So-called ordinary people are those who cannot adapt their thinking. My words may be blunt, but that's the truth. Their first reaction is always to ignore advice, believing the whole world is out to deceive them. To express it with a movie quote: 'You say it, but they won't listen; they hear it, but they don't understand; they understand, but they don't act; they act, but they do it wrong; when they make mistakes, they don't correct them; when corrected, they still resist; and they won't even speak up.' This reflects the mindset of most people in the cryptocurrency space. Many people post in forums about how much they've lost or what went wrong; those are the ones who refuse to listen to advice and never reflect on whether they were too reckless. They continually use their flawed methods that lead to liquidation, never trusting others, just like when you were a kid and didn't listen to your teacher. You wouldn't say you didn't listen; you'd just say the teacher didn't teach well. It's terrifying when a person never reflects on themselves. The ones who earn money are always those who listen to advice and can eat their fill. There are also many veterans in the cryptocurrency space who share their experiences. When these ordinary people see it, their first reaction is to say, 'Don't trust anyone.' It seems that those who are clever enough to get liquidated are unbeatable! I've rambled too much; I'll share my experiences and insights next. Please don't criticize if you disagree!
Do not easily be deceived into giving up low-priced chips. Stay firm in your beliefs to prevent manipulation by market makers.
Chasing prices and dumping stocks, going all in and out is always a big taboo. In a favorable trend, building positions gradually during declines is less risky, cheaper, and can yield higher profits than chasing prices.
Reasonably allocate profits to maximize capital release, rather than continuously adding positions and investing more when prices rise or holding onto a coin during a drop. Always maintain a positive mindset: do not speculate, be patient, avoid greed, and do not fear. Do not engage in unprepared trades. The prior positioning or private placement of low-priced coins relies on experience and speculation on the future of the coin, while the later secondary market competition relies on technology and information to follow the market. Don't lose sight of priorities, or it will all end in chaos.
When building positions and exiting, it is essential to layer and segment; gradually widen the price segments to effectively control the ratio of risk to profit.
Understand the interconnected effects and stay familiar with the market. While tracking coins, also pay attention to the movements of other coins; each coin does not exist in isolation in the overall trading market. Although there seems to be no connection, the ties are intricate. Understanding interconnected effects is crucial, and there are many tools available now to check coin information and consult.
Position allocation should be reasonable; the allocation of hot coins and value coins must be balanced, paying attention to the ratio of pressure resistance and profit intake. Being too conservative may lead to missed opportunities, while being too aggressive may expose you to high risks! The main characteristic of value coins is stability, while hot coins can be extremely volatile, potentially skyrocketing or plummeting.
Having coins on hand, money in the account, and cash in your pocket is the safest and most reassuring standard. Avoid going all in; doing so is fatal. Control over risk and reasonable capital allocation are key to your mindset and success, and having spare funds for investment is fundamental.
Master basic operations, learn to apply concepts from one situation to another, grasp fundamental trading ideas. Observation is a prerequisite; remember each high and low as reference data. Learn to record, summarize your materials, develop a reading habit, and cultivate the ability to filter information.
1. Investment cannot rely solely on luck.
If your profitable trades outnumber your losing trades, and your account value is increasing, congratulations, your investment is successful; you have found the knack and method for investing in cryptocurrency. However, if you have 9 profitable trades out of 10, but one losing trade negates all your previous profits and your account value is in the negative, then you need to be cautious. You won't always be this lucky; avoid over-leveraging, and if the direction is wrong, cut losses quickly and restart with the next trade.
2. Believe in yourself.
Many times, the trade you originally made is correct and could yield profits, but due to your lack of confidence or interference from others, you turn a correct trade into a wrong one. Such failures are very frustrating; you may wonder why you didn’t persist a little longer. As an excellent investor, you must have firm beliefs and willpower, knowing that the truth often resides with a minority.
3. Trading skills.
Investing in cryptocurrency requires trading skills; market trends follow certain patterns, and we should judge trades based on technical aspects, going with the trend and not against it.
4. Ensure proper risk control.
Investing in cryptocurrency is a high-risk, high-reward endeavor. We should implement proper risk control with each trade, use light positions for entry, add to positions in the trend, and avoid blindly over-leveraging. Also, set stop losses and take-profit levels for each trade to avoid greed.
5. Be cautious when entering trades.
Many investors often feel an itch to trade and cannot control the urge to enter trades, but if there are no suitable entry points, rushing in can lead to failures or awkward entry points, even if there are some profits, they are not significant. Good trading opportunities are often waited out; identify a wave of market movement and enter at the right time, do not succumb to impatience.
