As an old player in the cryptocurrency market, I have unknowingly traded for eight years. It’s truly not easy to survive in this market! I have been beaten badly by market makers, experienced numerous liquidations, and have felt lost many times, often sitting alone in dark corners, smoking one pack after another. This is the price of growth!
Although I have played in the stock market for many years, there are many similarities between the cryptocurrency market and the stock market. However, there are still many differences. Looking back now, it wasn't really about the direction that was the issue; I have always had a high accuracy rate in grasping the direction. The problem lies in the fact that the cryptocurrency market truly magnifies human greed infinitely. Without strong self-control, it's very easy to lose oneself. After all, there's a saying: one day in the cryptocurrency market is like a year in the stock market. One day in the cryptocurrency market might cover the ground that the stock market takes a year to cover!
Today, I want to share a summary of my years of trading experience for free, hoping it can help everyone. Of course, I will mainly talk in general terms here. Depending on the reactions from my followers, if they feel it’s necessary to go into more detail, I will later release three detailed articles on these three points. To summarize, there are three core points:
First, position management. This is the most important thing! If you haven't realized the importance of position management, it means you haven’t left the beginner stage and are still in the pure novice phase! I’ve talked about how I manage positions in my previous articles. If you’re interested, you can take a look again. Of course, I also just give a simple explanation, providing what I think is the simplest and most effective method that is easy to learn! You could say that position management determines how long you can survive in the cryptocurrency market in the future!
Here, I want to briefly mention that you should already have thought about where to set your stop-loss before opening a contract, right? (Don’t tell me you didn’t think about where to set your stop-loss before opening a contract.) The position size depends on where you set your stop-loss. Consider whether you can psychologically bear the loss if this trade hits the stop-loss. If you can't bear it, that means your position size is too large, and you need to reduce it! If you can bear it, that means your position size is just right! This is very easy to calculate; you can figure it out immediately. Don’t use percentages for position size; that’s really hard to calculate and wastes time. Often, good entry points require immediate action!
Second, develop good trading habits, which includes a few points:
First, always set a stop-loss when opening a position; this is an ironclad rule for contract trading. If you can't adhere to this, I suggest you just give your money to a dog trader to save yourself the torment! Never hold onto a position with a lucky mindset. Even if you manage to hold on and recover nine out of ten times, you might feel proud, thinking you can always recover, but just one time could wipe you out! Most people fall into this trap!
Second, maintain a good mindset. When trading, never get too emotional. Don’t lose a bit and then immediately try to recover that loss with frequent trades; that's very dangerous. I have seen too many people lose money, get emotional, and then try to recover quickly, leading to constant reckless trades that result in a total loss overnight. This goes back to what I mentioned earlier: when you open a position, think about where to set your stop-loss. If you know where your stop-loss is, you already know the potential loss, and that’s something you should have considered before opening the position. So if you hit the stop-loss, relax, adjust your mindset, maintain a good attitude, and look for better opportunities to fight again.
Third, do not be biased beforehand. If you know a bit about technical analysis, that's best; if you don't, then you should definitely avoid biases. I have encountered too many people who are biased: they think the market is going to drop, believing the market maker is deliberately pushing prices up, or they think the market is going to rise, convinced that it must rise given all the good news. This is a typical case of bias, and to put it bluntly, it shows stubbornness. People who can't admit defeat will struggle as the market changes rapidly. We cannot say, 'I think,' 'I feel,' 'I believe,' or 'I am convinced.' When the market changes, our mindset needs to adapt promptly! If you are wrong, you must admit it and stand firm!
Third, when trading contracts, you must pay attention to the risk-reward ratio! Many people do not have the concept of a risk-reward ratio in their minds. If the first two points are key factors that ensure you can survive in the cryptocurrency market for a long time, then the risk-reward ratio determines whether you can make big money in the cryptocurrency market. Many people trade contracts blindly; they haven't formed a system, and they just go by their feelings without leaving themselves an exit strategy, making random trades.
For me, the decision to trade depends on two things:
First, through technical analysis prediction, if I have a good grasp of whether the market will rise or fall, then I proceed.
Second, although technical analysis is not very certain, for example, I think the market will go up, but I'm not too sure, currently this point is very good, predicting that the downside is not much, but the upside is large, and the risk-reward ratio is high, so it can be done.
These two can be satisfied with one condition, and of course, it’s best to meet both conditions. For example, I usually require a risk-reward ratio starting at 1:3 when trading. For instance, I recently did a long position, and from a technical analysis perspective, I wasn't particularly confident, but it was still okay, about 70% confidence! However, I noticed the risk-reward ratio was very high, so I went for it, and by the time I exited, the risk-reward ratio reached 1:7. In other words, I made seven times my investment.
In the future, if I use the same position size to trade other contracts, I could be wrong seven times in a row, and I still won’t lose my principal. This greatly increases my margin for error. As a result, my mindset for trading will be better, and with a better mindset, my trading accuracy will also improve. Moreover, if I get just one trade right out of those seven, I make a profit, and if two are right, I earn even more. Especially since my accuracy in market analysis is still very high.
Therefore, the risk-reward ratio must be emphasized; it fundamentally determines whether you can make big money in the cryptocurrency market. Many people do the opposite: they run when they make a little profit but stubbornly hold on when they incur losses. Even if you are right in your direction, you still won't make money. If you say you’re not losing, then who is?
The views above are all personal opinions shared for learning and exchange, and should not be taken as any investment guidance!