As an old participant in the cryptocurrency market, I have unknowingly been trading for 7 years. It’s truly not easy to survive in the cryptocurrency market until now! I have also been beaten by market makers and experienced many liquidation events. I have been confused in the past, and countless times I hid in dark corners, continuously smoking. This is the price of growth!
Although I have played in the stock market for many years, and there are many similarities between the cryptocurrency market and the stock market, there are still many differences. In fact, looking back now, it wasn't that I had a problem with direction; my grasp of direction has always been quite accurate. The problem lies in the fact that the cryptocurrency market really magnifies human greed to an infinite extent. Without strong determination, it's very easy to lose oneself. After all, there’s a saying, 'A day in the cryptocurrency market is like a year in the stock market.' A day in the cryptocurrency market can cover what the stock market takes a year to accomplish!
Today, I will talk about a summary of my many years of trading experience in a free sharing, hoping to help everyone. Of course, I will mainly provide a general overview here. Depending on the reactions of my followers, if everyone feels it is necessary to elaborate, I will subsequently write three detailed articles to discuss these three points separately. In summary, there are three core points:
First, position management. This is of utmost importance! If you have not yet realized the importance of position management, it means you are still in the beginner stage. You are still a complete novice! In my previous articles, I talked about position management and how I manage it. If you're interested, you can take a look again. Of course, I also kept it simple, providing what I believe is the simplest, most effective method that is easy to learn and apply! You could say that position management determines how long you can survive in the cryptocurrency market in the future!
Here, I will briefly mention that before you open a contract, you should have already thought about where to place your stop-loss, right? (Don't tell me you haven't even thought about your stop-loss before opening a contract.) The size of your position depends on where you place the stop-loss. Consider whether the loss from hitting the stop-loss is something you can psychologically endure. If you can't, that means your position is too large and you need to reduce it! If you can endure it, then your position is just right! This is easy to calculate; you can figure it out quickly. Don't use a percentage of your position; that’s really hard to calculate. It takes time; often, opening a position at a good point happens in a split second!
Second, develop good trading habits, which include several points:
1. Always set a stop-loss when opening a position. This is an ironclad discipline for trading contracts. If you cannot adhere to this, I suggest you just give your money to the market makers to save yourself the torment! Never hold onto positions with a gambler's mindset; if you manage to hold on successfully 9 out of 10 times, you might feel pleased, thinking you can always hold back. But just one time can wipe you out! Such people actually make up the majority!
2. Maintain a good mindset. When trading, never get overly emotional. If you incur a loss, don’t rush to make it back immediately and start trading frequently; that’s extremely dangerous. I have seen too many people incur a loss, get emotional, and then try to recover immediately with constant risky trades, resulting in a total loss overnight. This goes back to what I mentioned earlier: when you open a position, you should have already decided where to place your stop-loss. So you know how much loss to expect if the stop-loss is hit. If it does get hit, relax your mindset, maintain a good attitude, and look for good opportunities to fight again later.
3. Do not have preconceived notions. If you understand some technical aspects, that’s best; if you don’t, then you should definitely not have preconceived notions. I have encountered too many people with this mindset: 'I think it will fall; it’s just the market makers deliberately pushing it up to force a short squeeze. I believe it will rise; no matter what happens, I won't believe it won't rise. I will hold my position; it must rise with so many positive developments. It’s just that it’s intentionally dropping to liquidate long positions.' This is a typical case of having preconceived notions. To put it bluntly, it's being stubborn and particularly obstinate, refusing to admit defeat. The market changes rapidly; we cannot say, 'I think, I feel, I believe, I firmly believe,' etc. When the market changes, our mindset must change in time! If you are wrong, you must admit it; take your losses standing tall!
Third, when trading contracts, you must pay attention to the risk-reward ratio! Many people do not have the concept of risk-reward ratio in mind. If the first two points are the key factors that ensure you can last longer in the cryptocurrency market, then the risk-reward ratio determines whether you can make significant profits in the cryptocurrency market. Many people trade contracts blindly, without forming a system, just relying on intuition, and they don't leave themselves any room for maneuver, hitting one direction after another.
For me, the decision to trade depends on two things:
First, through technical analysis, if I am relatively confident in predicting whether the market will rise or fall, then I will trade.
Second, although technical analysis may not be very reliable—like being bullish but not too confident—currently this price point is quite good. The predicted downside is limited, but the upside potential is large, and the risk-reward ratio is high, so it can be traded.
You can meet one of these conditions to trade; of course, it’s best if both conditions are satisfied at the same time. For example, I usually set my required risk-reward ratio starting at 1:3. To give an example, I made a long position a while ago. From a technical analysis perspective, I wasn’t particularly confident, but it was okay, about 70% confidence! However, I noticed that the risk-reward ratio was very high, so I traded, and when I exited, the risk-reward ratio reached 1:7. That is to say, I earned 7 times my investment.
So later, I used the same position to trade other contracts. I can be wrong 7 times in a row without losing my principal, which greatly increases my margin for error. Therefore, my mindset for trading will be better. With a better mindset, my accuracy in trading will also improve. If in those 7 trades I just have one that goes right, then I make a profit; if two go right, I profit even more. Moreover, my market analysis accuracy is still very high.
So the risk-reward ratio must be emphasized; it fundamentally determines whether you can make big money in the cryptocurrency market. Many people are exactly the opposite: they take small profits and run, but when they incur losses, they hold on stubbornly. Even if you are right in your direction, you may not make money. You say you’re not losing; who is losing then?
The above opinions are purely personal opinions for sharing, learning, and communication, and should not be taken as any investment advice!