Transforming from a novice to an expert in cryptocurrency trading only requires 5 core pieces of equipment: a trading strategy that matches the market, scientific entry and exit signals, position management to control risks, risk plans against black swans, and an emotional switch to conquer human nature. Remember: Staying alive means you can output; capital preservation first is reality!
Trading cryptocurrencies often leads to losses. Today, I will teach you step by step how to build your own "anti-explosion trading system"!
The answer is actually one sentence: You lack a complete trading system!
Do not be deceived by the sound of this; it sounds like a textbook. In reality, it is just like equipping gear in a game. Once you gather 5 core pieces of equipment, you can evolve from being "the chives being slaughtered by market makers" into "a cold-blooded profit machine". Let’s get straight to the essentials!
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1. Trading strategy: first clarify whether you are a cheetah or a tortoise.
"Mindless all-in" is not a strategy; "averaging down" is gambling!
Trend following * (suitable for the impatient): Keep an eye on BTC, ETH, and other major currencies, using moving averages and MACD to judge bull and bear markets; when a trend emerges, jump in directly (for example, if ETH breaks 3000 USD and trading volume doubles).
Swing trading + (suitable for those with more time): Focus solely on altcoins, run at a 10%-20% gain, cut losses at a 5% drop, fast entries and exits (refer to the Shiba Inu project on the SOL chain).
Arbitrage hedging (suitable for tech-savvy individuals): cross-exchange arbitrage, contract vs. spot price differences, making money from market loopholes (for instance, when the price differences between Coinbase and Binance suddenly widen).
Blood lessons: In 2024, a friend used a trend strategy to buy BTC but encountered a crash due to U.S. interest rate hikes, stubbornly holding on until liquidation—strategies must match the market stage!
2. Entry signals: Don’t rely on "feelings"; pull the trigger like a sniper.
"I feel it's going to rise" is metaphysics; "conditions triggered" is science! Technical indicators: RSI below 30 (oversold) + suddenly increased volume means buy; MACD dead cross + significant on-chain transfers to exchanges means run.
News: The Federal Reserve is dovish, a certain country passes a Bitcoin law. When such news breaks, decisions must be made within 5 minutes (refer to the significant surge triggered by El Salvador's second BTC allocation in 2024).
On-chain data: Whale wallets show unusual activity (for example, Vitalik's address transferring out 100,000 ETH); immediately follow trading websites to check on large holders' movements.
Real-life example: My neighbor, Old Wang, last year doubled his investment in three months by using the "Coinbase premium exceeding 2%" strategy—simple signals repeated are better than guessing.
3. Exit signals: those who can buy are apprentices; those who can sell are masters.
"Doubling down and then exiting" is a fairytale, "capital preservation first" is reality!
Hard stop-loss: if capital losses exceed 5%, even the King of Heaven must cut losses! (Do not believe in "averaging down during a pullback"; how many thought this before LUNA crashed to zero?)
Dynamic take-profit: after realizing 50% floating profit, move the stop-loss line up to the cost price, enjoying subsequent gains (for example, if BTC rises from 40,000 to 60,000, a drop back to 55,000 would trigger an automatic sell).
Time stop-loss: If three days pass with no movement, even if there is no loss, exit; do not waste capital efficiency (especially applicable to altcoins).
Example warning: There was a girl who went long on ORDI+, made an 80% profit but didn’t exit, thinking it would hit 1000 USD. Eventually, the project team dumped the price, and she got stuck at the peak—greed is a disease that needs curing!
4. Position management: do not put all eggs in one basket, and definitely do not drop them all on the ground!
"All in to get rich" is a TikTok script; "diversifying positions to control risks" is the path to survival!
Total position red line: Invest a maximum of 50% of capital in cryptocurrencies; keep the other 50% in USD to earn interest (isn't an annualized 8% attractive?).
Single currency limit: even the most favorable coins should not exceed 20% of total positions (consider how many people were fully invested in SOL when FTX collapsed?).
Leverage multiples: Anything over 10x leverage is suicide; 3-5x combined with stop-losses is the way (100x leverage winning ten times is not enough to cover one explosion). The mathematical truth: If you bet 2% of your capital each time, even with a 50% wrong rate, you will not be out; but if you gamble 50% each time, two losses leave you with only 25%—staying alive means you can output!
5. Risk control: you are not preventing losses, you are preventing yourself.
Market risk is not terrifying; being unable to control oneself is deadly!
Black Swan checklist: Think ahead about what to do if "Musk suddenly turns bearish" or "Anan gets hacked" (for example, immediately close 50% of positions).
