Week 5, Lesson 5
“If a person gave away your body to some passerby, you’d be furious. Yet you hand over your mind to anyone who comes along, so they may abuse you, leaving it disturbed and troubled—have you no shame in that?” —EPICTETUS, ENCHIRIDION, 28
We are into the Week 5 of the Fifty Two Trades in Fifty Two Weeks. Thank you for reading on.
“The 52” deep dives into one trade every week, targeting traders with zero or little trading experience. But I hope that my pro trader friends find this as useful. For details on why I am doing this and who is this for, please read the About section on top, which I will update from time to time.
Most trades that we take will be medium (3-4 weeks) to long term in nature. We might do some swing trading here and there if opportunity presents, but always with proper risk management. After all, our purpose is to make money, not lose sleep over it.
You can track our trades and progress live here at this Hashtalk Link
Over 10 years in banking and now 12+ years dealing with nuances of crypto, I have learned some very hard lessons. I intend to share them transparently as we go. More importantly, please keep the comments and feedback coming, so I know we are on the right track together.
Portfolio Update - Open Trades
It was a rollercoaster ride last week. Market mayhem always brings opportunities. If you missed, don’t worry. there will be more. As always, you can track all our trades live for full transparency.
In July 2024, we took four trades, two of which yielded impressive gains, delivering an average return of over 20% and netting us over $20,000. While our third trade encountered a 25% loss, our risk management strategy ensured that this only impacted 2.5% of our total capital amounting to $2,500, highlighting the effectiveness of our approach. The final trade of the month saw us locking in profits on 25% of the position, while the remaining 75% is holding steady at break-even after August's market dip.
Despite the challenging market, we secured a strong overall return of 18.25% for July.
Trade-0: Spot $BTC
We embarked on our journey with $100,000, investing in 1.8 BTC at the $55,400 level. We strategically sold at an average price of $60,250, securing a solid return of over 10% from this trade.
Trade-1: Long $SOL
The first position we took was a long position in $SOL at $131.5, at a leverage of 10x. We closed the position at $178.53, securing a total return of 35% on the trade. This stands as our most profitable trade of the month.
Trade-2: Long $BLAST
We initiated a long position in $BLAST at $0.017 with 10x leverage, setting a stop loss at $0.013. Unfortunately, the price of BLAST dropped, triggering our stop loss and resulting in a 25% loss, amounting to $2,500. But that's all part of the trading game—sometimes you win, sometimes you learn.
Trade-3: Spot $MOTHER
Our final trade of the month was with $MOTHER, which we entered at $0.0612 last month, setting our stop loss at $0.025. We secured profits by hitting our first target at $0.09 and booked 25% of our position. However, the market took a downturn in the last week due to economic factors in Japan and the USA, causing $MOTHER's price to dip below our entry point. Despite this, we anticipate a recovery as the market stabilizes and begins to recover.
Trade 4: Spot $WIF
After sudden fall in market due to Japan Interest Rate crisis since Friday, we moved our stop loss from $1.4 to $1. Currently our position is showing an unrealized loss of $400. Hoping to see some recovery this week as Global tension eases.
If you have any questions, ideas, or feedback, please feel free to DM me on Substack or Twitter, or join our Telegram group for live updates and alpha as they happen. Let's continue to navigate the market together!
CRYPTO MENTAL MODELS
Last few days have been very tiring for most markets and traders, especially if you have been holding on to ETH. If you have been reading our daily commentary on TG or 5 Min Weekly newsletter, then you would know that we have been very bullish Solana and we were urging our readers repeatedly that ETH ETF is going to be “sell the news” and probably worse.
Markets puked and we covered it in detail here. But I am very thankful that I have seen 5 such crazy bear market events in my last 10 years in crypto. I’ve seen the depths of the depths where you just want to give up and then the golden age where lambs and up-only mantras resound everywhere. With time, experience and watching these markets very closely, I have build some mental models that I want to transparently share over the course of this newsletter of next 52 weeks.
