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HomeThe Trader's PerspectiveRisk management and Market Psychology.

Risk management and Market Psychology.

In this edition of The Trader’s Perspective we interviewed Weslad, a professional forex and cryptocurrency trader and the founder of WCSE R&A.

Full interview with Weslad

BBOD: Please introduce yourself and your background in trading. 

W: My name is weslad, top trader in tradingview with over 6,700 followers, founder of WCSE R&Analysis Telegram group with over 13,000 followers, a professional forex and cryptocurrency trader with over 15 years trading experience, owner of pipsflush trading strategy, well known forex and cryptocurrency tutor and also a financial investment manager. 

BBOD: What is your main trading strategy and what kind of trading tools do you use to analyze the market?

W: Talking in terms of trading strategy, I will say so far, ELLIOT WAVE has been my best trading strategy and I use this mainly in accompany with PRICE ACTION analysis. So, the best tool for market analysis remain Relative Strength Index(RSI). This is used to determine market momentum situation. 

BBOD: What are the most common mistakes traders make and how to avoid them? 

W: The most common mistake is failure to follow designed trading plans or not even have any trading plans. The best way to avoid this is to remain disciplined and see trading as a business that needs consistency, rather than aiming to hit it big in just a trade like hyip program. 

BBOD: Please tell us more about WCSE R&Analysis and how a newbie can benefit from your WCSE R&Analysis? 

W: Firstly, let’s talk about what WCSE R&A stands for: Weslad Cryptocurrency Secret Exposed Research and Analysis. 

From the above meaning the group itself stands for research and analysis zone, where many top traders joined together and give out their trading ideas, and these ideas are usually well spelled out with typical tradingview access links for better understanding. We believe in teamwork, for maximum trading success! In WCSE R&A, many newbies have become better traders, where they trade independently based on the knowledge obtained from the group. Many intermediate traders are joined the group in order to become better and fully independent in trading decision making. 

BBOD: What is the riskiest trade you ever made? What was the outcome? 

W: Oh, interesting! The riskiest trade I took was also the most difficult trade I ever took as a trader, and this happened in 2009 with GBPJPY, when I went in with an aggressive lot size. Which at the end paid off with a huge profit. But the trade really drained off my patience as my stop loss was missed with just 1 pip before it ran into massive profit with over 250pips. This is really crazy. 

BBOD: What qualities make a trader successful? 

W: The best quality to be a successful trader is the ability to have self discipline, which is a key trait every trader needs and together with the patience to follow a designed plan to success. 

BBOD: Which crypto exchanges do you use and why? 

W: Presently, I trade with Bittrex, Binance and Bitmex. I choose them due to their platform simplicity and user friendliness. 

BBOD: How do you define risk when entering a trade? 

W: Risk is determined using a stop loss order based on self designed analysis or a trading plan, where the risk is the price difference between the entry point of the trade and the stop loss order. Risk mitigation is a must know to all traders that aim for successful outing on their trading. 

BBOD: How important are emotions in trading? 

W: The psychological aspect of trading is extremely important, because a trader tends to see different things as a trade develops. Ignoring the psychology of trading will almost guarantee a trader failure. At the same time this also encompass discipline to follow all the set rules without giving in to emotions. 

BBOD: How important is volume and liquidity in crypto exchanges? 

W: Trading volume is important in identifying healthy investments because it shows the amount of activity that is surrounding a coin or a token. This metric will allow traders to see how popular an asset is and how frequently it is changing hands. Moreover, talking about liquidity, it is the degree to which a particular asset can be quickly bought or sold without affecting the general stability of its price. It also represents one of the most important concepts, apart from market capitalization which everyone needs to understand when trading or investing in cryptocurrencies or any financial market. 

BBOD: How does one learn to accept losses? 

