Inside the Mind of a Professional Crypto Trader - Nik Patel
Nik Patel, popularly known as @cointradernik, is a renowned trader, investor, writer, and advisor in the cryptocurrency industry. With active involvement in the crypto markets since 2013, Nik has established a substantial following on Twitter, where he shares market insights and commented charts. He also publishes coin reports and provides his market outlook on An Altcoin Trader's Blog.
During an interview, Nik Patel shared valuable insights into his trading journey, investment strategies, market approach, and the lifestyle of a crypto trader and investor.
Getting Started and Early Experiences
Nik mentioned stumbling upon the Dogecoin subreddit in December 2013 and later discovering Crypto Twitter in February 2014 as his entry points into trading cryptocurrencies. He began trading that month after signing up for MintPal.
Reflecting on his early experiences, Nik shared that one of his first trades turned out to be his worst. In February 2014, he bought Mazacoin on MintPal because he noticed its consecutive significant rise. Unfortunately, he lost two-thirds of his initial capital on that trade.
Consistency and Profits
It took Nik around four months to achieve consistent profitability in the crypto market. This initial success was largely attributed to a stroke of luck in early 2014, which allowed him to learn, adapt, and refine his strategies throughout the year. Outside of crypto, it took him a little over a year to achieve consistent profitability.
Trading Beyond Cryptocurrencies
In addition to trading cryptocurrencies, Nik also engages in trading non-cryptocurrency markets, particularly metals and indices.
Memorable Trades and Differentiating Good and Bad Trades
Nik's best trade in terms of percentage gain involved buying Neutron at around 130 satoshis and selling it for an average of about 6800 satoshis, resulting in over 50x returns on his initial position size.
When it comes to distinguishing between good and bad trades, Nik emphasized that a good trade is one in which you follow your rules precisely, while a bad trade occurs when you abandon your rules and make emotional decisions, regardless of the outcome.
Lessons from the Bear Market and Influential Traders
Reflecting on the multi-year bear market in Bitcoin, Nik acknowledged the importance of considering both BTC and USD prices of altcoins. He realized that the bubble in January 2018 was primarily in USD prices, which informed his decision-making process moving forward.
Finding an Edge and Advice for New Traders
Nik's edge lies in cyclical positions, where he identifies undervalued projects with solid fundamentals and attractive price points. He holds these positions throughout their market cycles. He advised new traders to meticulously journal their trades to identify weaknesses and strengths.
Trading Strategies and Trade Duration
Nik employs various core strategies based on technical analysis for intra-week or intra-month trades. For longer-term positions, he extensively examines fundamentals and looks for historically cheap prices to hold the assets through a market cycle. He mentioned holding a coin for over a year as his longest duration.
Metrics and Analysis
In assessing the profitability of a coin or token, Nik finds the token emission structure, specifically inflation, to be a consistent metric that determines significant returns or the downfall of a token. He also incorporates on-chain transaction volume to differentiate from speculative volume and examines rich lists to analyze top holders.
Regarding the preference between technical analysis and fundamental analysis, Nik starts with fundamentals for longer-term positions and makes decisions based on technicals. For intra-week spot trades and leveraged trades, he relies solely on technical analysis.
Practical Aspects of Trading and Lifestyle
Nik shared insights into his daily trading routine and how he maintains a sustainable lifestyle. He begins his week by evaluating the market across different assets and journals his findings extensively. He marks out charts, sets alarms at important price levels, and notes what he is looking for at those areas. He executes trades and periodically monitors them. Since most of his trades take longer than a week to resolve, Nik spends his day working on his blog, freelancing, reading, and exercising. He consciously avoids staring at screens all day, as he finds active day trading to be mentally taxing. With alarms and systems in place, he doesn't need to constantly monitor charts.
Tools and Price Prediction
When asked about the essential tools for his trading, Nik mentioned having a laptop, an extra monitor, a tablet, TradingView, and various brokers depending on the assets being traded. He emphasized that not much else is needed.
Key Takeaways
From Nik Patel's insights, several key points emerge:
1. Establish and follow ground rules to avoid emotional decision-making while trading.
2. Maintain a detailed journal of trades and constantly seek improvements in strategies.
3. Be aware of community biases that may influence trading decisions.
4. Keep trading strategies simple yet effective.
5. Consider both BTC and USD prices when analyzing altcoins.
6. Learn from influential traders and adopt journaling as a valuable tool for self-improvement.
7. Develop an edge in the market by focusing on undervalued projects with solid fundamentals.
8. Trade multiple strategies based on technicals for short-term trades and utilize fundamentals for longer-term positions.
9. Incorporate metrics like token emission structure, on-chain transaction volume, and rich lists for analyzing the profitability of coins or tokens.
10. Maintain a sustainable lifestyle by establishing a structured routine and avoiding excessive screen time.
Nik Patel's insights provide valuable guidance for both new and experienced traders in navigating the cryptocurrency market. By combining discipline, continuous improvement, and a well-defined approach, traders can increase their chances of success in this industry.
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