They are especially much needed for the younger blood and degen in you. I strongly advise that you read it twice and absorb as much as you can. There will be a bear market again and I want you to be ready.
Able to Stable - In my early crypto carrier, I was unable to push the sell button and couldn’t cash out at all in 2018. Thankfully I dint sell and the market gave me serval chances again. What did I do? I f***d up again in 2021 but since then I have been a ruthless serial seller. On my personal portfolio, I have not only been long a lot of SOL, but also been cashing out religiously when I can. Sometimes, you do not have an edge, and sometimes, market is just exhausted. Book profits, take out cash, buy some assets, diversify, go on a holiday, buy gifts for family, so what fancies you most, but BOOK PROFITS REGULARLY in crypto. When markets are 30% down and you are buying, you know you will end up making profits, A near certainty. Not when you are buying ATH in your fav KoL shilled coin. Market will give you chances repeatedly. You need to be cash ready and stabled up.
Narratives win big - When something is in trend, Donn’t fade it. If you look at the larger crypto picture today, there is no use case other than degens trading memes. AI, gameFi, RWA, etc etc never stuck like memes. You need to take a seat back sometimes and realise that this is the only narrative in town. There used to be few back in the day like DeFi & NFT’s and then GameFi but this bull run has solely been memecoins on Solana more or less. Then why waste time elsewhere? Why not up your game on these unless you see a new proven narrative taking place.
Avoid catching falling knives. Those coins are falling because your well wisher VC’s are exiting or shorting or hedging their vested schedules. they launched at billions of dollars FDV and they hedged or sold and moved on to their next project. Look at any L2 around and you will know what I mean. If Meta and Google are free but stealing your data, VC driven Ponzi L2s are no different. Give you free airdrops and Ponzi upon Ponzi and take your money on listing. Blast and FT are classic recent examples, but this has bene the game since 2017. Same Sh** different day, different style.
Sell when market is Euphoric - I’ve seen this so many times now. The TG narrative last year was built by UNIBOT and died with UNIBOT. I bought UNIBOT at $17 and rode it till $200. Sold half but couldn’t pull there trigger on remaining half. I lost it all. Hard lesson learned. Don’t get caught in KoL hype - no one knows your positions better than you. Do not be married to your positions. A $10 profit is better than a $1 loss. There is a new opportunity every week here in crypto.
The Garbage Leaders - Be very selective who you are following. Most groups and KoLs are fake and so are VC’s. You need to make your own selection. Take notes and keep a track of their calls. DYOR. And trade with your own conviction, not someone else’s. If they were so good, they won’t be selling their newsletter for pennies or having a paid TG group.
A PASSING WORD ON LEVERAGE: A NUCLEAR WEAPON IN FINANCIAL WORLD
What is Leverage? Leverage uses borrowed funds to increase potential returns, but it also magnifies losses.
The Appeal and Danger Leverage can boost profits but can also lead to significant losses, margin calls, and emotional stress.
Key Risks
Increased Volatility: Small market moves can cause big losses.
Margin Calls: Brokers may force you to add funds or liquidate positions. Crypto markets were not spared during the weekend as global macro sell off came. Over $500B was wiped off with global liquidations forcing leveraged traders to lose around $1B to margin calls.
Total Loss: High leverage can wipe out your investment quickly. Many traders get REKT due to wrong position sizing.
Tips for Traders
Use Leverage Wisely: Opt for the minimum leverage to manage risk and switch to other trade options if volatility is more than expected.
Set Stop-Loss Orders: Limit potential losses, as we limit every trade at maximum 5% of our portfolio size for eg in our Blast trade, our decision to set a 25% stop loss saved us from a total wipeout.
Diversify: Spread risk across multiple positions.
Maintain Margin: Keep enough funds to withstand fluctuations.
Focus on Risk Management: Prioritize protecting capital over chasing profits and try to take profit consistently so you don’t end up losing the gains which you made
Conclusion Leverage can be beneficial, but over-leveraging is risky. Use it cautiously, manage risk, and aim for consistent, sustainable gains. For example: On our SOL trade, leveraging 10x and adjusting our take profit as stop loss allowed us to lock in gains even when the market took a U-turn last week. This highlights that successful trading is about capital protection, taking profit consistently and steady growth.
