We all know that many classmates often open contracts with 50-100x leverage + go long, which is very prone to liquidation; it can happen almost instantly!
Long with 50x leverage, and a 1.5% drop leads to liquidation.
Long with 100x leverage, and a 0.6% drop leads to liquidation.
The inherent advantage of cryptocurrency is its high volatility. Those who long with 100x leverage over the long term will inevitably face liquidation; this is unavoidable. It's not a matter of your technical skills or analysis being wrong, but rather that this mechanism is simply how it works! A slight fluctuation can lead to liquidation.
So the question arises, how to change this situation?
This is today's focus! Use options to replace contracts; they also leverage above 100x but lack a liquidation mechanism.
Looking at this, don't you find it incredible?
First, let's understand options.
Utilize a very small amount of capital to buy one option, equivalent to 1 BTC.
For example, the current price of Bitcoin is 70,000 USD each.
Zhang San and Li Si, these two classmates, both expect Bitcoin to rise, but their accounts only have 700 USD each.
Zhang San used 700 USD, opened a long position with 100x leverage, which is 700x100=70,000 USD, exactly equal to 1 BTC.
Li Si used 700 USD to buy 1 BTC call option; 1 option = 1 BTC, thus 70,000 + 700 = 100, essentially 100x leverage.
However, Zhang San's contract is 100x leverage, so a slight 0.6% drop during the day leads to liquidation and a total loss.
As for Li Si, since it is an option, it won't be liquidated regardless of how much it drops during the day, as long as the option has not expired. Even if it drops to 100, it won't be liquidated. Generally, the option cycle is chosen for 24-48 hours.
Thus, as long as Bitcoin recovers within this time frame, the profit will be equivalent to the profit from a 100x contract. For instance, if Bitcoin rises to 72,000 USD the next day, then Li Si's option would earn him 72,000 - 70,000 = 2,000 USD.
From here, we can see that the advantages of options are very obvious. Under the same leverage effect, contracts can be liquidated, while options cannot be.
Of course, options also have drawbacks, which is that they must realize a rise within the specified time to be profitable. Therefore, you need to determine whether Bitcoin will rise within 24-48 hours. If you are certain, you can buy call options; a downturn in the process does not affect the outcome.
In contract trading, even a slight drop can lead to liquidation, rendering subsequent increases meaningless.
When engaging in contract trading, reasonable position management is crucial. Here are some suggestions to help you better manage your positions and avoid unnecessary losses.
1. Reasonable Fund Allocation
Divide your funds into several parts, with each part used for a single entry. For example, if you have 30,000U, you can divide it into three parts of 10,000U each. Use one part for each entry to reduce risk.
2. Fixed Position Size.
Maintain a fixed position size for each trade to stay calm during losses or profits. When you earn a certain amount, you can appropriately increase the position size for each trade.
3. Avoid high leverage.
High leverage increases the risk of liquidation. Use no more than 5x leverage for altcoins and no more than 10x leverage for Bitcoin, which is a more reasonable choice.
4. Avoid counter-trend trading.
Do not short when the market is rising, or go long when the market is falling. Such operations often lead to losses.
5. Logical Trading
Do not rely solely on graphical analysis; have your own trading logic. This can help you make wiser decisions during market fluctuations.
6. Tips for Fund Management
If your funds are limited or currently in a losing state, do not invest a large amount of capital all at once. You can try investing 1,000U or 2,000U each time, divided into several portions, and operate slowly.
7. Techniques to Reduce Losses
Do not use high leverage: no more than 5x for altcoins and no more than 10x for Bitcoin.
Do not take counter-trend positions: Do not short when the market is rising, and do not go long when the market is falling.
Trade logically: Make decisions by combining graphical analysis with your trading logic.
Through the above strategies, you can better manage your contract trading positions, reduce risks, and increase profit opportunities.
I. The most stable way to trade contracts in the cryptocurrency circle.
Choose good coins and be a good person. As for leveraged trading.
The volatilities can be magnified through leverage, and the primary consideration in trading should not be volatility but certainty.
In an upward market, go long on strong coins; conversely, in a downward market, short weak coins.
