Contracts, for most people, are a double-edged sword, while for a small number, they are a tool for wealth. If you want to trade contracts, first understand the content below.
1. Suppose the probability of liquidation is 0.1%. After 1,000 trades, the total probability of liquidation reaches 63%. After 2,000 trades, the probability is 87%. The probability of liquidation is merely a theoretical assumption. In actual operations, due to the typical normal distribution of price movements, as leverage increases, the probability of liquidation grows exponentially, meaning the probability of liquidation with 10x leverage is much higher than with 5x leverage.
2. Suppose the transaction fee for each trade is 0.1%, with a 50% win rate. After 1,000 trades, the capital will likely be zero.
3. Suppose you have 10,000 yuan. If you earn 50% the first time and lose 50% the second time, you will have 7,500 yuan left. If you lose 50% the first time and earn 50% the second time, you will still have 7,500 yuan left. If you lose 90% in a trade, you would need to earn 900% to break even.
As for the method of splitting positions and setting stop-loss lines, there is no essential difference between the two; both reduce risk while also lowering potential profits.
4. In the spot market, 10% of retail investors can profit; in the contract market, 3% of retail investors can profit.
There are roughly three types of people who profit from contracts:
First, use small funds to make quick trades, relying on win rates to make money. Strict discipline is required, and once you make a profit, you should withdraw it.
Second, make money by relying on the profit-loss ratio. Even if the win rate is below 50%, if you earn more than you lose, you can make big money.
Third, profit by rolling over positions, like Tony turning 50,000 into millions, the lunch dogecoin 400 times, or the female college student who shorted Luna to earn millions. Many have built their wealth through rolling over positions.
I have played all three of these, starting from 8,000 entering the crypto world to millions. Below, I will share how I achieved this:
If you want to treat cryptocurrency trading as a second source of income, want to share in the profits of the crypto world, and are willing to spend time to grow and learn, then you shouldn't miss this article. Read it carefully; every point is the essence of the crypto world.
It can be said that whether in a bull market or bear market, these trading rules that must be followed can help you! Later, I will also talk about an essential tool for Bitcoin trading—BOLL, which can determine whether it is a bull or bear market. If used well, making 30 times your investment in a month is very simple!
Before each trade, everyone must ask themselves three questions:
First, think about the reason for each order you place.
Second, do you often find that profitable trades turn into losses?
Third, do you often find yourself holding onto trades until liquidation and not knowing what to do? These three questions are unavoidable for anyone trading. Crypto friends have encountered these situations to varying degrees; everyone has gone through this, especially beginners, who are often very blind. The essence lies in their lack of a mature trading mindset and trading system.
What is a trading system? It is a self-methodology for trading, opening positions, closing positions, increasing positions, decreasing positions, taking profits, and stopping losses, essentially a set of rules you create. The most direct benefit of such a system is that all your trades are documented, greatly reducing the chances of making mistakes and the amount of loss. Additionally, you won't need to watch the market in real time. When you strictly follow the system, you will know your goals and losses, allowing you to remain steady regardless of market fluctuations.
So how do you establish your own trading system? The most important thing is to have a good mindset. The crypto market is open for trading 24 hours a day, with unpredictable and volatile conditions. You need strong psychological qualities when trading. A person's operating habits, psychological stress tolerance, strategy execution ability, and ability to overcome greed and fear vary; these different capacity indices determine that each person needs a different trading system suitable for them.
From my long-term summary, an excellent system must contain the following characteristics:
First, the frequency of placing orders should not be too high. Many people in the crypto world are eager to get rich and feel like they will miss out on a lucrative market if they don't trade in a day. In reality, orders should be based on market conditions, not time. Blindly placing orders without market movement will only lead to losses. There are many opportunities in the crypto world, but the vast majority are not accessible to you. No one can seize every fluctuation. 'Waiting' is key; learn to wait and seize your opportunities, reducing the frequency of stop-loss orders, and your returns will naturally improve significantly.
Second, overcome greed. Greed is the most taboo thing in cryptocurrency trading, especially in contract trading. The market fluctuates daily; where there are rises, there must be falls. I have seen too many people fail to take profits on trades that could have doubled due to greed, leading to losses or even liquidation.
Third, strictly implement take-profit and stop-loss strategies. This is the most important operation in contract trading and a key reason why I can achieve a maximum return rate of 11,570.96%. Before analyzing market conditions and placing orders, always think about the take-profit and stop-loss positions, especially the stop-loss position. Calculate whether the profit-loss ratio justifies taking that trade. When you feel confident, set these two positions. No matter how the market fluctuates, you will remain steady as a mountain. Strictly enforce the stop-loss position to preserve capital, and take profit in batches to lock in gains.
Fourth, ensure proper position control when placing orders. Why is position control important? A simple calculation can clarify this: If you earn 20% on one trade and lose 20% on another, with a 50% accuracy rate, cycling through 40 trades can halve your assets. Considering fees, the remaining amount is even less, and the result will inevitably be zero assets. Therefore, you must implement position control well. Fixing capital is a good choice, and profit withdrawal is a great habit because what you withdraw is truly yours; leaving it in the exchange is just floating profit.
Fifth, practice and review. Once you have learned to control your mindset, position, funds, and candlestick trading techniques, you still lack the most critical and essential part of building your own system, which is to practice and review. Practice brings true knowledge, and reviewing can lead to improvement.
Reviewing should be done for every trade, weekly reviews, and both notes and real trades can help everyone summarize and enrich their reasons for opening trades, perfecting their take-profit and stop-loss points.
A trading system is not established overnight, but is summarized through continuous practice and trading. No one is born understanding candlesticks or contracts; everyone learns and summarizes through constant exploration. Who hasn't lost money and paid tuition fees? The important thing is that tuition fees cannot be paid in vain. Learn from your mistakes; gaining wisdom from failures helps you know what not to do and what to do next time in similar market conditions.
Wen Cheng 8
$
