Trading has two key points: first, the win rate, which is how many times you are correct out of 100 trades; second, the profit-loss ratio, which is the average profit compared to the average loss. Our study of trading revolves around these two factors, either improving the win rate or enhancing the profit-loss ratio. The core of all thinking is aimed at these two elements.
Some may not clearly understand the difference between gambling and contracts. Gambling has similarities and differences with contracts. Gambling is simple; you just bet high or low, which has a win rate of about 50%. Its profit-loss ratio is roughly the same as its win rate, making gambling 'high risk, high reward, low risk, low reward.'
Contracts also involve 'high risk, high reward, low risk, low reward,' but they also involve 'high risk, low reward, low risk, high reward.' Therefore, we should seek opportunities among these four types for 'low risk, high reward.'
The way to improve win rates is to do your homework, ensuring the correctness of directional research, and your trading plan should closely align with the direction.
In summary, most trades are unnecessary, and many are random. We should try to minimize these unnecessary trades. Those who are disciplined may perform better in this regard. Just like today's 'shopaholics,' they shop casually, knowing some things are optional. Maintaining a good state is also important. If you are always sleepless and confused, it will lower your win rate. In summary, doing your homework + reducing unnecessary trades + maintaining a good state will improve your win rate.
Improving the profit-loss ratio means minimizing losses while seizing the main trend. Aim to keep the stop-losses small for each trade, although this may lead to missing out on opportunities, so setting stop-losses is very skillful; it determines your entry timing. Catching the main trend means waiting for the trend to emerge before making trades.
Still the same saying: enhance your trading logic. Paying for knowledge is the fastest shortcut and the cheapest cost.
What five points should beginners pay attention to when entering the cryptocurrency world?
1. First of all, you need to know that the cryptocurrency world is an investment market that can make you rich overnight but also has the potential to lead to drastic consequences. Therefore, be aware of your limits; how much land you have and how much grain it can produce. Simply put, know how much capital you have and how much you should invest; you should have a mental scale.
2. Choose a platform. Any platform that recommends itself is unreliable. If you want to make money in the cryptocurrency world, some people want to make money off you. We should choose a legitimate, experienced large platform, such as Binance, Huobi, or OKEx. Don't listen to others saying these platforms cut off connections or have high fees. As a veteran in the cryptocurrency world for five years, these platforms are still very safe and reliable.
3. If you don't understand the technology, don't play around blindly. Only 10% of people in the cryptocurrency world make money. There's a saying: we can't earn money beyond our understanding. If you know nothing about the cryptocurrency world, you should first do your homework, understand what blockchain is, and what digital currency is. What are the trading methods for digital currency? What is spot, contract, and leverage trading?
4. After understanding the fourth point, when you are ready to take out some money to start operating, you must not buy coins recklessly at this time. Light losses may lead to being trapped, severe losses may lead to liquidation. The money you earn through hard work may be squandered due to ignorance in just two days. Thus, you should pay attention to analysts or hire teachers to guide you; this is the safest and most reliable method.
5. In the cryptocurrency world, never be greedy, do not heavily invest. Protect your position according to your funds and strength.
What knowledge does a complete beginner need to learn to enter the cryptocurrency world?
The following 15 points will help beginners quickly understand cryptocurrency knowledge and the terminology they must know upon entering the cryptocurrency world (must-read for beginners).
1. What is fiat currency? Fiat currency is legal tender issued by the state and government, guaranteed only by government credit, such as RMB, USD, etc.
2. What does Token mean? Token is usually translated as 'certificate.' Token is one of the important concepts in blockchain; its more widely recognized name is 'token,' but in the eyes of professionals in the 'chain circle,' its more accurate translation is 'certificate,' representing a proof of rights on the blockchain, rather than currency. In traditional value systems, only things that can be recorded in ledgers can be exchanged for value and circulated. Therefore, bookkeeping is the foundation of wealth creation. However, in the real world, the vast majority of things cannot be quantified, and the things that can be recorded are extremely limited. However, 'Token' can.
3. What does airdrop mean? Airdrop is currently a very popular cryptocurrency marketing method. To provide potential investors and cryptocurrency enthusiasts with information related to tokens, token teams often send unknown tokens to participants' accounts in proportion to the existing number of tokens. To receive more airdrops, one must purchase more tokens, which is a very effective marketing strategy.
