I've seen too many people complain that spot trading is slow, rushing into the futures market for excitement—leveraging to the max, going all in on chasing prices, only to fantasize about getting rich in the morning, and receive a liquidation notice by night.
The harshest filtering mechanism in the crypto world is this: those who always want to 'get rich quickly' are often the first to be eliminated by the market. Those who can stand firm are quietly using these eight rules and one indicator to stay alive.
Let's first talk about the common mistakes of those who get wrecked in contracts: treating trading like betting on highs and lows. They chase after longs when the market goes up and shorts when it goes down, using leverage of over 10 times, thinking this will allow them to 'bet small to make big.' But the volatility in the crypto world is irrational; a single large bearish candle can wipe out your principal.
I made this mistake early on too; three liquidations taught me: for ordinary people, contracts are not a tool for making money; they are a poison that accelerates bankruptcy. If you want to survive in the crypto world, first learn to say no to high leverage.
The next eight rules are survival principles that I have come to understand after stepping into countless pitfalls; each one corresponds to a way to avoid risks:
“Don't rush to average down on losses; preserving your capital is the bottom line.” Last year, a follower bought a coin that dropped 30%, and he borrowed money everywhere to average down, trying to 'lower his costs,' but the more he averaged down, the more he lost, and eventually, he ran out of living expenses. Averaging down is not a bad thing, but it depends on the trend—if the trend is downward, averaging down is just adding leverage to your losses. It's better to cut your position and preserve your capital, then buy back when it stabilizes.
“Don't be greedy during a small rebound; it could be a trap.” In a bear market, there are often “three consecutive up days” that look like a reversal, but in reality, they are just bait from the market makers. I've seen too many people rush in during such times, only to be wiped out by a large bearish candle. Remember, any rebound without volume is just a paper tiger.
“After five waves of increase, be wary of a decline; confirm the pullback before entering.” No matter how aggressively the price rises, it cannot go up continuously. Generally, after five waves of increase, it is likely to pull back three waves. When Bitcoin rose to $69,000 last year, the five-wave structure was obvious; at that point, you should wait for a pullback rather than chase the high—later it fell to $47,000, how many people got stuck at the peak?
“When a bearish candle engulfs a bullish candle, it may be an opportunity; if a bullish candle suddenly spikes in volume, be cautious.” This is a small trick for identifying reversals: for instance, after three consecutive bullish candles, if a large bearish candle covers them all, it indicates that the bears are gaining strength, and it’s time to exit; conversely, if a strong bullish candle appears suddenly during a downtrend, it may signal a bullish counterattack, but don’t rush in—wait for confirmation of the trend before acting.
“If the price fails to break through a high after three attempts, it’s likely to drop; if it stabilizes after four attempts at a low, you can build a position.” If the price hits the same high three times and fails to break through, it indicates heavy selling pressure, suggesting you should reduce your position; conversely, if it hits the same low four times without breaking, it indicates there is buying support, making it safer to build a position gradually.
“In an uptrend, watch for support; if it breaks, run; in a downtrend, watch for resistance; buy only after it breaks.” For example, in an uptrend for Ethereum, the 50-day moving average is the 'lifeline'; every time it pulls back to this line, it rebounds. Once it breaks below, it indicates a trend change, so don't hesitate to leave. In a downtrend, on the other hand, wait for the price to break through the resistance before entering.
“Going all in is suicide; diversifying positions leads to longevity.” I always keep 30% cash in my position, so even when a major drop occurs, I have funds to average down; during an uptrend, I sell in three batches to lock in profits without missing out on subsequent market movements. Those who go 'all in' either panic-sell when the price rises slightly or can't withstand a small drop, always struggling in a passive state.
“Trading requires mental discipline; don’t jump around with price fluctuations.” The crypto market has daily red and green fluctuations; some people get euphoric over a 2% rise and anxious over a 1% drop; this mindset is most likely to lead to bad decisions. I now spend just 10 minutes a day watching the market, and do what I need to do the rest of the time, which has actually led to greater profits than staring at the screen all day—when the mindset is stable, the operations won't go wrong.
Now let’s talk about the 'Bollinger Bands (BOLL),' an indicator so simple that even beginners can understand it, yet it can help you avoid 80% of the pitfalls.
Bollinger Bands consist of three lines: upper band, middle band, lower band. When the price is above the middle band, it indicates a strong trend; when it is below the middle band, it indicates a weak trend. The most practical signals are these two:
When the price breaks below the lower band, it is likely to experience a short-term rebound (but don't mistake it for a trend reversal; rebounds in a bear market often lure in buyers);
When the price breaks above the upper band, it may pull back (a pullback in a bull market is an opportunity, while in a bear market it may signal the start of a decline).
I use this indicator for filtering: only consider buying when the price stabilizes above the middle line; below the middle line, I only sell, not buy. Last year, using this tactic, I avoided five obvious downturns, which amounted to an additional 20% in profits.
Finally, let me emphasize the core of position management: with $10,000, at most take $5,000 to enter a trade; the remaining funds are 'emergency money.' When taking profits, sell half when you've made 50% to get your principal back; when cutting losses, immediately exit if it breaks the key support level. Don't wait for 'break even before selling.' In the crypto world, preserving capital is more important than anything else.
The formula for making money in crypto is actually very simple: principal × stable returns × time. If you lose all your principal, no market movement will matter to you.
