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Trading is becoming increasingly popular nowadays. However, when starting out, you need to define which approach you will take to enter the financial markets. Trading is so versatile that it’s not about adapting to the markets, but rather finding the right trading style that will match your personality and lifestyle. Each trading style has its own unique approach, risk tolerance, and strategy.

What is a Trading Style?

A trading style is defined by the way you trade the markets. How often you look at charts, how many positions you take, and how long you’ll hold them are all factors that contribute to your trading style. In this blog post, we will dive into the most common trading styles and their characteristics.

The four main trading styles are position trading, swing trading, day trading, and scalping.

Position Trading

If you’re just starting your trading journey, position trading is not a common style. This type of trading requires you to learn about both technical and fundamental analysis, which requires economic and financial understanding.

In terms of personality and lifestyle, position trading won’t require much of your time looking at charts. Position traders often check their positions once a week, which allows for a more relaxed lifestyle and the ability to dedicate more time to other jobs, family, travel, or your own startup.

Swing Trading

Swing trading is a popular trading style. If you’re just starting out in trading, I recommend that you begin with swing trading. This approach will help you develop the patience required to analyze medium and high timeframes, which have less noise and can help you understand the main dynamics of price action. You’ll need to learn fundamental analysis, but since you won’t be exposed to the market as much as position traders, your decision-making process won’t be as influenced by fundamentals.

In terms of personality and lifestyle, swing trading requires you to look at charts at least once per day. This is a relaxed approach to the markets since you’re trading medium timeframes that allow flexibility between trading sessions. You can use the rest of your time to learn new skills, spend time with your family, work a normal job, or pursue hobbies.

Day Trading

This trading style is commonly referred to as intra-week trading. It can be a good option for beginners since it allows them to avoid lower timeframes that often have more noise and can be confusing. While it requires less fundamental and macroeconomic understanding, it’s important to stay aware of news events throughout the week.

Here are some key points:

In terms of personality and lifestyle, day trading requires constant monitoring during the most important trading sessions (London, New York, and Tokyo). This means that you need to be available to look at charts throughout the day to manage your trading positions. If you’re day trading, you’ll likely spend most of your time trading and doing research.

Scalping is considered the most difficult trading style. It requires total focus on the markets on a daily basis, and there is a lot of noise on lower timeframes. This trading style is only recommended for experienced traders, as trading on lower timeframes and taking multiple trade setups throughout the day requires top-notch risk management tools and a psychological approach.

Here are some key points to keep in mind when scalping:

Scalping requires good time management skills, as scalpers usually only trade for several hours during the main trading sessions. Since they close their positions at the end of the day, they don’t have to look at the market until the next day. It is important to manage yourself well under pressure and work on your psychological balance on a daily basis.

It’s extremely important for you to define your trading style based on your lifestyle and personality. By doing this, you’ll be closer to being profitable in the long run and you’ll enjoy trading much more.

🐦At The Birb Nest, we have a dedicated team of Trading Analysts who are available 24/7 to help you reach your trading goals and learn. We’ve already shared several educational materials inside our discord that you don’t want to miss.

Don’t hesitate to reach out if you need any guidance!

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When it comes to trading, the goal is always to make a profit. However, the road to success is not always smooth, and the journey is often filled with risks. That’s where risk management comes in.

Trade management, on the other hand, involves the application of strategies to optimize the potential profits of a trading strategy. It includes the use of tools such as stop-loss orders, profit targets, and position sizing to maximize returns and minimize losses.

In this blog post, we will explore the importance of risk and trade management in trading and discuss some best practices for implementing effective strategies.

Risk Tolerance

💡 When entering a trade, it’s important to consider your risk tolerance. Personally, I approach each trade with the mindset that I’ve already lost the money I’ve invested. This helps me understand that successful trades aren’t solely focused on potential profits, but also on how much they could potentially lose.

As a general rule of thumb, if you’re risking USD 1.00, you should aim to make at least USD 2.00.