For example, when the new quarter just begins, the strongest upward momentum is typically seen in EOS and ETH, and during pullbacks, these are the first coins to consider going long. When the market is dropping, Bitcoin is the first choice for shorting. Even if the final result shows mainstream coins dropping more than Bitcoin, only shorting or following Bitcoin can greatly reduce the risk of a violent rebound.
Most traders in the cryptocurrency circle are short-term traders. When trading, it is challenging to stick to ideal exit positions, and they are also not skilled at position control. They cannot rely on oscillations to pull average prices. Given this situation, for most traders, a good entry price outweighs everything.
Once there is a profit, take some off the table to secure it, and set a stop loss at the cost price for the remaining portion. This is something I have always emphasized in my community.
The essence of contract trading strategies.
(1) Identify the main trend and trade in line with it; otherwise, do not enter the market.
(2) If you are trading in line with the trend, the entry point is:
1. A new breakthrough point in the trend;
2. Horizontal consolidation trending towards a breakout point;
3. Pullback points in an upward trend or rebound points in a downward trend.
(3) Following the trend will bring you substantial profits; never exit early.
(4) If the entry aligns with the larger trend and the profit on the books has proven you are correct, consider employing pyramid-style technical scaling (reference II).
(5) Maintain your position until the trend reverses and then close your position.
(6) If the market trend contradicts your entry, stop loss and exit quickly.
In addition to adhering to the above strategies, remember three qualities: discipline, discipline, and discipline!
The way of trading is to accumulate little by little, and compound interest is king. If you break away from your cost, you must resolutely avoid turning back into a loss. If you have profits, definitely take some off the table to prevent it from going to waste. In summary: If you earn, be bold to take it; let the rest be at the original price loss.
II. Perpetual Contracts
Profit-making techniques.
1. Avoid being fully invested.
How should funds be allocated? Fund allocation should be understood from two levels:
Firstly, understand fund allocation from the risk perspective. Clearly define how much loss your account can or is prepared to endure. This is the foundation of our fund allocation thinking. Once the total amount is determined, consider how many times you can afford to lose in the market before you can willingly accept defeat.
I personally believe that the most risky methods should also be divided into three rounds. That is, you should at least give yourself three chances. For example, if the total account capital is 200,000, and the maximum loss permitted is 20% (40,000), then the suggested plan for the most risky losses is: first time 10,000, second time 10,000, third time 20,000. I believe this loss plan has a certain rationality because if one of the three times is correct, you can profit or continue to survive in the market. Not being kicked out by the market itself is a success and provides an opportunity to win.
2. Grasp the overall market trend.
Trends are much harder to trade than oscillations because trends involve chasing highs and cutting losses; you need to have the determination to hold positions, while buying low and selling high is more in line with human nature.
Trading becomes less profitable the more it conforms to human nature; it is precisely because it is difficult to do that it becomes profitable.
In an upward trend, every violent pullback should be an opportunity to go long. Remember what I said about probabilities? So, if you weren't on the train or have exited, patiently wait for a 10%-20% dip to go bold.
3. Set designated take-profit and stop-loss targets.
Setting take-profit and stop-loss points can be said to be the key to whether you can make a profit. Over several trades, we need to ensure that total profits exceed total losses. Achieving this is not difficult; just follow these points:
① Each stop loss should be ≤ 5% of total capital;
Every profit > 5% of total capital;
③ Total trading win rate > 50%
Meeting the above requirements (profit-loss ratio greater than 1 and win rate greater than 50%) can lead to 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. Anyway, as long as total profits are positive, total profits = initial capital x (average profit x win rate - average loss x loss rate).
4. Remember not to trade too frequently.
Since BTC perpetual contracts are traded continuously for 24 hours, many newcomers trade every day, almost trading every day during the 22 trading days of a month. As the saying goes: 'If you walk by the river often, how can you not get your shoes wet?' The more you trade, the more likely you are to make mistakes. After making mistakes, your mindset will deteriorate, and once your mindset deteriorates, you might act impulsively, choosing 'retaliatory' operations: possibly going against the trend or over-leveraging. This can lead to a cascade of mistakes, easily resulting in significant losses on paper, losses that might take years to recover.
III. What Types of Contracts Are There?
Perpetual Contracts: Perpetual contracts do not have an expiration date; users can hold them indefinitely and conduct their own closing operations.
