Having experienced ten years of ups and downs in the digital currency field, I have witnessed the cycles of three bull and bear markets, from initially holding 50,000 yuan in capital to now realizing the dream of financial freedom.
In these six years of full-time cryptocurrency trading, I have experienced the ups and downs of life, from being heavily in debt to achieving financial freedom today, achieving a leap in social class. During this time, I have dabbled in various fields, whether participating in small dog projects, ICOs, or engaging in mining, I have tried them all. Along the way, I have stepped into countless pits and experienced the tug-of-war between bulls and bears, but what I felt more deeply was the tempering of my mindset. There are continuous surprises and also disappointments; this is a circle that is both magical and full of temptation.
I have summarized countless trading skills and strategies, but ultimately found that the only method that can continuously yield profits is simple and direct—bravely buy during bear markets and decisively sell during bull markets. This strategy seems crude but has been proven effective, allowing me to make consistent profits.
1. For example, if the total account funds are 200,000, the client allows you to lose up to 20%, which is 40,000, then I suggest your most adventurous loss plan is: the first time 10,000, the second time 10,000, the third time 20,000. I think this loss plan has a certain rationality. Because if you get one of the three right, you can profit or continue to survive in the market. Not being kicked out by the market is itself a success, and there is a chance to win.
2. Grasp the overall market trend. Trends are far more challenging than fluctuations because trends involve chasing highs and cutting losses, requiring firmness in positions, while buying high and selling low aligns more with human nature. Trading is about how much it complies with human nature—it’s precisely because it's difficult that it can be profitable. In an upward trend, every violent pullback should choose to go long. Do you remember what I said about probability? Therefore, if you're not in the vehicle, or if you've exited, wait patiently for a 10-20% drop to boldly go long.
3. Set profit-taking and stop-loss targets. Profit-taking and stop-loss can be said to be the key to determining whether one can be profitable. In several trades, we must ensure that total profits exceed total losses. Achieving this is not difficult; just follow these points:
① Each stop loss ≤ 5% of total funds;
② Each profit > 5% of total funds;
③ Total trading win rate > 50% satisfies the above requirements (profit-loss ratio greater than 1 and win rate greater than 50%), and can achieve profitability. Of course, you can also have a high profit-loss ratio with a low win rate or a low profit-loss ratio with a high win rate.
As long as total profits are positive, that’s enough; total profits = initial capital × (average profit × win rate - average loss × loss rate).
4. Be mindful of excessive frequent trading. Since BTC perpetual contracts are traded 24/7, many newcomers trade daily, aiming to trade almost every day during the 22 trading days of a month. As the saying goes: constantly walking by the river, how can one not wet their shoes? The more trades you make, the more likely you are to make mistakes. After a mistake, your mindset will deteriorate, and a bad mindset can lead to impulsive decisions, choosing a 'revenge' trading strategy: possibly going against the trend or heavily investing. This can lead to one wrong step leading to a series of mistakes, easily causing significant losses that may not recover for years.
Recognize the traps in the crypto world and adhere to trading rules.
One, the illusion of getting rich: the most expensive cognitive tax in the crypto world.
Every night in the cryptocurrency trading group, there are always people forwarding 'hundredfold coins' K-line screenshots. These carefully cropped local bull market curves are like the siren's song luring speculators. A certain unknown project token suddenly surged 500%, and a certain college student achieved financial freedom with living expenses; these beautified get-rich-quick legends are essentially carefully designed cognitive traps.
The typical model of insider trading is continuously replicated: creating a wealth effect through pumping → attracting retail FOMO emotions → unloading at high prices to complete the harvest. A certain animal coin project completed a crazy game from zero to a hundred billion market cap in three months, ultimately returning to zero after the founding team cleared out, leaving hundreds of thousands of accounts with a zero balance.
Data does not lie: CoinMarketCap statistics show that 93% of tokens launched in 2023 lost half their value within three months, and 79% of projects stopped updating their code within a year. These numbers expose the truth of the get-rich-quick myth—the collective illusion created by survivor bias.
Two, wealth alchemy: cracking the survival code in the crypto world.
