Let’s put it this way: in the cryptocurrency space, playing spot trading may not guarantee how much you earn, but at least you won’t lose money. Losing a significant amount is almost impossible, of course, this varies by person. For example, newcomers entering the market may find it very difficult to achieve this, but I believe that seasoned traders who have experienced two cycles of bull and bear markets can easily make steady profits in spot trading.
As long as you have a proper understanding of the cryptocurrency space, it is almost impossible to lose money in the spot market; those who understand will naturally see if I am right. Recently, I have been pondering this question: Why do people make money through spot trading in the cryptocurrency space far more than in futures? I summarize the following reasons:
1. Investor's cognitive level: Spot trading often has no leveraged capital and accumulates slowly, so those who generally hold spot assets are usually individuals with large amounts of capital. This group of people may have also achieved some form of 'certification' in other industries outside the market, so they are not in a hurry to succeed and can live well even without the cryptocurrency space; in contrast, the contract trading crowd is generally individuals with less than 100,000 US dollars. These individuals can go up or down; when they go up, it's like soaring dragons in the sky, and when they go down, it's like starting over from zero, so most people cannot resist the temptation of instant success.
2. Cyclicality: Spot trading tends to be longer-term with a higher margin for error, while contracts are more short-term with a lower margin for error. The high transaction fees and high funding rates associated with contracts force you to make judgments in a relatively short time frame. We know that market conditions, especially short-term conditions, are largely random; once you make a wrong judgment, you face real monetary losses, whereas spot trading only involves unrealized losses.
3. Psychological pressure: Those who have experienced it know that when trading contracts, you can’t expect to sleep well. The first thing you do when you wake up in the middle of the night is to check your phone to see if you’ve been liquidated. You dream of liquidation, and before going to bed, you keep staring at a market that doesn’t even fluctuate until you can’t take it anymore, then you silently add some margin to dare to continue sleeping. Spot trading, on the other hand, is completely opposite; I can sleep anytime I want without worrying about liquidation, and I have plenty of time to do what I want.
The above summarizes several reasons why making money in spot trading is simpler. Complexity does not mean correctness. Therefore, if we want to make steady money in spot trading, we must meet the following preconditions: 1. Don't invest if you don't understand: I believe this carries the highest weight among all reasons. I see many people complaining about Ethereum not rising, indicating that many people have heavily invested in Ethereum, but I can guarantee that at least 80% of them have not researched Ethereum deeply; they just think it’s good because others say so. If you truly understand what you are buying, you certainly won’t curse it for not rising. Many people who lose money invest all their money impulsively into something they haven’t researched, and once the market turns, they fall into endless doubt and panic, ultimately causing themselves to incur losses.
2. Timing of entry: Just because we have researched and confirmed that something is good doesn't mean we should blindly jump in right away. Even if something is skyrocketing, don’t let emotions drive you to FOMO and chase the high; wait to buy when it’s discounted. Just like with NVIDIA now, we must acknowledge that this is a very good company. A good company does not necessarily equate to making money. If the opportunity doesn’t arise, then look for the next one. In investing, there should never be thoughts like 'I must do this or that.' Proper waiting is essential; an excellent hunter does not fire aimlessly.
Summary: The core of making stable money in spot trading: 1. Do not invest if you don’t understand or haven’t researched; 2. Find a suitable entry point. This point doesn’t have to be absolutely low; a relatively low position will suffice. What does relatively low mean? It means when everyone is throwing away something like a hot potato, we pick it up, rather than chasing after it when everyone is scrambling to grab it, which can easily lead to injury. I've said my piece, and I hope you can continue to prosper as the leader.
