From August 31st to September 1st, shorting Cyber ​​resulted in a loss of one million. Two days have passed, and I finally have the energy to write a review to sound the alarm for myself and to remind my partners in the community not to fall into the trap.

Part 1: What happened

What happened was that one day before Cyber's Luachpool mining ended, the market maker DFW suddenly started working, raising the price from $3.5 to $8.8.

Friends started talking about it, this is the next YGG, go for it, short it, and let the market maker be the counterparty.

I opened a short position at 8.8 dollars. The more it went up, the more I added to my position. As a result, it kept going up to 12.4. I saw that the momentum was not right, so I chose to close my short position, thinking of following the market maker and going short again later. And at this time, the funding rate was already 2.5%, which was charged every 4 hours. It was 4 o'clock in the morning.

As a result, I opened long positions twice, and I stopped winning after a short period of time. When I was hesitating whether to continue to long or short, I continued to open long positions, and then I was too sleepy and fell asleep.

When I woke up for the first time, I found that I had made money. The price was 15.5, so I continued to sleep. When I woke up again, it was 11.2. I was so depressed. I checked the information and found that the project owner said that it would double the chips. I quickly closed the position. At this time, I was already scared and didn't know whether to continue to short or stop.

Until 16:00 in the afternoon, the project party's proposal to double the amount was passed. In the end, they said that the number was written wrong, and there was only a 10% increase (I am really impressed that even this was written wrong). However, the market no longer bought it, and the price difference between spot and futures was already 3 dollars.

Finally, the market maker chose to end the battle, and Cyber ​​also went from $3.5 to $16 and then to $8. (Since the ETH chain was only available on Upbit in South Korea, it once reached $35. The Koreans were too fierce, and the market makers were really ruthless, and then it fell to $10 in one hour.)

Unfortunately, I became a liquidity provider. I admit that I am an idiot. I write this down here in the hope that others will learn from it. Don’t short blindly, don’t trade against market makers, and don’t do things that you are not good at.

Part 2: My orders and losses

Summary of cyber losses [from top to bottom, according to the timeline]

1. 8.8-8.55 I shorted 10,000 positions and earned $2,900

2. I shorted 27,600 positions at an average price of 10.7, and stopped loss at 12.4, resulting in a loss of $85,000. I also traded in waves in the middle to reduce the loss.

3. Buy 18,000 lots at 12.74, take profit at 13.99, earn $22,361

4. I bought 16,000 lots at 13.9-14.6 and made a profit of $11,000.

5. I bought 20,000 lots from 14.57 to 11.2, and lost $67,000. [I had the opportunity to take profit at 15.5, but I didn’t do it because I was too sleepy and fell asleep, and I didn’t continue to sell.]

6. 12.2-10.68, 13,000 long positions, loss of $20,000.

7. Short 15,000 shares on August 8-3, earning $7,500

The final loss was $147,000. [137,000 loss + 10,000 funding rate]

Part 3: Summary and reflection on the mistakes I made in this process.

1. Unreasonable position control and covering positions with floating losses.

When I first started this project, I wanted to invest $100,000, and Brother Jinma even asked me specifically how much I was prepared to invest.

Later, I thought that $100,000 to $300,000 was acceptable. Afterwards, I thought that a position of $300,000 was too large when the market was so bad, and the short position was doubled to $600,000, and there was no limit. So it was still a position management problem. Poor position management led to a change in mentality.

And as the price increased, I kept adding to my positions from the average price of $8.8 to $10.7, and I also reduced my holding costs in the middle.

2. Only hedging, no naked short selling.

Our partners who often engage in arbitrage know that hedging is common and there are some principles:

I. Priority: Borrowing Coins > Short Selling;

II. Try not to hedge for too long;

III. For large positions, you can use An'an's VIP LOAN, which allows you to replenish margin 24 hours a day without closing positions, and there is no risk of being stabbed. [If you want to borrow more than $1 million at a time, you can contact Mr. Long to open the permission. I can recommend it to you if you need it. ]

Without naked short selling, the maximum return of short selling is 100%, but the loss may be unlimited because you will keep replenishing the margin. In order to ensure that there is no liquidation, I added 1.2 million dollars of collateral, and the liquidation price is 50 dollars.

In extreme cases, I would lose all of my collateral of $1.2 million. Fortunately, he is still there.

The odds for shorting are really not enough. The picture below is the line of another coin that Hongle sent me that was accurately liquidated. It's terrible.

Duan Yongping lost 150 to 200 million US dollars when he shorted Baidu. He said it was his most failed investment.

3. Not writing an investment plan, making random operations in the middle, and disrupting the rhythm.

Due to unreasonable position control and the 2.5 basis point funding rate every 4 hours (the next day, the funding rate was 2.5 basis points every 2 hours), it is easy to surrender when the account has too much floating loss. So always remember to write an investment plan and strategy before executing it. The tricky operation in the middle actually reduced the single loss limit, because the position was too large, so I didn't dare to carry the order.

