Foundations · Lesson 18 · Beginner
Survival rulebook and first paper trade
You run a fully rule-compliant paper trade, from top-down to entry.
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The core rules
Never trade without a pre-placed stop. Cut your losses short, let your winners run. Never add to a loser. Never all-in, never the whole account as margin, never the maximum leverage.
The one recommendation
Survival first: isolated margin, low leverage, 1 percent risk per trade, a hard stop behind a valid level, limit orders as maker, discipline over a large series.
Only once every item is in place may you open.
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The key points at a glance
- Never without a pre-placed stop, never add to a loser, never all-in.
- Survival first: isolated margin, low leverage, 1 percent risk, maker limit.
Deep dive
The banned list: what you never do as a beginner
A rulebook consists first of prohibitions, not clever setups. This via negativa protects you from exactly the mistakes that blow up accounts, and it matters more than any entry technique.
- Never trade without a stop placed in advance.
- Never add to a loser (no averaging down).
- Never go all-in, never run maximum leverage.
- Crypto is Extremistan: 50 percent moves, flash crashes, and depegs are the rule.
- After a losing streak: cut size, no revenge trade.
Your first paper trade, step by step
A rule-compliant paper trade always runs the same way, and you only open once every point is in place.
- Top-down: market climate and BTC trend, then the coin.
- Entry at a valid level, not at a gut-feeling spot.
- Stop behind the structure, rule of thumb 1 to 2x ATR.
- Position size from risk: at most 1 percent divided by the stop distance.
- Isolated margin, low leverage, maker limit order to save on fees.
Why survival comes before returns: the drawdown math
Elder's hierarchy is: first survive, then steady returns, then high profits. The reason is pure math: losses are asymmetrically harder to recover. BTC itself had drawdowns of minus 93 percent (2011), minus 83 percent (2018), and minus 77 percent (2022).
Ruin is absorbing: a liquidated account never recovers. That is why the 6 percent monthly circuit breaker exists: after a 6 percent drawdown in the month, the trading month is over, and paper profits do not count as a buffer.
Sources: Goodman, Elder, Taleb, Douglas
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