Emotion switch: after three consecutive losses, take a forced day off; uninstall the app for safety.
Environmental isolation: Don't check communities during a crash (panic is contagious), turn off price alerts (careless actions can lead to losses).
True story: During the 312 crash, a group member avoided losses by following the rule of "automatically shutting down when the crash exceeds 30%"; a week later, a rebound actually yielded profits—there's no need to predict storms; just build a safe haven.
Conclusion: Making money relies on a system; becoming rich relies on luck.
How to manage positions:
1. Control risks in terms of thought and operations.
Do not rush to buy; optimize by diversifying your purchases. Follow buying rules like 3-3-4 or 4-3-3, entering in batches to avoid panic buying.
Setting necessary take-profits and stop-losses is essential. When the price of an asset clearly breaks, technical indicators form a top, or the profits from your holdings significantly decrease or even incur losses, necessary protective strategies must be taken. Protect profits through timely take-profits and prevent further loss through timely stop-losses.
2. Adhere to the principle of risk diversification.
Diversify sectors and currency types to control risks. Each account should avoid holding a single currency and should not have too many types that make it difficult to respond to sudden market changes.
Reasonably distribute long, medium, and short positions; this is akin to positioning troops in battle. Capital is your army, and configuring long-term Bitcoin or Ethereum positions ensures you can definitely make money.
Other cryptocurrencies should ideally be limited to 3-5 types, with medium-term positions selected from current hot sectors. Short-term positions mainly focus on speculative grabs for rapid gains. The allocation of long, medium, and short positions should reasonably follow a 5:3:2 ratio.
3. Position risk control.
Control the progress of position sizes; maintain 30% during the bottom-building phase, increase to 50% when confirming a bull market, and keep above 70% when a bull market is confirmed. Remember not to operate with full positions; otherwise, you won't be able to cope with sudden market changes.
Limit total positions; heavy positions yield high returns, but they also carry high risks. Trading should determine positions based on market trends; when the trend is positive, positions can be heavier; when the market is unstable, positions should be reduced accordingly, holding a small amount of coins for flexible operations.
4. Capital management and profit management.
Reasonable profit management is the best method to ensure you earn and keep your profits. First, we must treat the cryptocurrency market as a cash machine, not a deposit machine. As long as you do not withdraw, your money is just a number. Profits must be realized, not endlessly reinvested. Only when you put that money in your pocket is it truly yours.
Do not take the money earned and roll it back in. At least half of the profits should be kept in the capital account; this is the reserve system. Of course, you can take out all the earned money. Even if the funds in this trading account incur losses, there will be capital left to recover.
Never roll your earned money and capital together every day; after all, no one is a deity and everyone can make mistakes. One day, a liquidation might happen, and at that point, you could lose everything, leaving you with no chance to recover.
5. How to control positions when following trades.
How to handle buying positions depends on the market conditions; if the market requires heavy positions, you should also reserve some positions for risk control. This chapter focuses entirely on short-term position control.
First, let's talk about controlling positions in Bitcoin contracts.
Use 100X leverage with a small position of 2%-2.5%, normally controlled at 3-5%.
Contract liquidations are common; friends who follow trades must use stop-losses and are strictly forbidden from holding onto losing trades.
If the entry points are not far apart, you can enter directly due to price discrepancies in exchanges.
When reaching the first take-profit level, consider reducing the position or taking profits directly.
Let's first use spot trading as an example with altcoins:
For a single cryptocurrency, the maximum combined total of three positions should not exceed 30%; at most hold 3-5 coins, with the total not exceeding 70% of the total portfolio (normal positions). For a single cryptocurrency, the maximum combined total of three positions should not exceed 20%; at most hold 3-5 coins, with the total not exceeding 50% of the total portfolio (conservative positions).
Then, let's take leverage as an example:
10x leverage, 2-3 layers of positions are optimal; exceeding 30% starts to pose risks. Going larger cannot withstand a random plunge, and the margin for error becomes too small. This is a conclusion from years of experience, so don't take it lightly.
If increasing leverage, you can simultaneously reduce positions; reducing positions can simultaneously increase leverage. This will ensure that your operations are closely aligned with market trends.
For a single cryptocurrency, the maximum combined total of three positions should not exceed 30%; at most hold 3-5 coins, with the total not exceeding 30% of the total portfolio (normal positions). For a single cryptocurrency, the maximum combined total of three positions should not exceed 20%; at most hold 3-5 coins, with the total not exceeding 20% of the total portfolio (conservative positions).
Averaging down operations.
Averaging down is an important part of normal operations.
