In a bear market, if you still adhere to the old mindset of buying low and selling high, you will often suffer heavy losses. At this time, short selling is a more feasible strategy.
Leverage short selling: Leverage trading can be used for short selling, but it is advised to control the position at 1x. Specific operations can be consulted with customer service.
Low-leverage contract short selling: Set the contract multiple to 1, operating fully when short selling.
Short selling points can also be determined based on the 'simple immediately usable trading system'.
This trading system not only has simple operations but also the following advantages:
Avoid human weaknesses: Clear and precise buy and sell points can effectively avoid the influences of greed and fear, allowing for buy when to buy and sell when to sell.
Wide applicability: Applicable to all cryptocurrencies, including mainstream coins and altcoins.
Flexible applicable periods: Periods above the 15-minute line can be used.
Avoid indicator paralysis: Effectively avoid misleading caused by indicator paralysis.
Finally, emphasize that in a bull market, focus on spot trading and avoid engaging in contracts. This 'simple immediately usable trading system' may seem simple but contains the principles of financial trading; I hope everyone does not underestimate it.
The bottom line that must be adhered to in contract trading
Contract trading carries extremely high risks; to achieve profitability in a high-risk market, the key lies in effective risk management, which is to earn more when making profits and lose less when incurring losses. Next, I will elaborate on the importance of risk management in contract trading and some key points of risk management.
In contract trading, making money once or twice may not be difficult, but achieving long-term stable profits is certainly not easy. The market is unpredictable, and we are but a drop in the ocean; we should not overly pursue win rates, lowest points, or highest points, nor should we fantasize about becoming rich in a short time. Every trade, regardless of right or wrong, should be approached with a calm mindset and timely cut losses. If a profit is small, accumulate several times; do not rush to achieve results. Greed and fear are the human weaknesses in the trading market; to be profitable, one must strive to overcome them.
Persisting in independent thinking is crucial in the cryptocurrency space. The market is relatively small, with limited trading counterparts; the essence of making money lies in sticking to your own trading strategy. Blindly following trends not only makes it difficult to profit but may even lead to losses. Therefore, one must strictly adhere to their own trading discipline, avoid greed and luck, and not feel smug for profiting from a single breach of discipline, nor should they feel regret for missing an opportunity due to adhering to discipline. Discipline is non-negotiable and must be upheld at all times.
To effectively manage risks and reduce the probability of fatal mistakes, the following points should be noted:
Reduce leverage: Control the actual leverage of positions to not exceed 2-3 times, ideally around 1 time. If using a full position model, be sure to set stop-loss and take-profit to prevent large fluctuations that could lead to liquidation.
Learn to cut losses: Cut losses are a crucial part of trading. Many retail investors do not lose due to cutting losses but due to liquidation. Market fluctuations are unpredictable; the key to making money lies in making more when right and losing less when wrong. Therefore, when wrong, one must cut losses promptly, setting a loss percentage that can be tolerated, such as 15% or 30%. Once this percentage is reached, regardless of the situation, cutting losses must be decisive.
Reduce frequency: The more trades, the greater the chance of making mistakes. If a significant loss occurs at the wrong time, the consequences will be severe. Therefore, trading frequency should be reduced, seizing high-probability opportunities, minimizing mistakes and losses. This not only benefits profit generation but also helps with mindset adjustment.
Capital management: Capital management is the most important part of trading; it can effectively protect the principal, reduce drawdowns, preserve profits, and improve risk tolerance. The following are several capital management disciplines:
Keep funds available: Never operate fully invested, even if only 10% of funds remain uninvested. In extreme risk situations, this amount can play a crucial role. I generally keep 10-20% of funds uninvested, occasionally used for short-term altcoin trades, with holding times generally not exceeding 24 hours.
Risk isolation: Contracts and spot must be operated separately. The spot part should not be leveraged at all, only profiting from spot price increases. The contract part can occupy 20-30% of the total funds, and in very certain trend conditions, it should not exceed 50%. The contract part should operate with low leverage, anchoring to cryptocurrency-denominated returns. If stable profits can be achieved in the contract market, the cryptocurrency-denominated returns will be considerable.
Avoid fund dispersion: Concentrate funds on a few relatively strong cryptocurrencies and avoid trading too many assets simultaneously. Too many trading assets not only fail to amplify profits but actually increase risks. It is best to focus on operations based on increasing win rates, making it easier to generate profits.
Reflect often and summarize: The trading process mainly includes judging the long or short direction, finding entry points, determining position sizes, adjusting positions based on market conditions, and setting take-profit and stop-loss. After completing each trade, one should carefully reflect, identify weaknesses, and improve. At the same time, summarize successful experiences and lessons learned from trades; with long-term persistence, there will surely be gains.
The above are my reflections on contract trading. Although specific opening techniques and strategies are not covered, I believe these foundational thoughts and concepts are more important as they are the cornerstone of trading. Only by solidifying the foundation and mastering certain technical analysis skills can one achieve stable profits in the cryptocurrency contract market.
Rolling position strategies and precautions
In the cryptocurrency space, if one wants to turn 10,000 into 12 million, rolling positions may be a relatively quick way, but it is also highly risky. The most risky rolling position method should be done in three stages, giving oneself at least three opportunities.
For example, if the total account funds amount to 200,000, the maximum allowed loss is 20%, which is 40,000. The suggested loss plan is: first time 10,000, second time 10,000, third time 20,000. This plan has some rationality because as long as one of the three trades is correct, there is a chance of profit or continued survival in the market. Not being eliminated by the market itself is a success, which also provides an opportunity for profit.
During the rolling position process, the following points should also be noted:
Grasp the overall market trend: Trend trading is more challenging than range trading because it requires chasing highs and cutting losses, testing the resolve to hold positions, while buying high and selling low aligns more with human nature. However, the essence of trading is counterintuitive; the difficulty of trend trading actually increases the potential for profit. In an upward trend, any violent pullback is an opportunity to go long. Therefore, if you miss the chance to enter or have exited, you should patiently wait and boldly go long when a 10-20% drop occurs.
Set stop-loss and take-profit targets: Stop-loss and take-profit are crucial for determining profitability. In multiple trades, ensure total profits exceed total losses. To achieve this goal, the following points must be observed:
Each cut loss should not exceed 5% of the total funds.
Each profit should exceed 5% of the total funds.
Overall trading win rate greater than 50%.
As long as the above conditions are met (risk-reward ratio greater than 1 and win rate greater than 50%), profitability can be achieved. Of course, high-risk-reward ratios with low win rates or low-risk-reward ratios with high win rates can also be employed as long as total profits remain positive. Total profit = initial capital × (average profit × win rate - average loss × loss rate).
Avoid excessive trading: Since BTC perpetual contracts trade 24 hours a day, many newcomers will trade frequently, trying to trade every day of the 22 trading days in a month. However, those who frequently walk by the river are bound to get their shoes wet. Too many operations inevitably lead to mistakes; once a mistake is made, the mindset is affected, which may lead to impulsive decisions and 'revenge' trading, such as trading against the trend or trading with heavy positions, resulting in substantial losses that might take years to recover from.
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