The blockchain technology revolution is reconstructing the value internet, but 99% of cryptocurrencies will ultimately go to zero. True value discovery requires penetrating the glossy packaging of white papers to see the essence of technological innovation. While most people are obsessed with the game of trading currencies, a minority of clear-headed individuals are studying breakthroughs in zero-knowledge proofs, analyzing TPS data of Layer 2 solutions, and tracking the real adoption rates of decentralized storage.
The investment master's 'stone flipping theory' by Peter Lynch remains valid in the crypto world: flipping through 100 stones may reveal one bull stock. A researcher from a certain institution tracked GitHub code submission volumes, discovering that a certain privacy protocol project's development activity was three times that of its competitors, and ultimately this project rose tenfold against the trend in a bear market.
Position management is Noah's Ark for traversing the bull and bear markets. A certain professional trader uses the '532' allocation strategy: 50% allocation to Bitcoin and Ethereum, 30% to mainstream public chains, and 20% for exploring new tracks. This structure kept his losses in the 2022 bear market to under 15%, far below the market average decline.
Three, time compounding: the ultimate algorithm of the crypto world.
When most people pursue 'doubling in a month', the true wise ones are practicing the '30% annualized' snowball strategy. A certain crypto fund achieved 47 times returns through a cross-cycle fixed investment strategy during the complete bull-bear cycle from 2018 to 2023, proving that slow is fast in investment philosophy.
On-chain data analysis reveals an astonishing pattern: addresses holding Bitcoin for more than three years have a profit probability of over 95%. These 'diamond hands' investors have experienced at least one 50%+ crash, ultimately achieving an average excess return of 8.3 times in the 2021 bull market.
Building a cognitive moat is more important than chasing hot topics. A certain DeFi deep researcher spent 300 hours studying automated market maker mechanisms; when Uniswap was just launched, he foresaw its revolutionary value. The $10,000 invested early became $2.7 million two years later, which is the best footnote for knowledge compounding.
In this 24-hour non-stop trading digital jungle, the true wealth code has long been written in the genes of blockchain: technological innovation never stops, market fluctuations are always present, and human greed is timeless. When we put aside the delusion of 'one coin villa by the sea' and instead cultivate the blockchain value network with an entrepreneur's mindset, time will eventually reward the patient with the richest rewards. Remember: in the crypto world, living long is ten thousand times more important than earning quickly.
Trading Code
1. Cherish your chips; never lose everything. Only by not leaving the table can you win. This market does not profit by luck; it’s your patience, experience, accumulation, persistence, and logic that yield profits.
2. Learn to review and summarize; you must reflect; daily summaries are essential, and it's best to document them.
3. Small dogs are a financial game, political perspective > monetary perspective ≈ cultural perspective > pure construction perspective, incorporating the election narrative of Pnut > Sotheby's Ban ≈ traditional cultural cult > the ordinary project party issuing coins (the project party's money > the project party's strength) / pure meme.
4. When you can't resist wanting to show off your profits, it's time to take profits.
5. Maintain emotional stability in positions; don't FOMO yourself. From the perspective of non-top narratives, withdraw profits at any time; for non-top narratives, just making profits is enough.
6. If you don't enter at the first opportunity with the leader, don't go for the second leader. Wait for the second round of the leader, believe that the strong will remain strong!
7. When encountering a hot market, don't be afraid to chase high when rushing in at the first opportunity; when facing certain opportunities, use market sentiment to judge the top, not the price. (For example: Trump)
8. Doubling must return to the cost; this market is not about who earns more but about who survives longer.
9. Dynamic thinking views narratives; the development of narratives often goes in the opposite direction of static logical thinking due to external forces.
10. Only enter during an uptrend; do not catch the bottom in a downtrend; there are eighteen layers of hell below the bottom.
11. Memes are essentially a game of attention; think about who will see a coin, and who will buy it.
12. Opportunities are always there, and the next one will be even better. If you missed a chance and didn’t operate well, preserve your capital and wait for the next opportunity.
13. Establish your own trading logic; when it comes to your own opportunities, you must go all in, don't envy money outside of your logic.
14. The barrier to making money is not the market, but your own greed, fear, impatience, and hesitation. Not entering and missing out, selling at a loss, all indicate a failure to manage your emotions.