W: Losing is a part of trading, even the best traders in the world have losing trades, it’s just that our brains hate to lose. As a trader, we need to always be in control of our emotions, this comprises of; ‘how you react when you lose?’ ‘how you feel?’ ‘what comes to your mind?’ 

If you feel very bad, angry or sad, that simply means you were risking too much, or taking a trade outside your plans. 

BBOD: How does a trader not allow their greed to influence their position size? 

W: Fear and greed are two drivers that influence our everyday lives; it can be rather damaging if not managed properly. Fear is often observed as the reluctance to enter a trade or the closing of a winning trade prematurely. Greed on the other hand manifests when traders add more capital to winning trades or over-leveraging with the aim of making a profit from small moves in the market. The best way of controlling this, is by looking at the big picture of the market and follow already established plans rather than gambling on a trade. 

BBOD: Is it important to keep a diary of your trades? 

W: Keeping a detailed diary always helps traders to learn more from previous trades, and keeping goals in the forefront of their minds and also help to tweak and perfect trading strategy. More importantly a trading journal goes a long way in helping traders to grow in becoming better in what we do because a trading journal is a critical component for our overall trading plan and future success. 

BBOD: How do professional traders quantify risk (how much can I lose) 

W: Hmm, risk in trading is a must for all traders, the key to becoming successful as a trader is to find the right balance between how much you risk per trade to achieve the desired profit you are aiming for, this balance needs to be realistic and relevant to the set trading plans. But in the case of professional traders they tend to use risk to reward ratio a bit differently than some newbie traders. First, professional traders generally do not always stick to any predetermined risk to reward ratio, which many popular trading books advocate. These traders have taken the time to thoroughly backtest their preferred trading instruments to find out the historical win rate of their strategy based on various risk to reward ratios. Instead of fixating on a random risk to reward ratio like 1:2 or 1:3, experienced traders tend to use extensive data analysis to define what risk to reward ratio is suitable for a given trading strategy. 

BBOD: Do you average losing trades? 

W: This aspect of trading is very important because averaging down a losing trade usually means lifting of stop loss or not even have any, whereas this heavily increases the risk of open position and normally leads to bigger disaster. Although trader may be lucky but I will say may be 1 out of every 5times. Losing is part of successful trading. Majority of traders seems to have this attitude of always winning and never losing. Successful trading is a game of probabilities and statistics. Understanding the simple math behind it is a necessity. Trying to correct a losing trade by doubling down with a lower entry price is another popular mistake that majority of trader made on a daily basis and this always end up with margin call. Too much of self belief in the original trade idea, stubbornness, or the need to avenge initial losses always result into lack discipline. 

BBOD: How does a trader find their edge in the market? 

W: The popular belief is that an edge is something that a trader knows or uses, that gives them an advantage over the market, or over all of the other traders. This is also the same thing with a certain approach, observation or special technique that is in theory. A trader must understand that his edge may not work 100 percent of the time and that he could easily make a large sum of money using his edge, and then enter a season where his edge no longer works. 

The truth is that there are traders who believe that they have an edge, and there are traders who believe that they need an edge and are consequently looking for one, and there are traders who laugh every time someone mentions an edge, while they go and make another profitable trade. In other words, there may be no such thing as an edge, not over the market, and not over other traders, unless you consider having received good trading instruction as an edge. My candid advice goes to all the new traders that aim in looking for market edge to stop wasting their time because the search for a trading edge is as futile as the search for the holy grail of trading.

BBOD: Thank you very much for participating on this edition of “The Trader’s Perspective”, it was our pleasure to have you here.

Feel free to share your comments or questions in our Community on Telegram!

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BBOD is a cryptocurrency derivatives trading platform for retail and institutional clients. It offers a secure and transparent custody system and marketplace to trade Bitcoin and Altcoins futures contracts with a stablecoin collateral. The “transparent custody” feature means that BBOD does not hold either the clients’ digital assets or their private keys. Instead, a client has their own contract account on the Ethereum blockchain.

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