Trading: A Mechanical Approach
Trading is a journey of self-mastery, where emotions and data collide. Through years of navigating index futures, forex, and crypto across multiple market cycles, I’ve learned that success isn’t about chasing big wins — it’s about staying alive.
Before each trade, center yourself and remember your purpose. For seasoned traders, it’s not about becoming a market legend, but about consistency and resilience in this ultimate player-versus-player arena.
Your allies? Your emotions (yes don’t ignore emotions, work with them!) and the wealth of data at your fingertips.
Over the years, I’ve distilled some core principles that have kept me competitive across all market conditions, focusing on what truly matters in a mechanical approach to trading while avoiding common pitfalls.
Core Principles
- Maintaining Balance: Keeping equilibrium in your trading strategy
- Fostering Self-awareness: Understanding your own psychology and biases
- Stoic on Trends: Remaining impartial to market movements
- Signal Confluence: Aligning a diverse set of data for stronger decisions
- Accepting the Imprecision: Embracing the inherent uncertainty in trading
Maintain Balance
Maintaining balance means catching yourself from euphoria or fear in the face of a sudden change in price or sentiment. Some of the easiest ways to become unbalanced is to take the words of a tweet literally, trading on a single data input, or just changing your level of conviction simply because someone of authority has taken the other side of your trade.
Tips: turn off social media, limit your chat time, trade higher time frame intervals and commit to taking a loss or a profit.
This is only possible if you maintain balance.
The easiest way to lessen the pressure on the individual outcomes of trades is to SCALE DOWN. Trade half your normal size. Reduce leverage.
When a trade’s daily candle significantly exceeds your optimal outcome, consider its size. This is known as WRB (wide range bar) sizing. Reduce your position size as the candle’s size increases.
As a long-term futures trader, I have been completely shocked at the standard size of positions most crypto traders take. Even in the most bullish environments, I cannot recall ever having been more than 2x my account size on any particular trade.
“yeah but your account is way bigger than mine, I need to make it this cycle!”
These are the words of someone who is out of balance with the market. You might cheat time once in a while and make money but in the end, you will give it back.
Fostering Self-Awareness
Trading alongside some of the most famous crypto traders over the years (those in the CoinRotator discord/telegram chats know who I am referring to, no point name-dropping here), one tone of voice that is constant in these rooms is, “idk, I could be wrong” and “what makes this a bad trade?” and what contingencies can I prepare myself for?
What this means is they are constantly looking objectively at what will make their trade less valid.
However, this is in itself somewhat confusing as they can easily change their mind more than once within the course of the trade.
Since they are positioned reasonably for their account size they are willing to be wrong and take a loss rather than simply refuse to process conflicting information.
Tip: If you set a target, don’t move it. You can always get back in on a lower time frame setup. If your favorite trader jokes about the absurdity of a coin you’re in, don’t sell it. Let your system take you out of the trade. The greatest trader I have ever known would constantly write, “But idk, I’m just meming, NFA.”
Stoic on Trends
This is perhaps the most difficult rule to fully embed in one’s mechanical mental model as a trader. We crave time to be stable and endure if things are going well and we want nothing more than for a bad trade to end as fast as humanly possible. But in a mechanical approach, we must submit to the indeterminate nature of trends. Some last for hours, some last for months (even years if you are trading monthly price bars).
One important component here is the freshness of a trend. Coinrotator.app shares the trend streak for any coin on the daily time frame to enable you to determine if a coin is entering a new trend or has been in one for too long.
This is somewhat a personal preference, and traders will find they perform better or worse depending on the trend streak they enter on. Find your range.
Know that in the end, nobody knows when a trend will end. But when you get in early and ride the trend as long as possible, you will make far more than you will lose on other trades entered in the same process. In other words, remain stoic on the outcome of each trade and once in a while you will experience the asymmetric upside that crypto uniquely provides.
Tip: Before entering any trade have a set of conditions for which you will exit with either a profit or a loss and do not deviate from them unless the external information is extraodinary.
