Conversation with Traders: How to Drive Trading with Data

Benson is an experienced cryptocurrency trader who has been trading full-time since 2019. His trading style has evolved through several stages, from initial technical analysis to later focusing on contract data, and now developing his own liquidity indicators. Below are the main points of the conversation:

1. The Evolution of Benson's Trading Strategy

1. Initial stage: Frequent chasing of gains and cutting losses leads to serious losses.

2. 2019-2022: Pay attention to the funding rate indicator. When the contract open interest is high and the funding rate reaches extreme values, it indicates that the market may reverse. Profit through reverse operations.

3. After 2022: Due to the rapid interest rate hikes by the Federal Reserve, the original funding rate strategy became ineffective. Started researching order book data and developed the CoinKarma indicator.

4. Now:

   • Over 60% of the position is allocated to quantitative strategies for asset appreciation in cryptocurrency.
   • Approximately 40% of the position is primarily in stablecoins, used for participating in on-chain trading or contract trading.
   • The annual yield target is to outperform the market index by about 2-3 times.

2. Core Trading Indicators

1. Overall LIQ(Overall Liquidity Status):

   • Determine possible reversal points in price by depicting the market liquidity conditions
   • When the price approaches the upper or lower limit of the range determined by the indicator, the market is likely to reverse.
   • Help find positions with higher safety margins in volatile markets.

2. CVD(Cumulative Trading Volume):

   • Used to determine whether the market is in a sideways trend or a directional trend.
   • When the CVD intensity is high and the market order volume is strong, a one-sided market may be迎来.

3. Trading Operation Process

1. Check the liquidity data posted on the CoinKarma Telegram channel every morning.

2. Determine if there are intervention opportunities based on the Overall LIQ indicator.

3. Determine the operation method based on the certainty of the opportunity:

   • High certainty: going long or short
   • Low certainty: hedging spot, buying put options, etc.

4. Check if the existing altcoin holdings meet expectations and whether the reasons for holding still exist.

4. Altcoin Investment Strategies

1. Prefer projects that have a "hazy beauty", with a large space for imagination but not yet fully realized.

2. Avoid pure tool-type projects, as their valuation can fluctuate significantly with changes in market sentiment.

3. Pay attention to whether the project demand has long-term sustainability.

4. Adopt different strategies for different targets:

   • Potential market hotspot assets: Hold until market attention or bull market ends
   • Large market cap tokens: Assessing price trends through technical analysis or fundamental analysis.

5. Risk Control Principles

1. Timely profit-taking: Sell promptly when the target reaches expectations or the reason for holding no longer exists.

2. Control Leverage: The cryptocurrency market is highly volatile, and high leverage can easily lead to being liquidated by the market makers.

3. Avoid buying tokens in the same way as buying stocks: The cryptocurrency market changes rapidly, and purely tool-oriented projects can easily collapse as trends fade.

6. Market Insights

1. Contract trading is essentially a game of how to win over most people.

2. The main players conduct liquidation by creating price fluctuations, aiming to achieve the maximum return at the lowest cost.

3. High leverage is one of the characteristics of the cryptocurrency world, and the main players often use this feature to harvest retail investors.

4. It is important to continuously seek new deterministic alpha, because once a certain indicator is widely used, its effectiveness will diminish.

5. Think about how to construct a trading structure through non-consensus methods, aligned with the interests of the main players to outperform the majority.

Benson emphasized that successful trading requires a basic understanding of how the market operates, understanding the sources of volatility, the costs of major players' operations, and the potential returns. He suggested that novice traders first establish this market awareness, and then develop their personal trading strategies.