15. Don't touch trash; diversify your focus. Allocate your limited energy to the most valuable.
16. Prejudices in people's minds are a mountain; never be prejudiced. Approach new things and new narratives with an empty cup mentality. For narratives you don’t understand, start with a small position; once you enter, your research mindset will be completely different. If you don't achieve the desired results promptly, you won't completely miss the opportunity to damage your mindset.
17. Small narratives must run within the day; 3-5M is basically the peak of small narratives. Most small dog small narratives can't even reach 1M, while a large narrative of 200-300 million is a peak, and beyond that, it depends on the emotional fermentation.
18. Old projects with small pools suddenly surge because those who had already positioned themselves earlier entered first; going in now just provides them with exit liquidity.
19. Preserving capital is the first principle; let profits run, only then can you have the chance to capture big gains.
20. Long-term trades should not exceed your cost line; being overly FOMO and adding positions can endlessly raise your cost.
21. When a token's market cap/LP and trading volume are severely imbalanced, when the market cap is very low but trading volume is very high, the best strategy is to add some LP to earn transaction fees.
22. The primary market is a small-for-big market; do not think about big-for-big, and definitely not big-for-small.
23. Force quantification of every trade: for example, 1.5 times to break even at 50%, sell 10% for every subsequent increase of 1.5 times, prohibited from adding to positions. It's somewhat similar to the hat trick strategy; buying 1,000 USDT at 100k to get to 100M can yield 130k in excess returns, and significantly reduce risk (the reason for breaking even at 1.5 times is that often it may not reach 2 times, but top opportunities like Trump can consider not breaking even).
24. Before heavily investing in any coin, consider whether you can bear the risk if it goes to zero.
25. Risk small for big gains without setting stop losses; for big-for-big, stop losses must be established.
26. Many profit tops are KOL's small accounts; you need to follow these small accounts to buy, allowing the KOL's major accounts to help you exit liquidity.
27. Don’t add to positions; if trapped, avoid averaging down costs, as this often backfires in short-cycle speculation.
28. After a significant loss, you must summarize immediately; it’s best to write it down word for word to give yourself time to cool off. Don’t rush to recover; it’s easy to lose control and make impulsive trades. This situation can also occur after losses, leading to unwillingness to exit the market, blindly adding positions, and betting on a rebound.
29. Prohibit adding to positions at high levels.
30. Meme is a track of betting small for big gains; do not catch the bottom (there will always be newer, better, and cooler narratives for everyone to FOMO); only eat the first wave.
Many people ask me about buying strategies? There really is one! This is the phased 343 position-building method:
Once you have identified the coins you are ready to enter, ensure cash is also prepared, for example, initially allocating 300,000, with 120,000 for BTC.
① 3: Use 30% of current funds to build a position, which is 36,000 (12 times 0.3) for the first position;
② 4: If after building a position the price starts to rise, wait for the price to pull back; don’t rush to add to your position. After the price pulls back, add to your position, using 40% of the current funds to do so (any rise has a pullback).
If after building a position the market worsens and starts to fall, every time BTC drops by 10%, add 10% of the remaining funds to your position (3,600), until fully supplemented. Such situations are rare, but even if they occur, don't be afraid, because it's a phased position-building; your price has already been averaged out (and there's still 40% of total funds left to add to your position, referring to the 4321 strategy's 4).
③ 3: If after adding to your position the price starts to rise, still wait for a price pullback; after the price pulls back, add to your position, using 30% of the current funds to do so, completing phased position building.
Overcome fear, control greed!!!
If you only want to sell at the highest point, you can only be trapped because there is no highest point in your mind.
In conclusion, the most important thing is to persist in sitting patiently, reviewing trades, conducting research, and continuously learning. Daily 12+ hours of sitting quietly, sweeping chains, and thinking will eventually yield the results you desire. If you can't endure this hardship, don't engage in this industry. Remember, we are the most talented trading geniuses, we will succeed. We will all achieve the results that belong to us. Let's encourage each other.
What is a wedge consolidation pattern?
A wedge consolidation pattern refers to price or index movements between two converging lines, but unlike a triangle consolidation pattern, the two boundary lines of a wedge incline either upwards or downwards simultaneously. The volume changes in wedges decrease step by step towards the apex, just like in triangles. In the market, a standard wedge usually takes 3 weeks or more to form. The trend after a wedge breakout will be very rapid. If it breaks downwards, the decline usually erases the previous gains accumulated by the wedge itself, and sometimes it may drop even further.
