ZAMA trading review
The ZAMA project is very popular, the last round Dutch auction price was $0.05, raising over 100 million dollars, Binance Alpha cost price is $0.025, and there is approximately 20 million dollars of selling pressure, note: there are also early builders of NFT, with a cost of $0.005 also having tens of millions of dollars of selling pressure, this point was not researched before;
Before the opening, I had about tens of thousands in hand, when the pre-market contract was at a price of $0.045, I wanted to hedge and lock in a few hundred dollars of profit, because the Dutch auction was anchored at a selling price of $0.05, I didn't lock in to greed for an extra 10% profit.
After Alpha opened, it rose from $0.04 to a maximum of $0.042 and then fell to $0.038 without selling, later it was even worse on the spot market, continuously dropping, with the highest on the same day at $0.038 and the lowest at $0.03, the next day it dropped to a minimum of $0.026, up to now no positions have been sold on the spot market.
At the same time, I also opened a ZAMA contract long position; on the first day, I opened a long at 0.038, and then gradually bought down to 0.032, with a total cost price of over $6000 at 0.033+, setting phased sell orders on the first day with prices from 0.0345 to 0.0365 to 0.0375 to 0.041 to 0.051 and other multiple tiers.
On the first day, about three-quarters of the contract was sold in batches; the unrealized profit of the contract was over $700, with $400 realized, and more than $2000 remaining in position; later, the price fell to 0.028 and I bought more than $1000 to go long; now the remaining position of the contract has a cost of about 0.031, with an unrealized loss of over $300 (current price 0.028);
Summary: The contract part is close to neither profit nor loss, the spot position that should have been earned has almost no profit of over $600.
Review summary
Where did I go wrong in the whole process?
Fatal mistake: Anchored at 0.05 in the Dutch auction, ignored the macro environment and the selling pressure at a cost of 0.025, and didn’t investigate the NFT holders' cost price of 0.005;
I know the Alpha cost price is 0.025, and there is a selling pressure of $20 million. I know the Dutch auction is at 0.05;
I mistakenly believed: Someone was eager to spend 0.05 to buy ZAMA, so it must be worth at least 0.05 or even higher;
The real situation of the market: The macro environment is extremely poor with no one buying; Alpha users at 0.025 only need the price to be higher than 0.025 to have profits, and they are eager to cash out.
Hedging failure: Pre-market 0.045, with 80% unrealized profit in spot.
Originally wanted to hedge, but gave up the protection of 80% profit due to the greed for the last 10% increase (0.045->0.05).
Reflection: Using 80% certain profit to gamble on 10% potential space, the risk-reward ratio is extremely poor. Committed the human sin of greed, wanting to 'eat the whole fish tail.' Remember: the fish tail is the place with the most thorns, leave it for others.
Trading discipline analysis
Collapse of execution power
Description: Originally wanted to hedge, but didn't because there was a selling price of 0.05.
Comment: Initially rational, but later still couldn't resist human greed.
Reflection: Plan your trades, trade your plans. No plan, no trade; trading must follow the plan. If the plan is to milk profits, locking in Alpha's profits, then you must execute hedging or sell at the opening, rather than ending up with no Alpha profits at all.
No stop loss on spot
Description: 0.042 -> 0.038 -> 0.03 -> 0.026. Held all the way.
Evaluation: Unwilling to admit 'I was wrong in my judgment.' Started to stubbornly hold onto positions; the most important thing in trading is to respect the market, the market does not know you exist, and sees you as fodder. Although spot does not have the risk of liquidation, profit drawdown is still a loss.
Reflection: At the very least, use partial profit-taking methods, selling at least half of the position first, rather than stubbornly holding on.
Contract catching flying knives
Description: 'Later, the price fell to 0.028 and I bought the contract again...'
Evaluation: Unwilling to accept the drawdown of spot profits, began revenge trading. The worst thing in trading is revenge trading; fortunately, the capital was small and did not cause major mistakes.
Reflection: Respect the market; it is the first rule for wanting to live long in the trading market, the market is always right. Do not attempt to 'ask' the market to return the profits you lost.
Good point: Contract tiered profit-taking
Contract tiered profit-taking protected the part of the contract without losses
Reflection: Why sell the contract at 0.034 but not sell spot at 0.038?
Reason: Treated spot as 'faith (collectibles)' and treated the contract as 'business (trading).' Must also treat spot as business.
How to correct
Milking profits is milking profits, do not think about eating the whole fish, being vague about correctness is the way to survive. Next time, first look at the macro environment and enthusiasm; if the macro environment is very poor and there is huge selling pressure, run when making profits; making small profits in a bear market is winning.
When the pre-market price can lock in nearly $100 profit, remember you are here to milk profits; you must mechanically execute hedging.
Prohibit 'adding to losses': When trading (especially contracts) falls into loss or greatly reverses profits, it indicates that you were wrong; the market is always right. Absolutely prohibit adding positions to lower costs. This is the fastest path to liquidation.
Final sentence: Plan your trades, trade your plans; no plan, no trade; trading must follow the plan.