In my experience, I prioritize achieving a higher risk-to-reward ratio (R:R) while also being realistic. Pursuing a higher R:R requires patience as you wait for the price to reach your take profit level. However, it’s important to remember that there is no guarantee that the price will reach that level. Therefore, it’s essential to detach yourself from the outcome of the trade and be prepared to close it if things don’t go in your favor. I understand that this can be a difficult task.

Measuring Risk

These are the two main ways of measuring risk:

Here’s an example of how using a 1% risk per trade in a 20 trades sample, can benefit the longevity of your account instead of taking on excessive risk:

Risk to Reward

The traditional approach of using risk-to-reward as your main trade and risk management tool is highly effective. This tool measures the amount of risk you are taking on in comparison to your potential reward. By using this tool, you can ensure longevity in your trading account.

To illustrate the effectiveness of risk-to-reward, let’s examine an example of an equity curve with simulations of different risk-to-reward ratios and strike rate percentages.

Win rate: 50% – RR: 1 to 1

In this scenario, a 50% win rate with a 1:1 risk-to-reward ratio will prolong the longevity of your account. However, this strategy is essentially gambling, as the results of a 100-trade sample data set show that the chances of a positive or negative balance are almost 50/50. It’s like flipping a coin.

Win rate: 50% – RR: 1:2

This is a great example of a high risk-to-reward ratio. Despite a 50% win rate, you can still expect to win 5 trades out of 10 on average. What’s more, your wins will outweigh your losses two-fold, making it much more likely that you will be profitable after a sample of 100 trades.

Please keep in mind that these examples are intended to provide guidance, and it is important to consider the time required to execute 100 trades. The time needed will depend on your individual trading style. For example, if you are day trading and only taking one trade per day, it will take 100 consecutive days of trading to have a statistically significant sample size.

Inter Market Correlations

This is an important consideration: Most markets are correlated with each other, and the main difference between them is risk-on and risk-off assets. When you only trade cryptocurrencies, you are essentially trading nearly 90% correlated risk-on assets, which magnifies your risk.

If you take a long position on ETH, LINK, and XRP at the same time and BTC experiences a significant drop, even though your analysis is sound, these altcoins will follow BTC and you will end up getting stopped out on all of them. Essentially, you are risking 3% of your account in a single correlated market.

To achieve success in trading, it is crucial to efficiently manage your trades and risks. This includes having a clear understanding of your risk tolerance, utilizing dependable risk-to-reward strategies, and measuring risk accurately. By doing so, you can minimize losses and maximize gains. It’s important to remember that trading is not a get-rich-quick scheme, and patience and discipline are necessary for long-term success.

🐦 At The Birb Nest, we have a dedicated team of Trading Analysts who are available 24/7 to help you reach your trading goals and learn about risk & trade management. We’ve already shared several educational materials inside our discord that you don’t want to miss with more in-depth analysis of these topics.

When it comes to trading, the goal is always to make a profit. However, the road to success is not always smooth, and the journey is often filled with risks. That’s where risk management comes in.

Trade management, on the other hand, involves the application of strategies to optimize the potential profits of a trading strategy. It includes the use of tools such as stop-loss orders, profit targets, and position sizing to maximize returns and minimize losses.

In this blog post, we will explore the importance of risk and trade management in trading and discuss some best practices for implementing effective strategies.

Risk Tolerance

💡 When entering a trade, it’s important to consider your risk tolerance. Personally, I approach each trade with the mindset that I’ve already lost the money I’ve invested. This helps me understand that successful trades aren’t solely focused on potential profits, but also on how much they could potentially lose.

As a general rule of thumb, if you’re risking USD 1.00, you should aim to make at least USD 2.00.

In my experience, I prioritize achieving a higher risk-to-reward ratio (R:R) while also being realistic. Pursuing a higher R:R requires patience as you wait for the price to reach your take profit level. However, it’s important to remember that there is no guarantee that the price will reach that level. Therefore, it’s essential to detach yourself from the outcome of the trade and be prepared to close it if things don’t go in your favor. I understand that this can be a difficult task.