[K Line Mini Dictionary]
Wedge consolidation patterns are divided into ascending wedges and descending wedges; below we will explain them separately.
1. Ascending wedge (see figure 3-37)
An ascending wedge refers to a price or index that, after a drop, has a strong technical rebound requirement. The price rises to a certain level and then turns downward, but the pullback point is higher than the previous low, followed by another rise to a new high, and then a pullback, forming a trend of higher highs, connecting short-term highs to form a resistance line. At the same time, connecting short-term lows forms a support line, ultimately forming two lines slanting upwards simultaneously. The support line below is steeper, and trading volume decreases as it approaches the apex. Ascending wedges often occur during bear market rebound phases or appear at the late stages of bull markets, representing a repair consolidation pattern.
An ascending triangle has only one side inclined upwards, usually representing an upward breakout bullish trend. However, from the perspective of the ascending wedge's chart, both sides incline upwards, suggesting a stronger bullish trend should be the case, but this is not necessarily true. The resistance line of the ascending triangle indicates that investors only sell after the price reaches a certain level. Once supply is absorbed, the upper pressure is relieved, and the price will break upward. In the upward wedge, while there isn’t much selling pressure during price rises, investor interest gradually decreases, and each new rising wave is weaker than the previous one. Ultimately, when demand completely disappears, the price reverses downward. The ascending wedge, like the triangle, is also a consolidation pattern, often appearing during the recovery stage in a bearish market, indicating that a bottom has not been reached, merely a technical rebound after a decline. If it breaks downward later, the descending range of the ascending wedge will at least erase the previous price increases, and it may decline even further.
Generally speaking, after an ascending wedge appears, the probability of downward breakout in the future is about 70%, while the probability of maintaining an upward stall in the ascending high is relatively small. Therefore, ascending wedges usually provide investors with a clear signal to reduce positions: the future trend is reversing! The technical significance indicated by the ascending wedge is that buying power is gradually weakening. When the support line of the ascending wedge is effectively broken, it's a clear sell signal. At this point, the subsequent trend is likely to show a large volume long shadow or a gap down, with a sharp decline!
So when encountering a wedge consolidation pattern, investors should pay attention to the following issues:
(1) Whether it's an ascending wedge or a descending wedge, the upper and lower lines in its pattern must converge clearly to a point. If the pattern is too loose, the possibility of forming a wedge consolidation should be doubted. Generally, a wedge takes more than 2 weeks to complete. The intersection formed by extending the two lines of the ascending wedge is the pressure point for future rises.
(2) Although the proportion of ascending or descending wedges that break downward during a bear market is large, if the opposite occurs with a substantial upward breakout, it could indicate the start of a new bull trend. At this point, we should adjust our originally bearish views and follow up in a timely manner. In summary: first, have a view of the future market; at the same time, make timely adjustments based on market changes.
(3) The price or index within the ascending wedge moves, ultimately choosing a breakout direction. If it breaks downward, the ideal breaking point is from the first low point to 2/3 of the distance between the apex of the ascending wedge. Another possible scenario is that the price consolidates up to the tip of the wedge, slightly rises, and then drops sharply. At this point, the primary focus should be on changes in volume; a breakout upwards requires significant volume support, otherwise, it could be a false breakout.
(4) There is a significant difference between the ascending and descending wedges: the ascending wedge often experiences a sharp drop after breaking the lower support; conversely, a breakout with volume upwards is usually a rapid rise. However, after breaking the resistance level of a descending wedge, it may rise sideways, with trading volume still light, and then the price will slowly rise, with trading volume also gradually increasing. If this situation occurs, investors can consider following up only after breaking out of the trading range, which can save time!
