I am 32 years old this year and started trading cryptocurrencies at 22. In 2023-2024, my capital reached 8 digits. My current lifestyle includes staying at high-end hotels costing around 2000 yuan, with luggage and hats potentially bearing cryptocurrency symbols. This is much more comfortable than what the older generation experiences in traditional industries or what '80s kids do in e-commerce. I have hardly experienced business disputes and have fewer worries.
I patiently summarize my insights; the biggest point in trading cryptocurrencies is having a good mindset, while technique is secondary.
In fact, the losses in trading cryptocurrencies are often the result of a battle between oneself.
You might think, are these losses truly unavoidable? Actually, they are not.
Many losses are not because the market 'betrayed' you, but because you could not correctly control your emotions and decisions when facing market fluctuations. You may not have set stop-losses, or may not have recognized the situation in time, letting your mindset affect your judgment. What you can control is not the market's ups and downs, but your response to these changes.
Thus, the root cause of losses in trading cryptocurrencies largely stems from misunderstandings about the market, especially excessive focus on price fluctuations. Trading cryptocurrencies is not a gamble; it requires you to calm down, rationally treat market fluctuations, and follow certain principles, instead of being swayed by emotions.
Investment needs clear plans and goals; it's not just about buying when the market is bullish and selling when it is bearish, but rather having a reasonable mindset to face market fluctuations.
After years of navigating the cryptocurrency space, I have summarized 8 iron rules. Although not many, their value is extremely high. If you find them completely unreasonable after reading, feel free to evaluate me as you wish.
◎ 1. Be a highly defensive trader.
Becoming a highly defensive trader is a key transformation for novice traders in their trading journey. Many beginners may initially be misled by a desire for quick success, hoping to make profits quickly, or even trading with a 'get-rich-quick' mentality. However, a more realistic and feasible mindset should be: to maximize the protection of your capital. These two mindsets cannot coexist; if you focus only on rapid profits, your capital may be lost even faster.
A rule from the sports arena also applies to trading: offense is the best defense. In this context, it means to trade only under favorable conditions, and to protect your funds at other times, staying away from the market. Beginners may get lucky in their initial trades, but luck cannot last; you should be wary of the 'beginner's effect' trap.
Imagine, if you held a gun, you wouldn't easily waste bullets unless you were sure you could hit your target accurately. The same principle applies to trading; preserve your capital and only deliver a 'fatal blow' when a truly favorable opportunity arises. In trading, maximizing capital protection is the key to success. As long as you can effectively control risk, even when encountering strong entry signals that ultimately result in failure, the impact on your capital can be controlled within a reasonable range.
◎ 2. Frequently checking charts and constantly monitoring trades.
This often has an adverse effect on trading. In life, too much interference usually does not yield good results. If you constantly try to over-control your trades, the result may be counterproductive, leading to more trouble.
Have you ever unconsciously increased your position or exited a trade prematurely because of excessive focus on the charts? In hindsight, did you feel you were too impulsive at that moment? Such unplanned behaviors are often one of the reasons many people incur losses.
The simplest way is to set a trading plan and then forget it. This is a principle I often emphasize to beginners, and it is also one of the most valuable experiences I have gained: the less you interfere with your operations in trading, the better. Simply follow your trading plan and let trading proceed as planned; this is true trading wisdom.
◎ 3. The result of the last trade should not affect the next trade.
The result of the last trade should not affect the next trade. This is an extremely important principle, but many people often forget it. They can easily be swayed by the result of the last trade. However, it is important to understand that each trade is unique, and the trading results are randomly distributed. Suppose you make 100 trades; the gains and losses may be quite similar. However, their distribution is unlikely to be so uniform. It is possible that 5 or 10 consecutive trades could be losses, and if these losses affect your mindset, the upcoming profit opportunities may also be hindered by your emotional state.
