Preface:
On that sleepless night in March 2023, when the BTC price plummeted by 20%, my account underwent a brutal evolution from 6 million to zero within 3 hours. This disaster became the most important turning point in my trading career. This article will restore the true process of reconstructing trading discipline from the perspective of institutional traders.
1. Understanding the Essence of Leverage Usage
1.1 Leverage Rate ≠ Risk Coefficient
The risk formula should be corrected to: Actual Risk = Leverage Rate × Position Ratio × Volatility
The actual risk of a 5% position under 100x leverage is indeed less than that of a full position under 30x leverage
1.2 Dynamic Margin Management (using 5000U principal as an example)
Initial Margin: ≤ 5% (250U)
After a profit of more than 10%, move the stop loss line to the cost price
For every 100% increase in principal, reduce the maximum single position by 1%
2. Market Microstructure Analysis
2.1 Three-Dimensional Analysis of Trading Volume
Time Dimension: Observe the active period of major funds from 20:00 to 24:00 Beijing time
Price Dimension: Key position trading volume must reach more than 2 times the 20-day average volume
Order Book Depth: Be cautious of liquidity risk if the bid-ask spread exceeds 0.5%
2.2 Practical Corrections in Wave Theory
Join the OBV Energy Flow Indicator to verify wave patterns
The third wave must meet: RSI(14) in the range of 60-80
When the fifth wave appears with TD sequence count of 13, profit-taking must be activated
3. Professional Construction of Trading Systems
3.1 Scientific Path of Pattern Focus
First, use 3 months to backtest a single strategy over 500 times
Consider strategy combinations only when the Sharpe ratio > 2
It is recommended to start with clear patterns such as 'breaking above the upper Bollinger Band for 20 days + volume increasing by 3 times'
3.2 Institutional-Level Execution Standards for Stop Loss
Fixed Stop Loss: 2% of total account value
Dynamic Stop Loss: 2 times ATR(14)
Time Stop Loss: Close position immediately if no expected volatility occurs within 4 hours after entry
4. The Mathematical Foundation of Risk Control
4.1 Improved Application of the Kelly Formula
f* = (bp - q) / b
Where:
b = Expected Odds (suggested to take 3)
p = Winning Rate (must be at least 60%)
q = 1 - p
The calculated result should not exceed 10% of the principal
4.2 Black Swan Protection Mechanism
Keep 20% cash equivalents (e.g., USDC)
When the VIX index breaks 30, automatically close 50% of the position
Use options for hedging, with monthly expenses not exceeding 2% of the account
5. Daily Life of Professional Traders
5.1 Essential Elements of Trading Journals
Record the expected and actual values of volatility for each trade
Mark slippage costs (especially for large orders)
Emotional State Assessment (using a 1-10 scale)
5.2 Methodology for Cognitive Improvement
Read 3 CME or Binance Research Institute reports each month
Backtest classic strategies using Python
Participate in online seminars for institutional investors
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