Delivery Contracts: Delivery contracts have specific delivery dates, including this week, next week, this quarter, and next quarter delivery contracts. When the specific delivery date arrives, regardless of profit or loss, the system will automatically deliver.
USDT Margin Contracts: This means you need to use the stablecoin USDT as collateral, and as long as there is USDT in your account, you can conduct contract trading for multiple cryptocurrencies, with profits and losses settled in USDT.
Coin-based Margin Contracts: These are based on the underlying cryptocurrency as collateral. You need to hold the corresponding cryptocurrency before trading, and profits and losses are also settled in that cryptocurrency.
(1) MACD with Moving Averages
Top divergence occurs.
At this time, if the moving average has significant supporting power for the stock price's pullback, it indicates that the bullish power below is relatively strong. Observe if it easily breaks through the support level, and decisively sell at high points.
When a bottom divergence occurs, the moving average's pressure on the upward move is quite evident. It is also a time to take profits at high points, and when it breaks through the moving average level, consider buying low again.
Example 1: Using BTC's 4-hour level top divergence in May 2019 as a case study. After the 4-hour top divergence, a pullback occurs, and MA60 provides support, maintaining the upward trend.
Example 2: EOS daily chart at the end of 2018. After the daily chart shows a bottom divergence, it breaks through the 30-day moving average with increased volume and moves upward, while the pullback shrinks in volume and has strong support at the 60-day moving average.
Example 3: Let's make a comparison. EOS experienced MACD divergence from June to August 2018 on the daily chart, but during the rebound, it encountered strong pressure from the upper moving average, unable to break through after a prolonged attack, ultimately opting to continue downward.
(2) MACD with Volume Combination
Price, volume, and MACD are the most commonly used indicators. Volume indicates upward momentum, while lack of volume indicates waning upward momentum; all significant rises are pushed out by volume, and all significant falls are crushed by volume.
Thus, trading volume is a very important reference indicator.
When a top divergence occurs, and the trading volume does not shrink while funds are still entering, wait temporarily. If there is a volume decrease during an upward movement, it indicates a peak.
When a significant volume increases, the bulls may be suspected of unloading; it is also important to protect profits. During a bottom divergence, if trading volume does not change significantly, you can hold; during a volume drop, panic selling may occur, indicating further downward space.
Example 1: Using BTC's 4-hour level top divergence in May 2019 as a case study.
When the price hits new highs, the MACD indicator does not set new highs. Meanwhile, trading volume has shrunk compared to the previous rise, indicating weakening upward momentum. The collaborative effect with MACD's top divergence is a peak signal.
Example 2: EOS daily chart at the end of 2018. The price continuously hits new lows while MACD does not hit new lows, and the corresponding trading volume's red bars are shortening, indicating a weakening of downward momentum. The collaborative effect with MACD's bottom divergence is a bottom signal.
(3) MACD with KD Combination
KDJ is a cyclical indicator that serves as a good reference for identifying turning points. Its drawback is that it is too sensitive to fluctuations, making it prone to false signals. It is suitable for short-term indicators.
Example 1: Using the 4-hour level top divergence that occurred in May 2019 with BTC, the price continuously hit new highs while MACD did not create new highs, and KDJ remained above 80 in the overbought zone, showing a downward trend. The collaborative effect with MACD's top divergence is a peak signal.
Example 2: EOS daily chart at the end of 2018. The price continuously hits new lows while MACD does not hit new lows. KDJ remains below 10 in the oversold zone and shows a downward trend. The collaborative effect with MACD's bottom divergence is a bottom signal.
(4) MACD with RSI Combination
RSI is a market strength indicator that indicates the strength of bullish and bearish forces, relatively sensitive. It is suitable for short-term indicators.
Example 1: Using BTC's 4-hour level top divergence in May 2019 as a case study. The price continuously hits new highs while MACD does not create new highs, and RSI remains above 80 in the overbought zone, without setting new highs, showing a top divergence. The collaborative effect with MACD's top divergence is a peak signal.
Example 2: EOS daily chart at the end of 2018. The price continuously hits new lows, while MACD does not set new lows, and RSI remains below 10 in the oversold zone, without creating new lows, showing a bottom divergence. The collaborative effect with MACD's bottom divergence is a bottom signal.
The more indicators that show divergence simultaneously, the higher the probability of a peak or bottom turning point.
