Zero to Hero: Beginner’s Guide to Trading Well on Kollider
Today’s “Long Story Short” guides you through the initial process of trading on Kollider and coming up with a strategy. Kollider’s series is purely educational and not investment advice. Please do your own research.
We had one goal with our trading articles: give you a great foundation for your trading journey. But many posts later, all the information might now seem intimidating to someone just starting out.
With our trading competition underway (and with a chance to win from 5,000,000 sats), it could be a good time for you to learn and an even better time for us to compile some of our educational pieces to get you on your way.
So, here’s a walkthrough.
Getting Started on Kollider
There are two main portals to trade on Kollider. Kollider Lite aims to reduce extraneous information that beginners would mostly find confusing. It’s complete on its own for trading and works well for doing directional trading, anything that holds positions longer, or strategies that don’t require very active management of orders.
For those who frequently place and amend limit orders, Kollider Pro is likely a better choice, as it gives more granular control and price information that first-time users aren’t necessarily interested in seeing.
Understanding Lightning Network Requirements
Once you’ve chosen which version of Kollider you want to use (side note: you can use both Lite and Pro to access the same account), you need to decide whether you want to trade straight from your Lightning wallet or by depositing.
So, how do you actually trade straight from your Lightning wallet? Although Lightning itself could get more complex (e.g., you can run your own “node”), you can ignore most of the details if you go for a solution like the mobile app, Breez, or the browser extension, Alby. Both Breez and Alby automatically log into your Kollider account whenever they are active.
Outside of Breez and Alby, a lot of Lightning-enabled wallets let you log into your account by scanning a QR code from the wallet app itself. You can get the QR Code to scan by clicking “Lightning Sign In” after clicking “Login” on Lite or Pro.
Although trading “instantly” from your Lightning wallet is the most convenient option we provide, you can also deposit directly into your Kollider account via a Lightning invoice or an on-chain transaction. You can do so under “Wallet” in your “Dashboard”.
Simply put, there is no need to operate your own Lightning node in order to trade with Kollider. However, if you already have a node, you could use Kollider Lite seamlessly with Umbrel through the app store.
Figuring Out Your First Strategy
Once you’re on Kollider, figuring out your next steps could still be daunting, especially if you’re new to trading or even just investing (i.e., buying and selling financial products in general).
Luckily, our products can be traded in very small amounts. Our $1 bitcoin contracts and ability to leverage means that you could risk very little to just begin getting a feel for how trading even works.
After playing around with small contracts, you might want to step it up with a strategy. By “strategy”, we are referring to a methodical and repeatable (and improvable!) approach to trading. Our article on The Minimum Viable (Trading) Strategy could be quite helpful to get you to think in terms of frameworks.
Although you could come up with your own, there are some common strategy umbrellas that you could adopt in your own trading. We covered market making and spread trading before. We’ve also hinted at discretionary trading strategies. You can do manual or algorithmic trading for those strategies. Shorter term market making could get difficult without a bot. Fortunately, you could get inspiration from and customise this market-making trading bot, which follows the same framework from our market-making article.
If you decide to come up with your own strategy framework (again, probably not the best way to start if you’re still a beginner), this should give you an idea of market traits to consider when coming up with your own signal and execution models.
Starting With Something, Anything
(Important reminder: this is only what we would do starting out and is not trading advice. This may not work as well for you, so proceed with a lot of caution and healthy scepticism).
In general, once you have the theoretical aspects above, you may still want something– anything– concrete to get you started immediately. So, let’s cover what we ourselves would do if we were just starting out today.
As newbies, we would lean towards manual trading with a discretionary directional strategy, as that setup is easier to iterate on and faster to create than anything algorithmic. We would also have The Minimum Viable (Trading) Strategy (“MVS”) in mind at this point. Anything we experiment with will be to try to fill in the three parts of the MVS framework:
- Entry signal to help us increase our position
- Risk settings to help us manage the max amount we could lose
- Exit procedure or signal to help us reduce our position
Step 1: Exploring Your Product
The first step for us would be to connect to Kollider Lite through the Breez app store and play around with $1 contracts using 1x leverage. Although Lite has a nifty chart, we would also open up a TradingView 30-min chart for BTCUSD to have a detailed reference point. We would then start with the idea of going off price bounces and momentum. For example, if the prices recently dropped, slowed down, and stopped, we might get into a long $1 position and buy 1 BTCUSD perpetual swap position if the prices start going up.