Measuring Risk

These are the two main ways of measuring risk:

Here’s an example of how using a 1% risk per trade in a 20 trades sample, can benefit the longevity of your account instead of taking on excessive risk:

Risk to Reward

The traditional approach of using risk-to-reward as your main trade and risk management tool is highly effective. This tool measures the amount of risk you are taking on in comparison to your potential reward. By using this tool, you can ensure longevity in your trading account.

To illustrate the effectiveness of risk-to-reward, let’s examine an example of an equity curve with simulations of different risk-to-reward ratios and strike rate percentages.

Win rate: 50% – RR: 1 to 1

In this scenario, a 50% win rate with a 1:1 risk-to-reward ratio will prolong the longevity of your account. However, this strategy is essentially gambling, as the results of a 100-trade sample data set show that the chances of a positive or negative balance are almost 50/50. It’s like flipping a coin.

Win rate: 50% – RR: 1:2

This is a great example of a high risk-to-reward ratio. Despite a 50% win rate, you can still expect to win 5 trades out of 10 on average. What’s more, your wins will outweigh your losses two-fold, making it much more likely that you will be profitable after a sample of 100 trades.

Please keep in mind that these examples are intended to provide guidance, and it is important to consider the time required to execute 100 trades. The time needed will depend on your individual trading style. For example, if you are day trading and only taking one trade per day, it will take 100 consecutive days of trading to have a statistically significant sample size.

Inter Market Correlations

This is an important consideration: Most markets are correlated with each other, and the main difference between them is risk-on and risk-off assets. When you only trade cryptocurrencies, you are essentially trading nearly 90% correlated risk-on assets, which magnifies your risk.

If you take a long position on ETH, LINK, and XRP at the same time and BTC experiences a significant drop, even though your analysis is sound, these altcoins will follow BTC and you will end up getting stopped out on all of them. Essentially, you are risking 3% of your account in a single correlated market.

To achieve success in trading, it is crucial to efficiently manage your trades and risks. This includes having a clear understanding of your risk tolerance, utilizing dependable risk-to-reward strategies, and measuring risk accurately. By doing so, you can minimize losses and maximize gains. It’s important to remember that trading is not a get-rich-quick scheme, and patience and discipline are necessary for long-term success.

🐦 At The Birb Nest, we have a dedicated team of Trading Analysts who are available 24/7 to help you reach your trading goals and learn about risk & trade management. We’ve already shared several educational materials inside our discord that you don’t want to miss with more in-depth analysis of these topics.

Recent bank failures have shaken global financial markets. Last week, the Silicon Valley Bank failure dominated the headlines. In this blog post, we will discuss why this happened and how it directly affects the crypto market, particularly Bitcoin. Is it possible that the ongoing monetary policy of the Federal Reserve is coming to an end?

Impact of the Federal Reserve Fund Rates

This has been one of the most aggressive rate hikes in the last four decades. But first, let’s understand what rate hikes mean.

💡 Interest rates are the amount that a lender charges the borrower for the loan. In terms of the Federal Fund Rates, this is the target rate set by the FOMC to determine the rate by which commercial banks borrow and lend their excess cash (reserves) to other institutions.

Investors always keep an eye on the interest rates set by the FOMC because an increase in interest rates will make borrowing money more expensive. This will also make certain goods and services more expensive, causing consumers to spend less. This decrease in demand will cause businesses to cut down on production and lay off employees, which will increase unemployment and slow down the economy.

Higher interest rates will directly impact the bond market, as yields from U.S. Treasuries to corporate bonds will start rising, making them more attractive to investors than risk-on assets such as stocks or crypto assets. That’s why, in the past months since the Federal Reserve started raising rates, crypto assets and stocks have been declining sharply in a bear market, as they are no longer attractive to investors.

Bank Failure

The recent failure of Silicon Valley Bank, the 16th largest bank in the U.S., can be attributed mainly to the ongoing higher rates set by the Federal Reserve.

