Nik Patel, also known as @cointradernik, is a full-time trader, investor, writer and advisor in the cryptocurrency space. He has been actively involved in the cryptocurrency markets since 2013. Since then, Nik has built a large following on Twitter, where he posts market analyzes accompanied by narrated charts. He also writes currency reports and shares his market insights on An Altcoin Trader’s Blog.
Binance Academy spoke with Nik about trading, investing, his overall market strategies, and his lifestyle as a cryptocurrency trader and investor.
Binance Academy: How did you start trading cryptocurrencies?
Nik Patel: Before I knew anything about cryptocurrencies, I came across the Dogecoin subreddit in December 2013 and eventually found Twitter's crypto community in February 2014. I started trading that month - there after registering on MintPal.
Academy: Tell us about your first trading experience. Bad trades?
Nik: My worst trade was one of my very first. I remember signing up for MintPal in February 2014 and buying Mazacoin because I noticed it had increased significantly for consecutive days. I ended up losing two thirds of my initial capital on this one trade.
Academy: How long did you trade before you became consistently profitable?
Nik: It took me about four months for cryptocurrencies. This happened mainly due to luck in early 2014, which then allowed me to learn, adapt and refine my strategies throughout the rest of the year. Outside of crypto, it took me a little over a year.
Academy: Do you still trade non-crypto markets?
Nik: Yes, I trade all markets. In addition to cryptocurrencies, including metals and indices.
Academy: What’s the best trade you’ve ever made?
Nik: Percentage-wise, I bought Neutron at around 130 satoshis and sold it for an average of around 6,800 satoshis, a return of over 50 times my initial position.
Academy: Now that we've covered some highs and lows, what do you think makes the difference between a good trade and a bad trade?
Nik: A good trade is characterized by carefully following your rules. A bad trade is when you chose to ignore your rules, making an emotional decision, regardless of the outcome.
Academy: Many profitable investors would probably agree with this answer. A good or bad trade is not determined by its outcome, a good trade can be a loser, and a bad trade can be very profitable. The key is to develop a good strategy and stick to it for the long term.
Now that we've experienced a multi-year bear market for bitcoin, what lessons have you learned from it?
Nik: While everyone (myself included) was exclusively concerned with the BTC prices of altcoins, we should have been interested in the USD prices. This is where the bubble was in January 2018. Later, I began to consider both prices and their historical contexts in my decision-making process.
Academy: It’s interesting to see how crowd psychology on social media can create and reinforce bias. While we're on the topic of community, which traders do you admire the most?
Nik: Tom Dante is probably the most important when it comes to my own process, especially when it comes to keeping journals aimed at finding minor improvements in the trading process.
Academy: Finding improvements in your strategy is a never-ending and vital process for any investor. What do you think your advantage is, and how did you find it? What advice do you give to new traders trying to find their edge in the market?
Nik: My edge is particularly strong in cyclical positions, where I find undervalued projects with good fundamentals and a cheap price and hold them through their market cycle. I suggest you keep a detailed journal so you can learn to spot your weaknesses and strengths.
Academy: It is likely that the majority of successful traders keep a journal of their trades. It is essential to monitor performance (especially at the beginning) to reinforce strengths and identify weaknesses. Do you trade multiple strategies or are you looking for specific trading setups?
Nik: I have several basic strategies based on technical factors for trades with a time horizon of less than a week or a month. For longer term positions, I look at the fundamentals in detail and then buy at historically low prices to hold for a market cycle.
Academy: What is the longest time you have held a currency?
Nik: Over a year.
Academy: Sometimes it can seem like an eternity in crypto. It's a challenge to take long-term positions while managing risk in such a rapidly changing market. What do you think is the most useful indicator for assessing the profitability of a currency or token?
Nik: The token issuance structure. Inflation is the only consistent metric that has proven to facilitate either large returns or the death of a token.
Academy: Do you integrate blockchain indicators into your strategy?
Nik: I like to look at on-chain trading volume to differentiate it from speculative (exchange-based) volume. I also look a lot at the largest holders of a token.
Academy: Which do you prefer, technical analysis or fundamental analysis?
Nik: For longer term positions, I start with the fundamentals that I consider interesting, then make a decision based on the technicals. For spot trades during the week, I base them solely on technical setups. Additionally, for leveraged trades, I also base them solely on technical data.
Academy: Now let's move on to the more practical aspects of trading, as these are also important things to consider that can be underestimated. What does your average trading day look like and how can you maintain a sustainable lifestyle while staring at screens?
Nik: I tend to do a market assessment for all assets on Sunday so I know what I'm looking for for the week. I then write a detailed journal and plot my charts, setting alarms at important price levels, with notes on what exactly I am looking for at those locations. I then execute my trades and monitor them periodically.
Since the vast majority of my trades take more than a week to close, I spend most of my day working on my blog, freelancing, reading, playing sports, etc. I don't stare at screens, which is why I choose not to day trade. Since I work from home and have alarms and systems in place, I don't need to spend my time looking at graphs. I wasn't a fan of this lifestyle, so I made the decision not to day trade constantly.
Academy: What are the most important tools for you when it comes to trading?
Nik: I don't need much. I have a laptop, an extra screen, a tablet, TradingView and several brokers depending on the asset being traded. Few other items are needed.
Academy: It would be a shame to let you go without a price forecast. Where do you see Bitcoin at the end of 2020?
Me: $26,000.
Thanks to Nik for giving us the opportunity to take a look at his strategies. If you want to learn more about trading, check out the Guide to Margin Trading or the Ultimate Guide to Binance Futures Trading.
Let's recall some of the key points Nik taught us:
Establish ground rules and follow them: Avoid trading with your emotions. If your rules are ignored and you start making decisions based on emotion, your results may reflect this.
Review your trades meticulously and continually look for improvements in your strategies.
Sometimes it can be helpful to stop and think about how mass psychology biases influence your trades.
Don't complicate things. A good strategy with a simple setup can be very useful.
