I know an old senior, who entered the cryptocurrency world with 100,000 yuan, and now has a market value of 42 million. He once told me a sentence that enlightened me. He said: "The cryptocurrency market is just a crowd of people, as long as you control your emotions, this market is a cash machine!"
Struggling in the cryptocurrency world, the trading strategy is your 'secret weapon'. The following mnemonics are the crystallization of practical experience, be sure to collect them!
Nine hard rules for trading cryptocurrencies summarized by a senior trader, remember them well to benefit for a lifetime, shared only once
One, about returns
Assuming you have 1 million, when the return reaches 100%, your assets will reach 2 million. If you then lose 50%, it means your assets will return to 1 million. Clearly, losing 50% is much easier than gaining 100%.
Two, about the amplitude of rises and falls
If you have 1 million, after a 10% increase on the first day your assets will reach 1.1 million, then after a 10% drop on the second day your assets will remain at 990,000. Conversely, if you drop 10% on the first day and rise 10% on the second day, your assets will still be 990,000.
Three, about volatility
If you have 1 million, earn 40% in the first year, lose 20% in the second year, earn 40% in the third year, lose 20% in the fourth year, earn 40% in the fifth year, and lose 20% in the sixth year, your assets will remain at 1.405 million, with a six-year annual yield of only 5.83%, which is even lower than the interest rate of a five-year treasury bond.
Four, about 1% daily
If you have 1 million, if you can make 1% every day and leave, then after 250 days, your assets could reach 12.032 million, and after 500 days, your assets will reach 145 million.
Five, about 200% annually
If you have 1 million, if you achieve a 200% return for five consecutive years, then after five years your assets will reach 243 million, but such high returns are very difficult to sustain.
Six, about ten times in ten years
If you have 1 million and hope to reach 10 million in ten years, 100 million in twenty years, and 1 billion in thirty years, then you need to achieve an annual return of 25.89.
Seven, about averaging down
Assuming you bought a certain cryptocurrency at 10 yuan for 10,000 yuan, and now it has dropped to 5 yuan, if you buy another 10,000 yuan, then your average cost can be lowered to 6.67 yuan, instead of the 7.5 yuan you might expect.
Eight, about holding costs
If you have 1 million and make a profit of 10% on a cryptocurrency, when you decide to sell, you can leave 100,000 yuan in value as chips, then your holding cost will be zero, and you can hold it long-term without pressure. If you are extremely optimistic about this cryptocurrency and leave 200,000 yuan in value as chips, you will find your profit rises from 10% to 100%. But don't get complacent, because if this cryptocurrency drops by 50% later, you may still incur losses.
Nine, about asset allocation
With a risk-free asset A (annual return 5%) and a risky asset B (return -20%-40%), if you have 1 million, you can invest 800,000 in risk-free asset A and 200,000 in risky asset B. Then your worst annual return is zero, and the best return could be 12%. This is the prototype of the CPPI technique applied to capital preservation funds.