II. Eight Common MACD Patterns
(1) Buddha Hand Upward: After the fast line and slow line have a golden cross, it rises upward, then follows the stock price's pullback downward.
This typically occurs when major players are washing out positions. The stock price pulls back, causing the fast line to approach the MACD line, and then the fast line immediately turns upward, forming a Buddha Hand Upward pattern.
(2) Little Duck Emerges: The fast line crosses the slow line below the 0 axis, does not cross above the 0 axis, or only briefly crosses before returning below the 0 axis, then dies crossing the slow line, and a few days later the fast line crosses again.
This pattern appears as a bottom formation when selling pressure is exhausted after a drop. It should be understood as a bottom reversal signal, and entry can be considered.
(3) Wandering in the Clouds: The fast line has a dead cross with the slow line above the zero axis, continuing to cross below the zero axis, and then crossing above the slow line again at or above the zero axis. The K-line formation at this time often crosses or is crossing important moving averages.
This pattern forms during a bottom reversal, showing consolidation. It can also be a bottom formation, indicating an upward momentum, and should be understood as a positive entry signal, warranting decisive market entry.
(4) Swan Spreading Wings: The fast line crosses the slow line below the 0 axis, then pulls back without crossing above the 0 axis, approaching the fast line. The MACD green bars shorten, but there is no dead cross with the slow line, and it reverses upwards again, combined with lengthening MACD green bars, forming the Swan Spreading Wings pattern.
This pattern is mostly a bottom formation, presented when the stock price is in a downward search for a bottom and selling pressure is exhausted. It should be understood as a stronghold for major players to build positions, and entry can be considered.
(5) Undersea Cable: The MACD has been running on the 0 axis for a long time. After the fast line crosses the slow line below the 0 axis, the two lines begin to merge into one line with equal values. If the two lines begin to diverge upward, that would be a suitable buying opportunity.
(6) Fishing at the Bottom: When the fast line generates a second golden cross below the zero axis, it indicates that the bottom has been completed and is starting to rise. You can consider buying in.
(7) Aerial Cable: When the fast line crosses above the slow line below the 0 axis and continues to run above the 0 axis for a period of time, the price adjusts, and the fast line F also begins to adjust downwards. When the fast line adjusts to the slow line, the two lines merge into one.
When they separate and a bullish development occurs, that is the time to buy; a new wave of upward momentum is about to begin. This pattern generally presents itself after a slight setback during an upward trend, showing a strong upward attack.
(8) Aerial Tramway: The main difference between this pattern and the aerial cable is that the aerial cable does not have a dead cross, while the aerial tramway will experience a dead cross. A similar point is that all moving averages are in a bullish arrangement.
As shown in the figure, DI has a dead cross with DEA above the 0 axis.
The line does not cross below the 0 axis first; after a few days, it crosses above the 0 axis and crosses DEA again. This pattern usually indicates strong upward momentum after a brief price adjustment, and is a positive entry signal. If volume can continue to increase, it would be a missed opportunity.
As of today, we have introduced what MACD is, how to find buy and sell points using divergence, the collaborative effects of MACD with four commonly used indicators, and the eight common MACD patterns through three lectures.
That's all I have to say about the MACD indicator. In the future, as you continue learning, you will gain a deeper understanding of how to apply MACD divergence.
If you are determined to trade cryptocurrencies for a lifetime and hope that one day you can support yourself through trading, please remember the following nine methods. The content is not much, but every sentence is practical advice, shared with those who are destined to receive it!
Is trading cryptocurrencies better now, or is hoarding coins better?
Always remember this phrase: In the cryptocurrency circle, mindset is more important than technique. Make money in a bull market, accumulate coins in a bear market, do not cut losses in a bull market, and hoard coins in a bear market!
1: Coin Hoarding Method, suitable for bull and bear markets.
2: Bull Market Following Dips Method, suitable only for bull markets.
3: Hourglass Replacement Method, suitable only for bull markets.
4: Pyramid Bottom Fishing Method: Suitable for predicted major crashes.
5: Moving Average Method, understand some basic candlestick patterns.
6: Violent Currency Hoarding Method, focus on coins you are familiar with; only suitable for long-term quality coins.
7: Violent Compound Interest Method, triple your investment immediately and switch to another bottom coin.