However, after making money by going long twice, he slept with the third long order open, resulting in the data of not closing the long position being reached and the price fell directly again.

I placed a trade at 17.9, and it actually went up to 16.5 at its highest. I woke up and saw it was at 15.5, so I was still making a profit. However, I did not take profit in time, so I closed my long position at 11.2 in the end.

I woke up and saw that I should reduce the quantity at 15.5, and choose to open a downward order, which has reduced the risk enough compared to me holding on. Unfortunately, I was too sleepy to think too much.

4. Stay focused when making important decisions.

I found that most of the mistakes I made in the past were made when I was not in good spirits, which happened to be at night. I didn’t sleep much the whole night, and I had very little energy and was in a bad mood, so I would place orders randomly.

I was too sleepy when I was doing the operation, so I didn't watch the market. I had to think about what to do if I encountered an emergency before going to bed.

The last time I suffered losses due to lack of energy was when we were doing the new IPO. Everyone placed orders and went to sleep. In the middle of the night, more than 10 Kodas were stolen, with a value of more than 300 ETH.

5. Don’t trade against market makers.

They know that it is a game of project owners and market makers, and the funds in the market are exhausted, and they are also in urgent need of making money. Compared with them, retail investors have too many information gaps and capital gaps, so it is a super difficult mode of play, and they should not enter the market.

At the end of the article, there is a description by Daewoo of the market makers’ routines and gameplay.

6. Learning to stop loss = having a second life.

The last time the arbitrage group held a meeting in Changsha to discuss hedging, the super teacher said that he could accept a maximum of 3 times stop loss, which means that if it tripled, he would be bankrupt, and he would never replenish unlimited margin.

I didn’t quite understand it at the time, but now I think about it, it’s because our SUI’s positions account for too large a proportion. Once the market goes crazy, you will put all your assets on the margin and play against the market maker, and the consequences will be disastrous.

Today we had a discussion in our small group: Stop loss can give you a second life, and I agree with it very much.

7. Be careful about making small profits and losing big money.

Every time I make a small profit, there is some positive feedback, and then I make a big profit.

At the beginning of this order, I made a small profit of $2,900, and then I thought about shorting $100,000, and then I thought that $300,000 would be acceptable. So I invested more and more as I lost more, hoping to lower the cost of holding the position.

There are many such cases in life. Casino owners are not afraid of you making money, but are afraid that you will not come.

The movie "All or Nothing" said it well: People have two hearts: one is greedy, and the other is unwilling.

8. Observe and record your emotions.

Yesterday I saw what Jun Ge said in the Jinma Ge group. We should reflect on our emotions and be aware of our own mentality at all times, whether it is empty or full, and make our behavior controllable.

We are too easily swayed by our emotions and are completely out of control. Don’t trust yourself too much, make plans in advance, and review your emotions afterwards. This is how you can understand yourself better. Investment can only become yourself in the end, so understanding yourself is a gradual process.

Every review is an analysis of yourself.

People cannot be taught by others, but they can be learned by being taught once.

9. Do what you are good at.

In fact, I have done very little overall this year. It feels like I haven’t traded for a long time. I haven’t done much spot trading, let alone contracts.

I still couldn't help but open an order this time. In a bear market, you should watch more and do less, go out and have fun more, and you can lose less money.

Teacher Zhang Xiaoyu said: Investing is a process of subtraction, you don’t need to know everything.

Try to only do what you are good at and make money using methods that you are good at.

Our team mainly makes money through arbitrage, new listings, margin trading, asset management, and long-term coin hoarding. Trading is really hard, and you can only avoid pitfalls if you admit that you are an idiot.

10. Learn to forgive yourself and look forward.

After every experience of losing money, selling out, being cheated, missing out on great opportunities, etc., you should slowly accept your stupid behavior and eventually make peace with yourself.

Thanks to my family and brothers for their support. I just went back to Shanxi a few days ago to deal with family matters. I told my family to learn to forgive themselves, and now it’s time to tell myself.

I find that I forgive myself faster and faster now. Last May, Stepn felt bad for half a month after a profit drawdown of three million dollars. This time it was okay. I was able to write a review in two days. I guess this is growth.

Finally, I want to say: Investing is an infinite game. I have to be grateful to the market for giving me the food I want and for being lucky enough to survive.

I am also grateful to the market for teaching me a lesson at the right time and telling me not to get carried away.

It cost me 1 million to learn this lesson, and I finally learned it. (I hope I really learned it)

The full text is over.

Picture captions: opening position and price, the currency that Hongle mentioned as having been previously inserted, Duan Yongping’s quotes, and Dayu’s explanation of this market maker’s trading method.