Beginners' Guide to Avoiding Pitfalls in the Crypto World: Survival Rules for Leverage, Averaging Down, and Stop Losses
1. The Truth About Leverage
Many people think that 100x leverage is more dangerous than 1x, but the risk doesn’t lie in the multiplier; it lies in your judgment and position size. What’s the advantage of 100x? With the same margin, you can open more positions, allowing for greater flexibility. For example, if you see the trend correctly but miss the right entry point, high leverage gives you more room to average down and pull losing trades back to profitability. The key is not the size of the multiplier, but whether you can control your own actions.
2. The Art of Averaging Down
Averaging down is not mindlessly increasing your position; it’s precise rescue. My habit: only average down at key support/resistance levels, and do not average down in a flat manner—directly go in with 2-3 times the position size to quickly lower the average price and let profits run faster. Remember, averaging down is for turning losses into gains, not for digging a deeper hole for yourself.
3. The Ruthless Principle of Position Management
No matter how big the market move, I always start with a 25% position size, or even lower. Going all in? That’s the gambler's frenzy, not a trader's game. Leave enough buffer; when the market spikes and washes out, you can watch with a smirk rather than lamenting after a margin call.
4. Taking Profits and Cutting Losses: The Dignity of Experienced Traders
“Those who can buy are apprentices, those who can sell are masters.” We’ve all heard this a million times, but how many people die from being unwilling to cut losses? Take out your principal first when in profit, let the profits roll; if the direction is wrong, cut it immediately—don’t fall in love with the market. I’ve seen too many people hold onto winning trades until they turn into losses, then they blame the market manipulators—when in fact, those manipulators only harvest the greedy.
Final piece of advice: The core of making money in crypto isn’t about how accurately you predict, but how you survive when you’re wrong.
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