2. Descending wedge (see figure 3-38)
Here we will discuss the descending wedge. The descending wedge is exactly the opposite of the ascending wedge, usually appearing midway through a long-term uptrend. The descending wedge refers to a price that, after a significant rise, experiences a strong technical pullback; the price falls from a high point to a low point and then rebounds, but the rebound high is lower than the previous one, and the subsequent pullback creates a new low, which is lower than the last pullback low. This forms a pattern where the latter wave is lower than the former, connecting short-term highs and lows to form two lines slanting downwards, thus forming a descending wedge consolidation pattern. Ascending wedges often appear during downtrends, while descending wedges often appear during uptrends. In an uptrend, descending wedges are essentially adjustments during the price rise process, representing a profit-taking from previous bullish positions, often followed by the stock price continuing to choose to break upward. In a downtrend, the descending wedge has a greater likelihood of breaking downward.
The descending wedge (see figure 3-39) has a market meaning that is exactly the opposite of the ascending wedge. After a period of rising prices, profit-taking occurs. The bottom line of the descending wedge inclines downwards, seemingly indicating that market support is weak, but the new pullback wave is smaller than the previous pullback wave. After breaking the previous low point, there is no further decline; instead, there quickly appears a recovery trend, indicating that the selling pressure comes only from profit-taking during the upward move and is weakening, with no new active short-selling force emerging. After cleansing the floating capital, the probability of breaking upward is very high. The descending wedge is also a consolidation pattern, generally appearing midway through a medium- to long-term bull market. The appearance of the descending wedge tells us that the bull market has not yet peaked; it is merely a normal temporary adjustment during the upward trend.
The difference between a descending wedge and a triangle pattern is that both sides incline downwards simultaneously, while in descending channels and flags, the sides are almost parallel and stable. For both ascending and descending wedges, overall trading volume decreases from left to right, and the closer the price approaches the top, the smaller the trading volume becomes. The descending wedge differs from the ascending wedge in that its volume-price matching is ideal, i.e., price rises with increasing volume and falls with decreasing volume. When the stock price rises and breaks the upper line of the descending wedge, the trading volume will significantly increase, while the descending wedge often has a pullback after breaking the upper line, generally supported by the extension of the upper line. Based on practical experience, the probability of a descending wedge breaking upward is about 70% compared to downward breaks. From a timing standpoint, if the consolidation time of the descending wedge is too long, exceeding three to four weeks, the likelihood of a downward breakout becomes relatively greater. The best buying point for a descending wedge is the breakout of the upper line and the confirmation point after the breakout!
When encountering a descending wedge, investors just need to pay attention to the following points to operate well in the future:
A wedge is a consolidation pattern of a subsequent reversal movement; an ascending wedge often appears during a downtrend, while a descending wedge often appears during an uptrend. The ascending wedge often occurs during a bear market's rebound phase or appears at the late stage of a bull market, signaling a potential top. The appearance of a descending wedge generally indicates that the bull market has not yet peaked; it is merely a normal temporary adjustment during the upward trend. The ascending wedge (uptrend) ultimately breaks downward, while the descending wedge (uptrend) ultimately breaks upward, both being classic patterns!
[Special Reminder]
In operation, after the ascending wedge breaks the lower support, there is often a sharp drop. Therefore, after the lower limit breaks, investors should follow up promptly; while after the descending wedge breaks upward resistance, it may evolve into a sideways development, forming a hovering state, with trading volume still very low, and then slowly rising, with trading volume increasing accordingly. For this situation, investors can wait until the price breaks out of the hovering state before following up appropriately.
Insights and recommendations for operations in the crypto sphere:
Price fluctuations are normal; buying during falls and selling during rises are common in the crypto world. If you can't even withstand this level of volatility, you need to work on your mindset; otherwise, you will easily be led by market emotions.
A strong rebound does not equal true potential; the most volatile coins are often the result of speculative trading, which may not have long-term value. Truly potential coins fluctuate more steadily, relying on fundamental support; don’t be deceived by surface illusions.
Be cautious of sudden pullbacks after buying; a sudden pullback after a rise may be a signal for the insiders to unload. Pay attention to the changes in volume and price; don’t catch the falling knife at high points and become the one who gets cut.
In the second half of the black horse coin bull market, coins that performed flat in the early stages may explode several times in the second half, like marathon runners sprinting in the final stretch. These coins often have potential and are worth paying attention to for market rotation opportunities.
In a sideways market, some coins may experience several-fold increases after a few months of sideways trading, possibly gearing up for a breakout. Keep an eye on these coins; if their fundamentals are solid, the next wave of breakout may not be far away.
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