While the collapse of the cryptocurrency Silvergate Bank sparked a wave of deposit withdrawals around U.S. banks, it was not the main reason for SVB’s collapse. Instead, the ongoing high-rate environment led to startup clients withdrawing funds to keep their companies afloat. When demand for goods and services slows down, it is not good for companies. As a result, SVB found itself short on capital and was forced to sell all of its available bonds at a $1.8 billion loss. This caused panic about a possible bank run, and SVB’s stocks declined by almost 60%.

Customers withdrew $42 billion of deposits by the end of Thursday and by the end of that business day, SVB was drowning on a $959 million negative balance and wasn’t able to collect enough collateral from other sources.

Why is this important for future FOMC declarations regarding rate hikes? “Black swan events” like this have a tendency to be contagious. Investor panic could lead to massive withdrawals from banks across the US, which could result in unfortunate consequences like those experienced by SVB. The next FOMC statement is scheduled for March 22, 2023. The Fed is currently dealing with an unpleasant situation in which it must remain aggressive in order to reach its goal of 2% inflation. However, more aggressive rate hikes could potentially cause an economic collapse and recession. Expectations for the next target rate are now 95.2% inclining towards a 25-50 basis points increase.

Why this is important for the future of Bitcoin & Crypto Assets

As previously explained, a high-interest rate environment is detrimental to risk-on assets. However, it is feasible for the FED to pivot now, given the looming possibility of an economic collapse that could surpass the scale of the “Great Recession.”

It is worth noting that cryptocurrencies are not immune to broader market trends. In fact, the value of most cryptocurrencies has also significantly declined in the aftermath of these events. One of the primary reasons for this is that cryptocurrencies are still predominantly reliant on the traditional financial system. Most crypto exchanges depend on banks to process transactions and store fiat currencies. The breakdown of banks can cause disruptions in these services, which can impact the value of cryptocurrencies.

As seen in the image above, Bitcoin has declined almost 22% from the recent highs in the past 2-weeks. As for now, Bitcoin has gone up and erased almost 50% of the recent decline because of the possibility of a dovish FED in the upcoming economic calendar.

Despite these challenges, the crypto market remains resilient.

Technically Speaking

Bitcoin has rebounded strongly from the 200-day moving average and is currently trading in a range formation zone within a high volume node between the high at 25,296.10 and the low at 20,385.00. The expectation of a dovish FED in upcoming meetings could potentially drive prices higher, as speculation plays a significant role in asset prices.

A breakout from this range could push Bitcoin’s price towards the next high volume node, which is currently between 28,000.00 and 32,500.00. However, the fate of Bitcoin’s price is not set in stone, and another black swan event could quickly drive prices lower. Therefore, managing risk is crucial in this situation, especially given the current unstable geopolitical and economic environment.

The recent bank failures have significantly affected the value of cryptocurrencies. However, this is not a sign that the crypto market is doomed. Rather, it is a reminder that cryptocurrencies are still in their early stages and are subject to the same market forces as traditional assets.

🐦At The Birb Nest, we have a dedicated team of Trading Analysts who are available 24/7 to help you reach your trading goals and learn about financial markets. We’ve already shared several educational materials inside our discord that you don’t want to miss.

Don’t hesitate to reach out if you need any guidance!

Our CEO – Crypto Birb recently released a Bitcoin Call, follow the link below to have the full explanation:

I’ve just bought $715000 worth of $BTC following my trend breakout signal. Here’s full explanation👇 pic.twitter.com/Uc4ZhCkL0x

— Adrian Zduńczyk, CMT (@crypto_birb)

If the Bitcoin price is heading higher, then you don’t want to miss this amazing opportunity to win $100 in $BTC and a FREE Hoodie of The Birb Nest 👇

💥$100 GIVEAWAY💥

It’s official. After many years, our incredible hoodies are back at 100 pieces with a special trading bundle only. To celebrate, I’ll give away $100 in $BTC and a limited hoodie to two lucky followers. To win, just:

🔑 Like

🔑 RT

🔑 Comment “hoodie” now! pic.twitter.com/uPVuINF2of

— Adrian Zduńczyk, CMT (@crypto_birb)

As you may know, geopolitical and macroeconomic uncertainty plays a significant role in driving market trends. The day-to-day fundamentals and comments on crucial topics such as FED Interest Rates, Russia & Ukraine War, and Energy Crisis, among others, can have a substantial impact on the markets. With so much volatility, it’s difficult to confidently predict possible economic outcomes for 2023. Nevertheless, we’ll explore the main topic and analyze it in-depth to gain a better understanding of the current market state.