4. What is candy? Various digital currencies issued when first launched during an ICO, given free to users, are a way for the project issuer to create momentum and publicity for the project.
5. What does breaking the issue price mean? Breaking refers to when a cryptocurrency falls below its issuance price.
6. What does private placement mean? It is a way to invest in cryptocurrency projects and the best way for project founders to raise funds for platform operations. Private placement refers to raising funds privately as opposed to public offerings, meaning selling stocks (cryptocurrencies) to a small number of eligible investors outside the public market, to obtain funding.
7. What does ICO mean? Initial Coin Offering, derived from the concept of Initial Public Offering (IPO) in the stock market, is a fundraising activity where blockchain projects exchange their issued virtual currencies for commonly used virtual currencies in the market.
8. What trading platforms are currently available in the cryptocurrency world? Binance, OKEx, Poloniex, Bittrex, Bitfinex, Kraken, Huobi Pro, Gate, etc. 1. Basic characteristics of virtual currency trading: (1) Trading time: 7*24 hours, no market holidays. (2) No price limits: Virtual currency trading has no price limits, while stocks have price limits. For example, on May 28, Bitcoin's one-day increase exceeded 20%. (3) Trading unit: The minimum purchase is 0.0001 BTC (about 0.6 yuan), with no minimum purchase limit like stocks (100 shares). (4) Instant trading: That is T+0; stocks are T+1 trading, meaning stocks bought the same day can only be sold the next trading day. However, virtual currency is T+0 trading, meaning it can be sold the same day after being bought. (5) Withdrawal and cashing out have no time limit: Funds can be withdrawn and cashed out anytime, with high liquidity.
9. What is the concept of a wallet? Simply put, it is like a personal bank card. If you are worried about storing virtual currencies on trading platforms, you can store them in your personal wallet. Wallets come in various forms, with some being dedicated to a single currency, such as wallets that can only hold EOS, while others can hold multiple currencies, such as imToken and TokenPocket (TP wallet), the latter being more versatile.
10. Positive/Negative News Various news that stimulates price increases are called positive news. Conversely, news that leads to price drops is called negative news, such as trading platforms being hacked, leading to the loss of Bitcoin, or unfavorable news like government crackdowns.
11. Public Chain / Private Chain / Alliance Chain A public chain refers to a blockchain that anyone can participate in transactions and where transactions can be effectively confirmed. Currently, most blockchain systems belong to public chains, such as Bitcoin and Ethereum. Public chains are suitable for scenarios where everyone can join and maintain the system, such as mutual insurance. A private chain refers to a blockchain where write permissions are restricted to a specific organization or group. Read permissions can be externally issued or limited to any extent. Developing enterprise-level applications based on private chains helps businesses realize on-chain operations. The immutable nature of on-chain information enhances social credibility and boosts investors' confidence in companies. An alliance chain refers to a blockchain controlled by several organizations through a consensus mechanism. The credit mechanism within it is maintained collectively by these organizations. The legality of all transactions must be confirmed by the majority or all of the organizations before being written into the blockchain as legal block records. Imagine in the financial industry, a blockchain alliance formed by several socially credible financial institutions, with each institution running a mining node, representing all participants to exercise consensus rights and maintain normal growth and operation of the blockchain.
12. Rebound / Consolidation / Correction A rebound refers to a temporary price rise against the general trend of falling prices, where the rebound is smaller than the decline. A correction is the opposite, referring to a temporary drop in the overall trend of rising prices. Consolidation refers to the entire cryptocurrency price being relatively stable, with small changes in amplitude and no significant fluctuations.
13. Leverage Leverage trading, as the name implies, is using a small amount of funds to invest several times the original amount, aiming to achieve relatively high returns based on the volatility of the investment target, or to incur losses, somewhat like gambling.
14. Basic principles of virtual currency transactions.
(1) Market Price Trading: Transactions are executed at the current market price, which can to some extent guarantee that the investor's buy/sell orders are executed in a timely manner. However, at the same time, investors cannot predict the transaction price before placing a market order, which has a certain degree of uncertainty. Generally, the more volatile the market, the greater the uncertainty risk of the market price transaction.
(2) Limit Price Trading: Investors can set a buy price below the market price or a sell price above the market price. When the market price fluctuates to the set price, the transaction will be executed. When the set price deviates significantly from the market price, it is easy to result in a failure to execute the transaction.
