1. Take profit and stop loss: the first line of defense against human nature

  • The wisdom of taking profits:

    • Just catch the body of the fish, don't be greedy for the tail (e.g. BTC from 60,000 to 70,000, catch the most stable 6000-6800 segment)

    • Practical skills: dynamic stop profit (move stop loss every 5% increase), forcibly close if profit retraces 30%

  • The cruel truth of stop loss:

    • Anticipating 100 trades may succeed 99 times, but one black swan can wipe it all out (refer to LUNA's overnight collapse)

    • Blood and tears formula: Single loss ≤ 2% of capital, total drawdown ≤ 10% must stop trading

2. Trading frequency: less is more philosophy

  • High-frequency trading will lead to demise:

    • With 10x leverage, opening 10 trades in 1 day ≈ giving the exchange 2000U in fees (calculated at a 0.05% rate)

    • Data truth: Top traders average ≤ 3 trades per day, with a win rate > 65% can achieve annualized 500%+

  • Golden rule:

    • Only take 1-2 high certainty opportunities daily (e.g. BTC breaking key weekly level + increased volume)

3. Empty position practice: the waiting art of top hunters

  • Missing out vs loss mathematical problem:

    • Missing out = 0 loss, blindly opening trades = -20% starting loss

    • Case study: In March 2024 during BTC consolidation, frequent long/short traders lost an average of 37%

  • Empty position signal:

    • Volatility index (VIX) > 80

    • 24 hours before major policy announcement (e.g. Federal Reserve meeting)

4. The core concept of position management

  • Newbie's deadly move:

    • 1000U capital × 100x leverage = 1 second liquidation

  • Professional player model:

    • Total position ≤ 10% of capital (e.g. 10,000U account single trade ≤ 1,000U)

    • Leverage ≤ 20 times (drop to 5 times in extreme market conditions)

    • Avoidance of averaging down: adding to a losing position is a suicidal act (see 2023 FTX collapse and chain liquidation)

5. The truth behind compound miracles

  • Stable compound model:

    • Earn 1% daily, 250 days → 12 times (1000U turns into 12,000U)

    • Lose 1% daily, 100 days → zero (mathematical inevitability)

  • Practical strategy:

    • Profit withdrawal rule: withdraw 30% of weekly profits into stablecoins

    • Loss circuit breaker: stop trading for 1 day after 3 consecutive losing trades

6. The ultimate form of trading system

  • Three steps to build a system:

    1. Signal layer: only trade 3 familiar patterns (e.g. head and shoulders breakout, EMA golden cross with volume)

    2. Execution layer: fixed opening quantity (e.g. always open 0.1 lots of BTC)

    3. Risk control layer: hard stop loss + time stop loss (if a position hasn't profited after 4 hours, forcibly close it)

  • Mindset mantra:

    • "If you don't understand = don't trade, if you trade, always have a stop loss"

    • "Take profits, never add to losses"

The necessary path from loss to profit

  1. Liquidation more than 3 times → Understand market cruelty

  2. No leverage for 3 consecutive months → Restructure trading cognition

  3. Establish a trading log → Record reasons/emotional state for each trade

  4. Find 1 effective strategy → Repeat execution over 100 times

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