Real World Asset Season

• TMC (Donny): Called in last week's NL with entries between $2.40 - $2.80, representing a 30%-50% unlevered return in a week at the time of writing.

• BCH (Fox): NL long from last week hit entry at 354 and ran up to reach a local high at 384.9 for an 8.7% unleveraged move.

• VIRTUAL (Fox): NL long from last week hit entry at 0.7313 and ran up to smash all our tp’s and reach a local high at 1.5333 for a 109.6% (!) unleveraged move.

• APP (Abe): $240 calls for 5/2 gained 150%+

• ROKU (Abe): $63 calls for 5/2 gained 92%+

• TGT (Abe): $96 calls for 5/2 gained 55%+

• RBLX (Abe): $62 calls for 5/2 gained 63%+

• AAPL (Abe): $205 calls for 4/25 gained 173%+

• UPST (Abe): $43 calls for 5/2 gained 215%+

• CROX (Abe): $100 calls for 5/16 gained 119%+

• SPX (Abe): $5,300 puts for 4/25 gained 195%+

• TSLA (Abe): $270 calls for 5/2 gained 158%+

• CRWV (Abe): $44 calls for 5/2 gained 62%+

• TSLA (Abe): $285 calls for 5/9 gained 77%+

The Importance of the Risk% Rule.

If you've spent any time listening to me rambling about trading, you'll have probably heard me mention "% Risk" in regards to my trades. But what is it? How do we use it? And why is it so important?

Risk% or the Max Risk rule is a fundamental principle of risk management for successful trading. Without employing a max risk, you are effectively gambling.

The rule is this. No matter what happens, I won't lose more than X% of my portfolio on any given trade. Usually, the high-end cap is 5% with extreme cases allowing up to 10%, but only for the highest conviction and sexiest trades.

In everyday trading, we aim to risk no more than 5% at a time. This naturally scales down with portfolio size, as well as with lower probabilities and higher RR trading strategies.

Using this rule is quite simple; whenever we are about to enter a trade, we identify a proper target, stop-loss, or invalidation level, and entry point before clicking any buttons. Using our entry and stop, we can easily calculate how much money we'd lose if we hit our stop loss.

For example, if we long 1 Bitcoin at $100K, our stop loss is $90K, and our total portfolio size is also $ 100K. This stop loss would lose us 10% of the portfolio, which is too much. So, what we do is simply adjust our position size (never the stop-loss) to match our desired risk. If we want to cap it at 5%, we would hold 0.5 Bitcoin instead.

The same concept applies to shorts. We adjust our position size until our loss at the stop loss is equal to our desired risk percentage.

But why this %? Why can't I trade with a higher %? Well that's because you'll mathematically fuck yourself over. 

Every trader loses; the good ones just lose less than they win. Say you have a 75% win rate, which is pretty amazing, but you could still lose 5 trades in a row. If you're losing 10% (or, god forbid, more) per trade, then you'll cut your account in half even though you have a winning strategy. The problem is that when your account goes down 50%, you now need 100% to get it back up. This means to BREAK EVEN, you would need a 75% win rate with an average risk-to-reward of 2+, which is FAR from easy.

Instead, by using a lower risk percentage, say 3% (which is still relatively high), you would lose around 15% at worst. You'd need about 20% to get back to breakeven, but that's a lot more achievable.

It is incredibly important to always manage your risk in this way. Some people ignore these rules, as a result some make crazy money because each trade can make them 20-100% on their account, but these people are gamblers, because before long they won't be in your group chat anymore flexing gains, they'll be contemplating whether it's worth living because they just lost 7 figs in 2 hours. I'm not exaggerating.

Manage your fucking risk or go to the casino instead. Pick one.

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