Signal Confluence
In mechanical trading, one of the most powerful factors is taking trades that align on multiple timeframes. Even more powerful is discovering external data that aligns with your system. This could be a growth in wallets on-chain, an upcoming catalyst that will bring more attention to your trade, or even another trader using the same system who finds the trade compelling.
CoinRotator screens coins daily, looking for these confluences on multiple time frames. In the private telegram chat for Key Pass holders, the daily update only shows coins in multiple time frame confluence (Weekly and Daily). These trades present more stable trending opportunities which is precisely what we want, to maintain balance throughout the trade.
Tip: The more conservative you are in your trade, the larger the amount of signal confluence you’ll want before making any moves.
Accepting the Imprecision
This is perhaps the most important aspect of taking the mechanical trading ‘leap of faith.' The number one trap inexperienced traders fall into with technical analysis and on-chart indicators is that if they find the right combination of indicators they will be able to remove any doubt about the outcome of their trades. In effect, they have discovered an infinite money glitch. Some take years, others take weeks before they realize that markets are always changing and what worked with 99% accuracy just a week earlier is now the best counter-trend signal they have ever seen.
But it's not that simple, unfortunately. All <robust> mechanical systems will succeed and fail in equal measures.
Robustness here means a system that is not over-optimized on recent data. Once you have developed a system you’ll want to test it with the same parameters across as many time frames and markets as you can collect data for.
CoinRotator’s algorithm has been tested on crypto, forex, and popular tech stocks. It is long-term profitable and has been the benchmark for buy-and-hold beta for several years now.
This isn’t a flex, it's more a reference to what is required in your system devlopment. The backtests for the CoinRotator algo have achieved Sharpe ratios as high as 5 on multiple markets on multiple time frames. But when trading manually has rarely peaked above 1.5.
Why?
No backtest accounts for real-time price action (liquidity, exchange errors, chain issues, and whatever other ‘act of god’ is occurring while your algo is working perfectly).
This is a controversial take as most are certain their algo is just a few tweaks away from global domination. But the truth is, the devil is in the details.
Having dumped on quants and algos this still doesn’t discourage me and hopefully you from adopting a more mechanical approach to trading.
You just need to be comfortable with the two most important components of mechanical trading:
Taking frequent and decisive losses.
Resist Fomo.
Often your mechanical system will not alert you to the hottest coin since Pepe, Popcat or even Apu. And you will feel the sting that its not possible to claim clout on twitter for being a certifiable genius. But the truth is, your mechanical approach will give you the means to discover consistently profitable trading opportunities in a way that the guy you are currently seething with envy could only dream of.
Don’t take that mental shift for granted.
Tip: You want to survive first then thrive, you can get rich by being lucky, but do you really want to take that chance?
These are just a few of the principles I have found useful in my journey as a mechanical trader in crypto.
Let me remind you in conclusion that my bio says:
I am not arrogant enough to presume all is known in advance in my process, I am very much cognizant there is still the alchemical in all of my trades. But I never allow it to *dictate* my decisions. Am I the most profitable crypto trader? Definitely not! My goal has always been to be the last one standing. And the mechanical approach has enabled me to achieve my goals year after year (class of 2017, stonks class [redacted👴]).
The final tip: Determine your priorities asap or else the market will determine them for you.
Coinrotator.io is about to launch v3 and you are invited to participate in the development process. By signing up for the key pass you will have full access to all Coinrotator tools and chats. Please have a look here to sign up:
Coinrotator.io
Please note, after filling out the sign up form, please message a mod in Discord. Your access to our advanced suite of tools is contingent on your successful completion of the form.
What you will get after signup:
- Coinrotator TradingView Indicator
- Beta Access to Lower Time Frame Trend Alerts
- Real-Time Access to Customized Futures Data
- Chat Access on Both Discord and Telegram
In the next article about mechanical trading, we’ll discuss specific stop loss strategies, how to handle wide range bars more effectively, and how to manage position sizing.
Wherever your trading adventure takes you, best of luck!
