Reviewing Past Trade Performance

Reviewing Past Trade Performance and Balancing Strategies

Understanding your past trading activity is crucial for improvement. For beginners, this review process should focus less on perfect outcomes and more on consistent execution of a Building a Conservative Trading Plan. The main takeaway is that effective trading involves managing your Spot market holdings while strategically using Futures contract tools to mitigate risk, rather than just seeking large profits. We will look at how to combine these two areas safely.

Balancing Spot Holdings with Simple Futures Hedges

Many beginners focus only on the Spot market, buying assets hoping they rise. However, futures contracts allow for more sophisticated risk management, especially when you hold significant spot assets. This concept is detailed further in Balancing Spot Accumulation with Futures Hedging.

Why Hedge?

Hedging means taking an offsetting position to reduce potential losses during market downturns. If you own 1 BTC on the spot market and fear a short-term drop, you can open a small short futures position.

Partial Hedging Strategy

A Simple Futures Hedging for Long Spot Bags approach is partial hedging. Instead of hedging 100% of your spot position (which cancels out potential gains), you hedge only a portion, perhaps 25% to 50%.

1. **Assess Spot Exposure:** Determine the total value of the asset you hold in your Spot market portfolio. 2. **Determine Risk Tolerance:** Decide how much downside you are comfortable absorbing. This relates to your Setting Aside Risk Capital for Trading. 3. **Calculate Hedge Size:** If you have $10,000 worth of BTC and decide on a 50% hedge, you would open a short futures position equivalent to $5,000. 4. **Monitor and Adjust:** If the market drops, the short futures position gains value, offsetting some of the spot loss. If the market rises, you lose a little on the futures but gain on the spot. This reduces variance.

Remember that futures trading involves Futures Trading Fees and Slippage Impact, which will slightly reduce your net performance compared to the theoretical hedge ratio. Always review your Spot Profit Taking Strategies alongside your hedging plan.

Using Technical Indicators for Timing Decisions

Indicators help provide context, but they are tools, not crystal balls. Never rely on a single signal; look for confluence, as discussed in The Danger of Trading on Single Indicators.

Relative Strength Index (RSI)

The RSI measures the speed and change of price movements.

Readings above 70 often suggest an asset is overbought (potential selling pressure).
Readings below 30 suggest it is oversold (potential buying opportunity).

However, in a strong uptrend, the RSI can remain overbought for a long time. Use it to gauge momentum exhaustion, not as an absolute buy/sell signal. See Using RSI for Entry Timing Decisions.

Moving Average Convergence Divergence (MACD)

The MACD shows the relationship between two moving averages of a price.

**Crossovers:** A bullish crossover (MACD line crossing above the signal line) can suggest momentum shifting up. A bearish crossover suggests the opposite.
**Histogram:** The bars show the distance between the MACD and signal lines, indicating momentum strength.

Be cautious, as the MACD can lag and produce false signals, known as whipsaws, especially in sideways markets. Review Interpreting MACD Crossovers Simply.

Bollinger Bands

Bollinger Bands consist of a middle moving average and two outer bands representing standard deviations from that average, indicating volatility.

When bands contract, volatility is low, often preceding a large move.
When price touches or breaks the outer bands, it suggests the price is relatively high or low *compared to recent volatility*. This is not an automatic reversal signal; sometimes the price "walks the band," as explained in Bollinger Band Walk Interpretation.

For practical guidance on local exchange use, see How to Use Crypto Exchanges to Trade in the Philippines.

Analyzing Past Performance: A Practical Review

Reviewing trades requires honesty about entry, exit, and emotional state. When analyzing, focus on whether you followed your Risk Reward Ratio for Beginner Trades plan.

Use a simple log to track key aspects. Here is an example structure:

Trade ID	Asset	Entry Price	Exit Price	P&L (%)	Reason for Entry	Emotional State
001	BTC	30000	31500	+5.0%	RSI oversold bounce	Calm, followed plan
002	ETH	2000	1900	-5.0%	FOMO buy near peak	Excited, ignored Resistance
003	SOL	120	126	+5.0%	Partial hedge test	Analytical, small position size

This helps identify patterns. Did you enter trades when you felt "excited" (often a sign of FOMO)? Were your profitable trades ones where you identified clear Identifying Support and Resistance Zones?

Trading Psychology Pitfalls

Emotional control is often more important than technical skill. Beginners frequently fall into predictable traps:

**Fear of Missing Out (FOMO):** Buying an asset only because it is rapidly increasing in price, often leading to entry at poor prices. This is a common mistake detailed in Avoiding Common Crypto Trading Mistakes.
**Revenge Trading:** Trying to immediately win back losses from a previous bad trade by taking on larger, riskier positions. This escalates losses quickly.
**Overleverage:** Using too high a multiplier on your Futures contract. High leverage magnifies small price movements into catastrophic losses, leading to Liquidation risk. Set strict leverage caps; for beginners, leverage should be very low (e.g., 2x or 3x maximum) when first learning Basics of Crypto Futures Contract Trading.

If you are trading long-term, consider reading How to Trade Crypto Futures with a Long-Term Perspective.

Sizing and Risk Management Examples

Risk management is about position sizing relative to your total capital, not just the trade itself. This is part of Spot Position Sizing for Beginners.

- Scenario: BTC Spot Holder Considering a Hedge**

Assume you hold 1 ETH spot, currently valued at $4,000. You are worried about a potential correction down to $3,600 (a 10% drop). You decide to use a 40% partial hedge.

1. **Spot Value:** $4,000 2. **Hedge Target (40%):** $1,600 notional value. 3. **Futures Position:** You open a short futures contract representing $1,600 worth of ETH.

If ETH drops 10% ($400 total loss on spot):

Spot Loss: $4,000 * 10% = $400
Futures Gain (approx.): $1,600 * 10% = $160 (ignoring fees/funding for simplicity)
Net Loss: $400 - $160 = $240.

By hedging, you reduced your potential loss from $400 to $240, allowing you to hold your core spot position. This strategy helps maintain a steady path, aligning with the principles of Defining Your Crypto Trading Time Horizon. Always ensure your stop-loss orders are set for your futures positions to prevent cascading losses due to high volatility events, as discussed in Futures Trading During High Volatility Events. For more advanced technical analysis, explore How to Trade Futures Using Volume Profile Analysis.

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Reviewing Past Trade Performance

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