It is also important to note that excessive confidence after a winning trade can have a negative impact on trading, just as the fear that follows a losing trade does. Overconfidence can lead to a willingness to take on too much risk, and in the long run, its negative effects can be quite severe. Therefore, maintaining calm in trading and not being swayed by short-term results is key to sustaining a stable mindset and achieving long-term success.
◎ 4. Simplify trading, and you will gain more.
In trading, moderation is key. Many common mistakes traders make are overdoing things. They overanalyze the market, overinterpret signals, overthink, and overtrade, generally doing many unnecessary things. As a trader, learning to be appropriately 'lazy' is also important.
First, it is essential to clarify that the favorable signals in the market are limited, even rare, over a period of time. Most of what you see and hear may just be 'market interference,' noise that is of no benefit to you. Learning to filter these signals and then select the truly beneficial 'high-quality signals' is a routine step in seeking opportunities.
Secondly, I recommend you learn the mindset of hedge fund traders for your trading. They handle millions or even billions in capital, but trade very principled, like selecting diamonds from sand, only choosing the most rewarding opportunities. For those signals that are 'possible' or 'seem like' something, it is better to stay away. In my over 20 years of trading experience, the best trades are always the most obvious and intuitive.
Welcome to follow the public account (Crypto God of Words), where you can learn and exchange ideas, and also have a clear understanding of market direction and strategies. No matter what style the market is, knowing in advance allows you to better master it!
◎ 5. Have a clear exit plan before entering the market.
In trading, no one tells you what to do. You must set your own rules, which means you must be responsible for your actions. Many people lack this self-control, leading to frequent losses of trading direction.
One of the most important tasks before trading is to determine your exit plan. It took me several years to realize: exiting is more important than entering. Observations show that many people's exits are arbitrary, resulting in either very little profit or significant losses. Establishing a strict take-profit and stop-loss plan is the best method. Such a plan can provide clear guidance, allowing you to remain calm and execute your plan in both profitable and losing situations. This disciplined exit plan helps ensure that you maintain a clear mind in trading, reducing the impact of impulse and emotions on decision-making.
◎ 6. Avoid worthless trades.
In the world of trading, worthless trades refer to trades where the risk and profit are not proportionate, usually occurring when traders are in a blind and frequent trading state. Such trades often result in losses that exceed profits, affecting the trader's mindset and even trapping them in a vicious cycle of losses.
Specifically, it manifests in traders facing a volatile market, who eagerly rush in upon seeing so-called 'opportunities' without considering the profits and risks of the trade. Such blindly entering traders usually do so with a lucky mindset, thinking that even a small profit is a gain. They overlook large risks for small profits and even view any market movement as an opportunity not to be missed, subjectively magnifying small opportunities and impulsively trading. This attitude not only shows contempt and disrespect for the market but also makes it difficult to achieve good results in the market.
For professional traders, they usually prepare trading plans and set stop-losses in advance to ensure that even if they incur losses, the impact is not too significant. However, losses from worthless trades are different, as these traders have a shallow understanding of the market, make arbitrary trading decisions, and lack careful consideration. Such avoidable losses are more detrimental than beneficial for a trader's growth.
◎ 7. High discipline.
High discipline plays a crucial role in trading in financial markets. It refers to the trader following a set of clear rules and principles when trading to effectively manage risks, achieve investment goals, and avoid adverse consequences caused by emotions and arbitrary decisions. The level of discipline directly relates to the success of trading and is considered one of the key factors for successful trading.
I insist on emphasizing that trading decisions should not be influenced by emotions. Every day, I spend only half an hour checking charts, deliberately avoiding the temptation to obsess over market fluctuations. I advise traders to strictly adhere to their trading plans and avoid over-analyzing the market, as disciplined execution is the cornerstone of stable profits. By adhering to my predetermined plans, I can remain calm, avoid emotional decisions, and thus improve trading efficiency and stability.
◎ 8. Most of the time, you should stay away from the trading desk.
On the road of trading, a wise strategy is to maintain distance from the market. Overtrading is often a shortcut to losing capital, and remembering this is crucial.
