Reviewing Past Trade Execution

Reviewing Past Trade Execution for Beginners

When you start trading crypto, understanding what you did right and what needs improvement is crucial for long-term success. This article focuses on reviewing your past trades, specifically looking at how your Spot market holdings interact with simple Futures contract strategies like partial hedging. The key takeaway for a beginner is that reviewing trades helps you build a repeatable, less emotional process, moving you away from guesswork toward calculated risk management.

Balancing Spot Holdings with Simple Futures Hedges

Many beginners start by simply buying assets in the Spot market. As you gain confidence, you might explore futures to manage the volatility of those spot assets. A Futures contract allows you to take a short position (betting the price will go down) without selling your underlying spot assets.

Partial Hedging: A Beginner's First Step

Partial hedging is a practical technique where you only hedge a fraction of your spot position. This lets you protect against moderate downturns while still benefiting from potential upside movements. This concept is central to Balancing Spot Holdings with Futures.

Steps for Partial Hedging:

1. **Determine Spot Exposure:** Calculate the total value of the asset you hold in your spot wallet. 2. **Set a Hedge Ratio:** Decide what percentage of that exposure you want to protect. A common starting point is 25% or 50%. This helps in Understanding Partial Hedging Basics. 3. **Calculate Futures Size:** If you hold 10 BTC and decide on a 50% hedge, you need to open a short futures position equivalent to 5 BTC. You must use the Futures Trading Interface Basics to correctly size this. 4. **Use Strict Leverage:** When opening the futures trade, keep leverage very low initially (e.g., 2x or 3x maximum) to minimize Liquidation Risk with Leverage. Understanding Understanding Margin Requirements here is vital.

Remember, partial hedging reduces variance but does not eliminate risk. You still need to manage fees and slippage, as noted in Managing Fees in Futures Trading.

Using Technical Indicators for Timing

While spot trading often involves holding for long periods, using futures for hedging or short-term speculation requires better timing. Technical indicators can offer confluence points, but they are not crystal balls. Always combine them with a solid understanding of Support and Resistance Explained.

Indicator Application Caveats

Indicators are best used across multiple Understanding Timeframes in Trading. What looks like a signal on a 1-hour chart might be noise on a 5-minute chart.

• **RSI (Relative Strength Index):** This measures the speed and change of price movements.

   *   *Beginner Use:* Look for extreme readings (e.g., above 70 for overbought, below 30 for oversold). However, in a strong uptrend, the RSI can stay overbought for a long time, as detailed in RSI and Trend Confirmation.
   *   *Hedging Context:* If your spot asset is heavily overbought (RSI > 80) and you fear a short-term pullback, initiating a small short hedge might be considered.

• **MACD (Moving Average Convergence Divergence):** This shows the relationship between two moving averages.

   *   *Beginner Use:* Crossovers (signal line crossing the MACD line) can suggest momentum shifts. The histogram shows the strength of that momentum.
   *   *Combining:* Combining RSI with MACD Signals often provides higher confidence than using either alone.

• **Bollinger Bands:** These show volatility. Prices tend to stay within the bands.

   *   *Beginner Use:* A price touching the upper band suggests short-term strength, but it is not an automatic sell signal. Look for price rejection or divergence when bands are wide, indicating high volatility.

These tools help simplify complex analysis, fitting into a philosophy of Simplifying Complex Strategies.

Risk Management and Trade Sizing Examples

No trade review is complete without assessing risk management. This includes setting stop-losses and ensuring your position size aligns with your capital, as detailed in Calculating Position Size Simply.

Practical Sizing Scenario

Suppose you hold $1,000 worth of Asset X in your spot account. You decide to use a 2x leverage short hedge on a Futures contract to protect 50% of your spot value, aiming for a 1:2 Risk Reward Ratio for Starters.

Metric	Value (Asset X)
Total Spot Value	$1,000
Hedge Target (50% of Spot)	$500
Leverage Used	2x
Required Futures Notional Size	$500 (If 1x margin used)
Stop Loss Distance (Entry to Stop)	5%
Target Take Profit Distance	10%

If you enter the short hedge at $100 per coin:

• A 5% move against you (price hits $105) results in a $25 loss on the $500 notional position (since your margin requirement is lower due to leverage, the percentage loss on your *margin* will be higher—this is why low leverage is key).
• If you use a strict stop-loss, you limit potential damage, adhering to the principles discussed in Setting Initial Risk Limits Spot.

Always confirm the current Spot Price Versus Futures Price to ensure your hedge ratio is accurate, especially if the basis is large. If you are considering strategies that exploit price differences, review the Basis Trade Explained.

Avoiding Psychological Pitfalls During Review

The most significant factor in poor trade execution is often psychology, not technical analysis. Reviewing trades helps expose these biases. If you find yourself frequently deviating from your plan, read more about How to Trade Crypto Futures Without Emotional Bias.

Common Pitfalls:

1. **Fear of Missing Out (FOMO):** Entering a trade late because you see others profiting. This often leads to poor entry points. 2. **Revenge Trading:** Increasing position size or taking an impulsive trade immediately after a loss to try and win back the money quickly. This is a direct path to excessive risk, often involving Why Overleveraging Fails. 3. **Over-Optimization:** Constantly tweaking entry rules after every loss, rather than sticking to a proven framework.

When reviewing, ask yourself: Did I enter because of a pre-defined signal, or because of an emotion? Documenting these feelings in a Keeping a Trading Journal is essential. If you are struggling with discipline, exploring advanced entry methods like How to Trade Futures Using Fibonacci Extensions might be too complex until emotional control is established.

Final Steps in Trade Review

After analyzing your execution, indicators, and risk management, ensure you log the outcome. Note the total fees paid and any Slippage Impact on Small Trades. A good review process solidifies learning, making your next trade execution more robust than the last. Consistently applying these review steps is the path toward building a reliable trading system.

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