profit; either there is news or a deep understanding of the asset is required, which allows one to look at daily and weekly charts and buy at the left-side bottom. He later re-evaluated his trading strategy and reached the conclusion:
In the crypto market, Bitcoin is the most suitable variety for thorough speculation. Therefore, he gradually shifted his trading focus to Bitcoin.
Currently, Raxy's fund size 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, with this portion of funds primarily relying on traditional chart pattern analysis and some small technical indicators to assist in decision-making.
By observing others' practical experiences and combining self-exploration in the market, Raxy gradually formed a trading style that fits his personality and goals through continuous practice and adjustment, enabling him to flexibly respond to market changes.
How to trade with high win rates using moving averages?
Raxy believes that the market is divided into two structures: consolidation and trends, and it is always a back-and-forth transition between the two. It is just that each person may understand the levels of consolidation and trends differently; for example, a daily consolidation may be a one-sided trend on an hourly basis.
Raxy adopts a moving average system dominated by EMA, which reflects the average price in the past.
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 considered a buy signal, and a buy operation is executed;
2) When EMA20 crosses below EMA200, it issues a sell signal, and a sell operation is executed.
By doing so, you can ensure that you are present during significant rises and absent during sharp declines.
However, moving average trading is not flawless. It actually lags behind market reactions, and in consolidation conditions, due to frequent price fluctuations, moving averages will cross back and forth, leading to significant wear, which means that during consolidations, there may be multiple false signals, resulting in unnecessary trading losses.
However, Raxy emphasizes that the biggest advantage of this trading strategy is its simplicity and clarity, avoiding complex analysis or subjective judgment, which can help avoid interference from market noise and emotional fluctuations; thus, it is suitable for those whose mindset is easily influenced and who have weaker emotional control, as strictly executing it can reduce the impact of subjective judgment and avoid making wrong decisions due to emotional fluctuations.
Can moving averages guide trading for altcoins?
Raxy believes that trading altcoins can refer to moving average strategies, but the effectiveness is relatively poorer.
Altcoins are characterized by high Sharpe ratios and extreme volatility, often accompanied by significant rises and falls. In trading, Raxy views the daily EM20 as an important reference indicator:
1) If altcoins fail to rise above the daily EM20, he usually will not make large operations.
2) He only considers the market to have real buying power, accumulation, or upward price movement when the daily EM20 is rising or has been broken; at this time, trading can be conducted according to moving average rules, that is, buying when it is above and selling when it falls below.
Raxy also mentioned that trading altcoins has higher requirements for profit-taking and position management:
Profit taking requires precise judgment, and buying in batches must be strictly controlled through detailed mathematical calculations; otherwise, the overall profit-loss ratio may easily become unbalanced.
Although moving average trading can effectively reduce wear during consolidations at the daily level, in smaller time frame operations, such as 1-hour or 4-hour levels, the situation can become much more complicated.
Therefore, Raxy prefers to use daily levels 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 clearly trending and less noisy market environments. This method relies on clear buy and sell signals, confirming market trend direction by breaking through key points (such as recent highs or lows).
In practice, Raxy looks at Turtle Trading combined with moving averages, focusing mainly on the moving averages. The Turtle Trading method can basically ensure that trends are present, while the smaller time frame moving averages can help determine when short-term trends end, for example, switching to a 1-hour or 4-hour timeframe, which can likely indicate an exit point, including combining it with some MACD and other indicators.
"I have seen too many indicators; I have reviewed almost all methods and strategies in the market and have genuinely lost money with them. So in the end, I chose indicators that everyone has heard of and are well-known, such as MACD and trading volume, which are very simple."
Raxy also mentioned that the logic of choosing the Turtle Trading method and moving averages is the same; to judge price rises and falls, there is too much to think about. It is not easy to think clearly, and it is easy to think incorrectly, so it is better to choose a simple and clear system to avoid chaotic thinking.
What indicators can be used to 'escape the top'?
SRSI is an indicator that Raxy places great importance on; SRSI is based on the overlay algorithm of dynamic strength RSI.
1) When SRSI shows a death cross, Raxy will adopt a defensive strategy of reducing positions.
2) When SRSI has a golden cross, he will consider re-establishing a position.
Although SRSI can effectively reflect the market's buying power and trends for a period, accurately judging the top in rapidly changing trend markets remains difficult.
Raxy also looks for clues from the behavior logic of large players. For example, when large players no longer conduct large-scale buying through the spot market and start using other means to gain profits, it may indicate that the willingness to push prices up further is weakening; at this time, the market's upward momentum may be nearing its end.
However, overall, judging the market's peak is always an extremely challenging task, with no single method that can predict it completely accurately.
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, unrealistic integer target goals should not be set 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 integer level. Once this target is established, that day is almost the beginning of your losses—there are 100% exceptions."
Additionally, one should always respect the signals of the trading system and allocate positions reasonably. Avoid potential losses caused by subjective blind confidence.
Moreover, you absolutely cannot run two strategies on the same account; it will become chaotic.
Six essential mindsets for successful trading
In the dialogue with Raxy, he also shared some mindsets learned during his transition to becoming a trader, encouraging everyone to keep striving:
1. Trading is like a hell-level dungeon in a life game; clearing this dungeon will provide a deeper understanding of various other things.
2. Investing in projects in the primary market is essentially investing in people and their character, while ultimately, the secondary market is still about position management.
3. There is no perfect trading strategy; one must learn to judge whether the market is in a trend cycle or a consolidation cycle and hedge in different market stages.
4. The realization in trading is to start doing subtraction: no longer fantasizing about getting rich quickly, because you know that profits outside of cognition will eventually return to the market; and you don't have to worry about continuous losses leading to severe consequences, as losses are all within your plan.
5. Follow the trend, the certainty will be higher.
6. Opportunities are always there; the important thing is whether you are still in the game.
Written at the end
After talking with 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 how can I do it comfortably and profitably? Finding a trading strategy that matches my personality and continuously adjusting the relationship between my personality and trading strategy is fundamentally important for traders.