When you buy one, you should first have a concept of how much USD you plan to buy. For example, if I want to buy BTC, I plan to buy a total of 1000 USD; for ETH, a total of 2000 USD; for ORDI, a total of 500 USD.
Secondly, have a rule for the progress of purchases; generally, use a three-position system, like 4-3-3 or 3-4-3.
If you start to see a price increase during the buying process, do not add to your position. If all three positions are in and the price drops, do not add more.
1. Set stop-losses. This is necessary, not optional.
2. Averaging down but still declining. This indicates a judgment error; consider proactively reducing positions. Wait for a reversal before averaging down.
3. Turn and average down. Averaging down should not be done more as prices fall; this can lead to heavier positions. Instead, wait for a trend reversal to average down.
4. There are two types of averaging down:
One reason to average down is to lower costs; this averaging down should exit as soon as it reaches above the cost price. Of course, sometimes the price may drop after averaging down, so execute according to the second principle.
Another reason for averaging down is to increase profits, also known as flexible positions. This part can be reduced according to your profit space; exit upon reaching profit targets. You can also exit based on resistance levels, gradually reducing positions in batches or all at once.
I generally view the first position as the basic position for the bottom position. Of course, this is not fixed. If the market is good, the proportion can increase; if the market is bad, keep the bottom position smaller.
5. The issue of needle-sticking to average down is actually a matter of overall position planning. If you find that the position has inadvertently increased, take the initiative to reduce it; do not gamble!
6. Issues with transferring positions.
If we have a set of 3-5 coins.
If you do not want to increase your position, you must exit one before entering another; no entering without exiting.
If controlling positions during a decline, always reduce the weakest position first.
If you do not want to increase the total position but want to buy strong coins, you can reduce the holding of weaker coins or sell the weakest coins to transfer positions to stronger coins.
Observe highs and lows, avoid risks.
Before placing a trade, check Bitcoin to see if the recent trend is good or bad. If Bitcoin is about to drop, everything will likely decline. If you think today's market is dangerous and may drop, reduce positions or liquidate.
In a potentially topping market, everyone should know how to operate. Most of our losses occur here. When trading, we must first check Bitcoin's trend and what phase it is in.
In a potential downturn or already declining trend, positions should be reduced while the usual trading positions should also see a certain reduction. As Bitcoin declines, gradually decrease long operations to ensure alignment with the overall trend, waiting to reach key support or a reversal before increasing positions again.
In a potentially bottoming market, do not discuss bottom fishing; the bottom emerges slowly. Short-term rebounds should also control positions and manage take-profits and stop-losses unless very significant reversal signals appear.
When entering a rebound or upward trend, initial trading can be normal, but as time progresses, more caution is needed, especially during key trend reversal times. Gradually reduce position sizes and trading frequency.
Assess the market's current time frame; this is essential for every investor's market awareness. If you cannot understand whether the overall market has risks, or how significant those risks are, your foundational knowledge is lacking too much. This cannot be explained in just a few words in one article. Friends like this should go learn the basics of market observation well; the Bitcoin market is the most standard and straightforward among all currencies.
Aside from solid techniques, over a span of two years, from 70 to over 28 million, it was due to strictly adhering to the following iron rules, summarized and shared for those destined to find it valuable!
1. Control emotions.
Traders must remain calm and control their emotions; they must respond calmly to sudden market changes. Otherwise, indecisiveness could lead to missed opportunities or losses. It is best to prepare for various possibilities before entering the market, so when market changes occur, they won’t feel too surprised and helpless.
2. Start with small trades.
For beginner traders entering the market, they must start with small-scale trades and choose relatively stable price fluctuations to gradually master trading rules and accumulate experience before increasing their trading scale and choosing more volatile assets.
3. Avoid quick profits.
Traders should not harbor a desire for quick profits. They should not enter the market based on subjective wishes. Successful traders generally separate their emotions from trading activities to avoid suffering significant risks when market trends contradict personal desires.
4. Always be prepared to accept failure.
Margin investment is a high-risk, high-reward investment method. Trading failures are inevitable in the trading process and are essential for traders to gradually learn lessons and accumulate experience. When facing investment failures, traders must carefully summarize to improve investment ability, avoid risks, and strive for profits.
5. Learn to wait and take a break.
Daily trading not only increases the probability of investment mistakes but may also raise trading costs due to proximity to the market and overly frequent trades. Observing and resting allows traders to analyze the development direction of the market more calmly. When traders lack enough confidence in their market trend judgment, they should also sit back and observe, understanding patience and self-control, waiting for the right moment to re-enter the market. As the saying goes: "Too much long trading leads to too many mistakes. Better to miss than to make a mistake. Opportunities are always present; seizing them requires sharp eyes rather than waiting for an empty opportunity."