(3) Basic principles of execution: The principle of 'price priority, time priority.' A higher buy price takes precedence over a lower buy price for execution, while a lower sell price takes precedence over a higher sell price for execution. When the order prices are the same, the order placed earlier takes precedence over the order placed later for execution.
15. A detailed explanation of common professional terms during trading.
[Turnover Rate] Refers to the frequency of a certain cryptocurrency being bought and sold in the market within a certain period, which is one of the main indicators for evaluating the liquidity of a cryptocurrency.
[Market Price Trading] Refers to buying and selling transactions at the current market price. Market price trading has transaction priority. If you complete the transaction faster, you can use market price trading.
[Limit Price Trading] Refers to buying or selling transactions at a specified price, also known as entrusted trading or order trading.
[Wash Trading] A trading technique used by market makers. The specific operation method is to open accounts on multiple exchanges simultaneously and quote trades in a tug-of-war manner between various exchanges to manipulate the cryptocurrency price.
[Washing] A method used by market makers to manipulate cryptocurrency prices by deliberately lowering them. The specific practice is to first raise the cryptocurrency price and then profit from selling. During this process, the main force often intentionally places large sell orders to pressure the market, forcing low-priced buyers to sell their digital currencies to relieve upward pressure, making it easier to drive up the price.
[Market Support] When prices are low and the cryptocurrency lacks popularity, large holders buy a large amount of the cryptocurrency to prevent the price from continuing to fall.
[Bull Market] Refers to a market trend showing a general rise and a sustained upward trend, with optimistic prospects. (In the cryptocurrency world, this is mainly led by the rise of BTC, which drives other mainstream coins and altcoins.)
[Bear Market] Opposite to a bull market, it refers to a market trend that continues to decline, with market sentiment showing sluggishness and persistent downward movement. (What you are currently experiencing is a bear market. During this phase, the most important thing is to survive. Then further actions such as hoarding coins and bottom fishing.)
[Monkey Market] This is something many people may not understand; it exists in the stock market. Why is it called a monkey market? Monkeys like to jump around, which corresponds to the volatile market conditions. During the monkey market phase, the market is hard to grasp. (Mainstream coins may rise today and fall tomorrow, and some altcoins may rise while others crash.)
[Main Ascending Wave] Originating from wave theory, it refers to the longest wave during the price rise. This is also a common trend in bull markets. If you catch the main ascending wave, you will make a significant profit. The opposite trend is sometimes referred to as the 'main descending wave.'
[Gradual Decline] The overall market trend shows a downward trend, but the movement often rises for two days and falls for one, always giving people hope but ultimately disappointing them.
[Waterfall] Refers to a sudden, sharp decline in the market, where several large bearish candlesticks appear in a short time, resembling a waterfall, flowing straight down, causing pain to onlookers. It is also referred to as 'plunging.'
[Explosive Growth] When the market is influenced by negative factors and remains low for a long time, the movement is very repressed. When the negative factors are removed, the market will show explosive growth.
[Washing] Large capital groups such as market makers or project parties manipulate the market through capital to create a fluctuating market, scaring away hesitant retail investors, achieving the goal of making huge profits.
[Accumulation] Generally involves washing out retail investors, after which the market maker will take over the coins sold by retail investors, increasing their own holdings to control the market (generally, accumulation operations occur at low prices).
[Market Control] It's simple. If I have a lot of money (the proportion of my coins to the circulating supply is large), I can easily manipulate the market. The goal is straightforward: to earn more money and trap retail investors. [Cutting Retail Investors] Some traders who lose money leave, while some new investors enter, just like cutting leeks, one after another. The happiest are the market makers.
[Fake Signals] Market makers use candlestick patterns to create upward or downward trends, leading us to buy or sell, achieving their goal of cutting retail investors.
[Positive News] Also known as good news. Mainly relates to news that is beneficial. In most people's eyes, positive news will definitely lead to price increases, but this is not the case. Positive and negative news are not directly proportional to price movements; they only have a certain impact and can stimulate the market.
[Negative News] Also relates to news, mainly referring to unfavorable news for the market. However, there is also a saying in the market: when negative news is exhausted, it becomes positive news.