8: Cyclical Band Method, suitable for familiar coins.
9: Play with small coins violently, take out the principal when it doubles.
In the cryptocurrency circle, achieving financial freedom and class leap, I have summarized 10 trading techniques. Understanding just one can lead to stable profits, and it is worth learning repeatedly.
1. Two-way trading: Suitable for bull and bear markets. Two-way trading is currently the most common trading method on the GGtrade platform, allowing operations based on market trends. You can go long or short, and as the year-end approaches, GGtrade has launched a series of promotional benefits, such as a 20% increase in return on investment, which is a great boon for investors.
2. Coin Hoarding Method: Suitable for bull and bear markets. The coin hoarding method is both the simplest and the most challenging. It is simple because you just need to buy a specific coin or several coins and hold them for six months or more without trading. Generally, the minimum return is tenfold. However, newcomers easily see high returns or encounter a coin price halving, leading them to consider switching coins or exiting. Many find it hard to stick to not trading for a month, let alone a year. Thus, this is actually the most challenging.
3. Bull Market Following Dips Method: Suitable only for bull markets. Use a portion of idle funds, preferably no more than one-fifth of total capital. This method is suitable for coins with a market cap between 20-100, as they won't be stuck for too long. For example, if you buy the first altcoin and it rises by 50% or more, you can switch to the next coin that has plummeted, and so on. If your first altcoin gets stuck, just hold on; in a bull market, it will definitely break free. The premise is that the coin isn't too much of a hassle; this method is actually hard to control, and newcomers need to be cautious.
4. Hourglass Replacement Method: Suitable for bull markets. In a bull market, almost any coin will rise; funds act like a giant hourglass gradually seeping into every coin, starting from large coins. There is a clear rule for price increases: leading coins rise first, such as BTC, ETH, DASH, ETC, followed by mainstream coins like LTC, XMR, EOS, NEO, QTUM, etc. After that, coins that haven't risen see a general increase, such as RDN, XRP, ZEC, etc., and finally various small coins rise in turn. However, if Bitcoin rises, choose a lower-tier coin that hasn't risen yet to start building a position.
5. Pyramid Bottom Fishing Method: Suitable for predicted major crashes. Bottom fishing method: Place an order to buy one-tenth of the position at 80% of the coin price, one-fifth of the position at 70% of the coin price, one-third of the position at 60% of the coin price, and one-fourth of the position at 50% of the coin price.
6. Moving Average Method: Understand some basic candlestick patterns. Set indicator parameters as MA5, MA10, MA20, MA30, MA60, and choose a daily line level. If the current price is above MA5 and MA10, hold on. If MA5 falls below MA10, sell the coin; if MA5 rises above MA10, buy in.
7. Violent Currency Hoarding Method: Focus on coins you are familiar with; only suitable for long-term quality coins. If a certain coin is currently priced at 8 USD, place an order to buy at 7 USD. When the purchase is successfully executed, place an order to sell at 8.8 USD. Profit is gained by hoarding coins. Withdraw the liquid funds and wait for the next opportunity, adjusting dynamically based on the current price. If there are three such opportunities in a month, you can hoard a considerable amount of coins. The formula is: entry price equals current price multiplied by 90%, and selling price equals current price multiplied by 110%.
8. ICO Violent Compound Interest Method: Continuously participate in ICOs. Once a new coin rises by 3-5 times, take back the principal and invest in the next ICO, continuing to keep the profits and cycle.
9. Cyclical Band Method: Look for coins like ETC that are in a downward trend and continue to add positions as the price falls. Once profitability occurs, continue to sell off, cycling continuously.
10. Small Coin Violent Play: If you have 10,000 RMB, divide it into ten parts and buy ten different types of small coins, preferably priced under 3 RMB each. After buying, do not manage them. Do not sell until they triple to five times their value. If stuck, do not sell; simply hold for the long term. If a coin triples, take back your principal of 1,000 RMB and invest in the next small coin. Such compound returns can be quite impressive!
Still, the same phrase: If you don't know how to trade in a bull market, click on the profile of Kui Ge, follow him, and get free insights on bull market spot planning and contract strategies.
Keep a close eye on: $ETH $BTC #现货与合约策略 #币安Alpha上新