Keep in mind that we are not traders in this scenario, but just learning to trade. Going off bounces like we noted above is not a recommendation for a signal, but just something that’ll help us get a feel for the market. Once we get into a buy position, we would wait to see how the market moves and how our profits and losses change.
We may then start to see other parts of the market dynamics. For example, maybe the trend in the last few days actually gives some “pressure” to the direction that the market will take in the next several days. So instead of just going for bounces, we may go for a point of a bounce only in the direction that the last few days have generally been going.
Step 2: Creating Entry Signal
In a sense, we are now starting to iterate and improve our own understanding and framework for trading. We could then improve the signal, or the very aspect we calculate, to give us an idea of direction. Reviewing technical indicators would give us some ideas of what’s popular, but we would start with common ones like RSI or MACD and experiment with using them on TradingView to just experiment with as we had with bounces.
Over time, we would start to develop a better understanding of what indicators work for us, whether common like the RSI or custom like our “bounce” with the “last few days” indicator. We would then use any combination of what we’ve observed works well enough for our markets (maybe something that is correct at least 60% of the time) and use that as our entry signal.
Step 3: Setting Up Max Positions and Leverage
Continuing with the MVS, when we feel confident enough with that signal, we would then work on our max position and order sizes. This is partly a function of what’s already available in the book. So, we may want to send order sizes of 100 contracts into the bitcoin perpetuals, but might allow ourselves to go up to 1,000 contracts of position, long or short. As far as leverage, without doing further analysis, we would likely opt for something just slightly higher than 1x (probably at most 3x since we know that bitcoin can be quite wild and going much higher than this could significantly increase the chance of liquidation unless we are more advanced and/or closely paying attention all the time).
Step 4: Using a Simple Way to Exit Positions
Finally, we would figure out the signal or procedure for reducing our position. We’d start simply with this by just using a stop loss and a take profit.
For a stop loss, we would start with prices that are 1% from where we entered the position. This gives us roughly 100 chances to be right before we lose our money. If our entry signal is at least 55% correct, then we hope to still be profitable over the 100 trading entries there.
For exiting a winner, our entry signal should give us a better idea of what’s a realistic winner size. Maybe we see that the prices move 5% on average when the signal is right. In that case, we might place a take profit around 4% just to be able to capture it.
Step 5: Iterating and Improving Your Strategy
Eventually, we would experiment with changing those stop loss and take profit thresholds as we get more trades. We might even start to use a weaker version of our entry signal (e.g., if the entry needs an RSI value of 90 to take an entry, possibly it just needs 70 in order to take an exit).
There are a lot of things that we would improve on as we get better at trading, including trying to go into algorithmic trading, but starting out with the steps above would give us a good foundation. Fun fact: we actually had a user tell us that they started their trading journey by reading our market making and minimum viable strategy articles, and then creating their own bot by connecting directly to our API.
Finally, Understanding and Beating the Competition
As a bonus, our competition can allow you to possibly win some sats for your trading. Because the competition is volume-based, you could win with strategies that tend to lend itself towards stable, higher volume, but lower expected profit per trade.
Strategies like market making can often be like this. They can trade a lot and get out of positions very quickly, and can be a healthy chunk of the product’s daily volume. While they often have a lower profit-per-trade, these strategies more than make up for it by getting a lot more volume (as they are usually closer to the front of the book).
Although this is not guaranteed to help you win or even stay profitable, it would be good to keep in mind as you go through the competition. There are strategies that do higher volumes as a natural part of the strategy. Momentum strategies tend to be the opposite, as they aim to get fewer entry signals that move big. This means that, once you’re more advanced from the practical steps above, you might want to experiment with something like market making.
One easier bridge between discretionary/momentum strategy and market making, even if manually traded, is shorter term swing trading done with minutes-to-hours-long holding times vs days or weeks. It doesn’t quite capture spreads only like a pure market-making strategy might, but attempts to capture turning points as the fictitious bounce indicator had tried above.
So, now that you’re equipped with theoretical knowledge and practical first steps, go out there and try to learn trading. As always, we’re here to help! You can ask us for help on any of our social media channels. You can find us on Twitter, Telegram, and Discord.
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