[Inducing Buying] When the price has stabilized for a long time, and the chance of decline is high, most shorts have sold their virtual currencies. Suddenly, the shorts raise the price, inducing the longs to believe that the price will rise, leading to widespread buying, only for the shorts to suppress the price, trapping the longs. [Inducing Selling] After longs buy virtual currencies, they deliberately suppress the price, making the shorts believe the price will fall, leading to widespread selling, resulting in falling into the longs' trap.
[Position] This is simple: the ratio of your account funds to the funds used to buy coins.
[Full Position] All account funds have been converted into coins. What you often refer to as 'going all in' or 'all in' means full position.
[Replenishing Position] For example, you hold BTC, and then BTC falls. To lower the average cost, you buy an additional portion of BTC.
[Increasing Position] You hold BTC, are optimistic about its development, and then buy some BTC again during its rise. [Establishing Position] Also known as opening a position, refers to using account funds to buy a certain quantity of a cryptocurrency.
[Reducing Position] Expecting risks in the future, selling part of the cryptocurrencies held.
[Locking Position] Those who engage in futures trading should know this. It's simple. For example, if you do EOS futures, you buy a long position of 10,000 and then open a short position of 10,000. Think carefully about your position. [Empty Position] No longer trading, just observing. In the cryptocurrency world, this can be understood as having only USDT in the account, with no other coins. [Light Position] The funds used to buy coins account for a very small proportion of total funds. [Heavy Position] The funds used to buy coins account for a large proportion of total funds. [Half Position] The funds used to buy coins account for half of total funds. [Clearing Position] No longer participating, selling all coins, preparing for an empty position to observe.
[Taking Profit] After obtaining a certain profit, selling all virtual currencies to secure the gains.
[Cutting Losses] After losing to a certain extent, selling the held virtual currencies to prevent further losses. [Sideways Market] The market fluctuates little, with price movements staying within a certain range.
[Rebound] When the price of coins is in a downward trend, it receives support from technical factors or capital involvement, causing the market to shift from falling to rising.
[Reversal] When the price drops to the bottom and can't drop further, leading to a shift from a downtrend to an uptrend. Commonly, there is a 'V-shaped reversal.' A rebound is the basis for reversal, and the magnitude of reversal significantly exceeds that of the rebound. [Arbitrage] This is simply understanding price differences between platforms and profiting from them through cross-platform trading. When arbitraging, attention must be paid to the speed of transferring coins, as sometimes transfer speed issues can affect your profits.
[Over-the-Counter Trading] Many platforms also call this fiat trading. The platform serves as a guarantor, allowing merchants or individuals to trade directly using RMB to buy or sell mainstream coins or USDT. The trading is similar to e-commerce (you know what I mean). [Cutting Losses] A more palatable term is 'liquidation.' This is something many of you often do: selling when the price drops, fearing it will drop further.
[Being Trapped] You buy coins, they drop, and you can't bear to sell. Congratulations, you are trapped.
[Untrapping] The coins you bought drop, and you feel sad. After some time, they rise again, and you are untrapped, feeling happy again.
[Missing Out] The market is bad, and you buy. When the market rises, you just observe. Perfectly missing out is called missing out.
[Roller Coaster] The coins you bought rise, and you feel great, telling friends about it, only to see them drop again in a few days. It's like riding a roller coaster, just a brief thrill, and then nothing more.
[Hoarding Coins] You are optimistic about the future development of this coin and want to achieve financial freedom by making it tenfold, hundredfold, or thousandfold, so you buy a large amount of this coin and hoard it.
[Going Long] Also known as 'bullish,' the buyer believes the coin price will rise in the future, buys coins, and sells at a high price after the price rises.
[Going Short] Also known as 'bearish,' the seller believes the coin price will fall in the future, sells the coins they hold (or borrows coins from the exchange), and buys them back at a lower price to profit.
[Mining] The process of using computers, phones, and other devices to run computational programs to obtain digital currency. Note: Mining will shorten the lifespan of the equipment.
[ICO] Initial Coin Offering, derived from the concept of Initial Public Offering (IPO) in the stock market, is a fundraising activity where blockchain projects exchange their issued virtual currencies for commonly used virtual currencies in the market.
[Private Placement] Private placements refer to fundraising activities targeted at a small scale of eligible investors, as opposed to public offerings. In simple terms, it is private fundraising not conducted through public markets.