Furthermore, the 7-week correlation coefficient at 0.97 provides a strong relationship and cross-dependence of BTC on the $SPX. Therefore, BTC is likely to follow any directions taken by large-cap stocks.

While the short-term fluctuations can’t be eliminated, the long-term price history since June 2010 reveals a reliable chart pattern where every decisive breakout to the upside following a declining 200-day trend of the primary bear run initiated a new bull run.

Traders should consider the fact that there is little sample within the short price of the history of Bitcoin. However, ignoring a 100% reliability of such a chart pattern may not be the smartest choice.

When it comes to FED monetary policy in 2023, there are a number of possible scenarios to consider, including recession and no recession, higher inflation or deflation, and a tighter labor market or an increase in unemployment.

The potential outcomes of these scenarios could have either a bullish or bearish impact on risk-on assets like Bitcoin and equities. If a recession does occur in the coming months, the FED might pivot quickly, which could help risk-on assets recover rapidly and possibly initiate a new bull market. However, if the labor market remains tight and wages are inflationary, the FED might need to continue tightening, which could result in further declines for risk assets. It’s important to understand the possible outcomes of these different scenarios in order to make informed investment decisions.

While the correlation between equities and Bitcoin has been decreasing recently, this doesn’t necessarily mean that Bitcoin will hold up if equities continue to decline. The low-interest rate environment over the past few years has driven both markets upward, resulting in an increase in market capitalization and institutionalization of the crypto space. This has led to crypto becoming more correlated with equity behavior and performance.

It’s important to understand the correlation between crypto and equities in order to establish a bull or bear thesis for crypto. Whatever justifications are made for taking a long or short position on equities should also be reflected in crypto. While crypto investors often have little macro knowledge and tend to be disconnected from stocks, it’s necessary to connect both markets in the middle ground. In a neutral or bear market, being completely ignorant of the direction of each market asset class is not acceptable. The reality is that connecting both markets is necessary, and being dismissive of fundamentals is not a good strategy.

As seen in the chart below, there is an interesting pattern-based technical similarity with the end of the last two bear cycles for Bitcoin:

Even though the bear market trendline has been breached, the previous bear cycle’s duration was between 2-3 years. At the moment, since the top of the market in November 2021, the time elapsed has been around 430 days. Due to the challenging macro environment and the bear cycle not lasting as long as previous ones, the chances of a bull cycle starting for Bitcoin this year are very low.

If interest rates stay high over the next two years, it’s less likely that crypto will perform well. FED officials have indicated that they plan to maintain high rates and not repeat the interest rate tightening and loosening cycles that were used during the inflationary crisis of the 1970s. Instead, they will keep rates elevated for a period of time, but at lower levels than those seen in the 70s due to higher levels of debt.

To sum up, understanding how macroeconomic uncertainty can affect Bitcoin and equities is crucial for making informed investment decisions. By analyzing possible scenarios and their impact on risk-on assets, we can better prepare for market trends. While Bitcoin and equities may not always be correlated, it’s important to understand the relationship between them and connect both markets in the middle ground.

Thanks for taking the time to read through our document. We think it’s important to stay informed about the current market state, which is why we’ve analyzed this topic in-depth.

🐦 At The Birb Nest, we have a dedicated team of Trading Analysts who are available 24/7 to help you navigate these extreme market conditions. We’ve already shared several market theses inside our Discord with Legacy and Crypto market explanations for both Intraday and Swing trading.

Don’t hesitate to reach out if you need any guidance!

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✨I do live streaming every Sunday at 11am(Japan time).Please come and watch.

👕 T-shirts and goods
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@hideaki_utsumi

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