Quick Macro & Crypto TL;DR
THE GOOD
Yeah right. The only good this week was that we had lot of opportunities to take some decent positions.
FED might be considering a 50 bps cut. But is that necessarily good?
THE BAD
Market Mayhem that we covered in more detail here : 5-Minute Macro and Crypto Weekly.
THE UGLY
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For more regular insights into macro and crypto trends, subscribe to our weekly newsletter: 5-Minute Macro and Crypto Weekly.
Week 5, Trade 5: Long $BTC, $SOL & $WIF
This crash has given us a very good buying opportunities and we took some positions that have worked for us in July. That was the simple trade when market is 30-50% down. Buy what works.
Why $BTC, $SOL & $WIF?
$BTC below $50K was a no brainer. We had closed our earlier $BTC position in profit with an average sale price of $60K. The $BTC trade became very lucrative when the price fell below $50K and the Risk to Reward ratio became very attractive. We bought some $BTC at $49,750.
Solana is our favorite coin as readers know and there is no other narrative but SOL memecoins. The pull back in $SOL was stronger and faster than $BTC and $ETH, dipping to $110, and we waited for a reversal before we took our positions at $121. For our detailed thesis on Solana you can read here.
We just wrote our thesis on $WIF last week and we still stand by that trade and hence we increased our stop loss to $1 and as the market drop we saw an opportunity to make additional return and went double down on our $WIF trade and bought more $WIF at $1.2. You can refer our last week trade for our rationale on the $WIF trade
Have We Passed The Market Mayhem Or More Bloodbath Is Yet To Come?
Global markets are showing signs of recovery this Tuesday, with cryptocurrencies rallying and hitting strong support zones.
We anticipate a 7-10 day consolidation within the current price range. However, market movements are inherently unpredictable. Following our strategy, we plan to allocate 5% of our portfolio to each trade during this period to manage risk effectively and capitalise on potential gains.
Global markets have recently priced in almost all the negative news, but they're still vulnerable to shocks. Any unexpected turmoil in the Middle East or a significant collapse of a major company, institution, or bank could trigger another sharp decline.
Given recent geopolitical tensions and economic uncertainties, such as the instability in various regions and financial strains on large entities, the markets are on edge. Should any significant adverse event occur, we could see another 5-10% drop in global markets but still nothing can be certain so it is best to stay out of leverage and trade the Spot market because the longer you're in the market, the higher the chances you win.
Technical Analysis & Trade Positioning
$BTC
Accumulation is the goal in $BTC as it has a strong support range at $49K. If it breaks then it has good chances to reach $40K-$43K but if that breaks anything can happens and all bets are of the table. Though right now, there is not much bullishness in $BTC right now but moves are sharp therefore restrain from trading and focus on accumulation.
$SOL
$SOL has a consolidation zone between $125-$145, it has been stuck in this many times in the past and the probability of moving upwards is very high in Solana but this time it will also need to break resistance and face 200D SMA which might be difficult to break in the given market conditions. Long term targets keep opening as $SOL starts breaking resistance levels. It has a major resistance at $190-$180 which has been a reversal zone many times in the past.
Conclusion
The fifth trade of “The 52” is Long $BTC, $SOL, $WIF
$BTC
Entry Price- $49,750
Stop Loss- $43,000
Take Profit 1- $70,000
Take Profit 2- $80,000
Take Profit 3- $90,000
$SOL
Entry Price- $118
Stop Loss- $100
Take Profit 1- $170
Take Profit 2- $190
Take Profit 3- $220
$WIF
Entry Price- $1.2
Stop Loss- $1
Take Profit 1- $2.5
Take Profit 2- $2.9
Take Profit 3- $3.5
You can track all our trades here.
Now go grab a coffee and please DM for any questions. Keep in mind, this is NFA and DYOR.
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