6. Set strict and reasonable stop-losses. Traders must set strict stop-losses before trading to control potential losses within an acceptable range. Setting a stop-loss range too wide can lead to significant losses, while setting it too narrow can cause positions to be easily shaken out by small losses, thus missing profit opportunities.
7. Do as you wish.
Do not easily let others' opinions or viewpoints sway your trading direction. Once an investor has established a preliminary concept of the market, do not change it lightly. Frequently changing trading plans can destabilize a trader's judgment of the market trend and may cause them to miss good opportunities. Others' opinions are for reference; the final decision rests with you. Do not blindly trust experts or follow the crowd; firmly believe that the market is always right.
8. Seize market entry opportunities.
When the price breaks through critical levels after a period of time, trading should occur. When prices effectively break the previous day's, week's, or month's highs or lows, it generally indicates that a new trend will form, and traders should act decisively to buy or sell. This is especially critical for ultra-short-term operations, where the entry price is crucial.
9. How to add positions.
When traders’ positions yield floating profits, any increase in positions must be gradual; the added position should not exceed the original amount. Reasonably control risks to prevent them from escalating uncontrollably.
10. Respond promptly.
When the market price trend is contrary to the direction of the trader's position, the trader should decisively take measures to exit the trade to ensure losses remain as low as possible and within an acceptable range. Generally, losing positions should not be held for more than two to three trading days; otherwise, losses will continue to grow, leading to significant losses and the loss of the opportunity to turn losses into profits. Stop the pain in time! This also gives oneself a chance to make money.
11. Let profits accumulate.
Taking small profits and giving back can lead traders to ultimately fail due to small gains and large losses. When the market trend aligns with the investor's position, traders should not close positions lightly. They should understand the importance of long-term investments.
12. Be ready to close positions for huge profits.
When traders gain huge profits in a short time, they must first mentally prepare to close their positions and then study the reasons for the market's violent fluctuations; otherwise, they will miss profitable opportunities. Market volatility carries the highest risk, often leading to a massive reversal after an initial gain, resulting in losses that can be several times greater than the profits.
13. Learn to short.
For general beginner traders, there tends to be a bias towards buying low and less tendency to sell high. In a buyer's market context, price drops are often easier than price increases, so traders should seize the opportunity to short at highs. Prices tend to rise slowly but drop quickly and sharply.
14. Do not overly focus on the entry price.
When traders confirm the trend direction and decide to trade, they should not miss out on potential profits from significant market movements due to setting the buy price too low or the sell price too high. They should strive to ensure the position is filled. If confident in price movements, do not overly pursue the best entry price but allow an appropriate margin of 3-5 points to ensure "there's profit to be made." Alternatively, they can enter with a light position and add to it when the market clarifies and the price improves.
15. The number of positions should not be too large.
In trading operations, generally, positions should not exceed 1/3 of the total; if necessary, reduce the position size to control trading risks, thus avoiding substantial financial losses caused by excessive position sizes and opposing price fluctuations.
16. Do not change plans casually.
Once the operational strategy is decided, traders must not arbitrarily change their strategy due to extreme fluctuations in gold prices; otherwise, they may make correct judgments but miss opportunities for significant profits, and they may incur unnecessary losses or only gain small profits, while also bearing the trading fees from frequent trades.
17. Do not follow the crowd.
Historical experience shows that when the trend is very clear, it may also be the time for a reversal. Most people's viewpoints are often wrong, and making money in the market is only for a few. When the vast majority are bullish, the market may have peaked; when the vast majority are bearish, the market may have bottomed. Therefore, investors must constantly make independent analyses of market trends, and sometimes going against the crowd can lead to profits.
18. Do not buy and sell at the same price level.
When entering a trade, a more prudent method is to build positions in multiple stages to observe market development. When the direction of the position aligns with the price trend, available funds can be added to the position. Conversely, when the direction of the position contradicts the price trend, avoid incurring heavy losses due to over-leveraging.
19. Do not place orders in the same direction after a stop-loss.
This effectively expands the stop-loss while incurring more fees, which is highly risky.
20. Do not expect the best price level.
Occasionally catching the peak and bottom is luck, while playing the game of counter-trend peak or bottom fishing is extremely dangerous. When a trader confirms that the market is about to turn, they should be ready to enter the market at any time; "close enough" is fine, as your goal is to make money, not to catch the entry point.
"Those who can seriously read this are bound to be different from those who can only scroll through short videos. You deserve a better growth path; share this with like-minded individuals, and we will meet at the peak."
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