6. Exit decisively.
One of the most common mistakes investors make is hesitating to exit, which can occur in two situations: one is being greedy when in profit, thinking there is still a lot of room for gains. If the market reverses, profits can easily turn into losses, so it's important to take profits and not be greedy—this is also a trading skill. The other is being reluctant to cut losses when in the red, believing there is still room for a turnaround. This is more serious; stubbornly holding onto losing positions can lead to a margin call, leaving little capital, making it difficult to recover. So regardless of the situation, exiting must be decisive and not hesitant.
7. Maintain a steady mindset.
Investment is a long-term process, not determined by one or two trades. So when you make a profit today, do not become complacent; when you face losses, do not lose heart. The market changes rapidly, and no one can guarantee they won't make a judgment error. If you become discouraged, you will struggle with future trades. It is especially important to maintain a steady mindset when facing failure, summarize lessons learned, and adjust your state for the next trade.
8. Pay attention to news.
The market has a wealth of news; sometimes a significant piece of news can change the original technical patterns and trends. Therefore, when trading, be sure to pay attention to the news and combine it with technical analysis to enhance your trading proficiency.
9. Sufficient capital.
If you are investing with borrowed money, it is advisable not to do so, as you are no different from a gambler and will ultimately face devastating losses. Investment should be done with spare funds, which allows for a calmer mindset. Sufficient capital can also be used for averaging down or locking in positions, making your operations more flexible and better at controlling risk.
In trading, we often encounter two frustrating situations: 'after taking profits, the price continues to rise significantly' or 'not taking profits, yet the price suddenly reverses and knocks out the trailing stop'. Both scenarios are among the most psychologically painful experiences for traders. In fact, this seemingly dilemma is not unsolvable; the key lies in employing a simple and effective technique—position management.
'Position management' is a flexible way to respond to market uncertainty. Its core idea is to split a unified position into multiple sub-positions, managed with different strategies. Common methods of position management include the following.
Use different entry methods (e.g., trend breakouts and pullback entries).
Use different exit methods (e.g., partial profit-taking, partial trailing stop losses).
Simultaneously adopt different entry and exit strategies to enhance overall strategy flexibility.
To address the issues mentioned at the beginning, simply dividing the original position into two can balance the goals of taking profit and 'letting profits run': one part of the position takes profits after reaching expected gains, while the other continues to hold and tracks trends through trailing stop losses. This strategy uses the same entry method but employs different exit strategies.
The advantages of this position management are very clear: on one hand, partial profit-taking can lock in profits early, reduce overall risk, and alleviate holding pressure; on the other hand, the part of the position that uses a trailing stop retains the potential for continued profits, truly achieving the goal of 'letting profits run'.
Key points for setting take-profit rules.
In trading systems, the design and execution of take-profit strategies are as important as stop-losses; they not only relate to the final profit level but also directly influence the overall profit-loss ratio and the sustainability of trading. Here are several key points to consider when formulating take-profit rules.
1. The profit-loss ratio must be reasonable.
When setting take-profit points, the distance between the take-profit point and the entry point should be greater than the distance between the entry point and the initial stop loss, meaning the profit-loss ratio should be greater than 1. This design helps maintain a positive expected value for the strategy even when the overall win rate is not high.
2. Take-profit points should be based on significant technical positions.
The ideal take-profit point should be set near obvious support or resistance levels, as these positions are often areas where price is likely to reverse or stall, improving the probability of successful take-profit.
3. When there are multiple take-profit points, prioritize the closest one.
When there are multiple potential take-profit targets in the market, prioritize the one closest to the current price. This can effectively increase the hit rate for take-profits, avoiding a situation where the market reverses before reaching a distant target. However, if the market is very strong and the candlestick effectively breaks through the previously set take-profit position with medium to long bullish (bearish) body, consider reassessing and adjusting the take-profit point to fit the current trend changes.
Key points for setting tracking stop losses.
In trend-following trading systems, trailing stop losses are a key tool for achieving 'letting profits run'. Compared to fixed stop losses, trailing stop losses can dynamically protect existing profits when the market is favorable and gradually lock in gains. Here are several core points to pay attention to when designing a trailing stop loss strategy.
1. Only move with the trend, do not adjust against it.
Tracking stop losses must strictly follow the direction of the opening position; do not loosen the stop loss in the opposite direction for 'market space' or 'error tolerance'. This practice contradicts the original intention of risk control and can easily lead to profit giving back or even turning gains into losses.
2. Set outside key technical positions.
Each time you track a stop loss, it should be set below a significant support level (for long positions) or above a resistance level (for short positions). This can prevent the price from hitting the stop loss during normal fluctuations while ensuring that once a key level is breached, we can decisively exit.
3. Be flexible in rapid market conditions: leverage Fibonacci retracement.
When the market runs rapidly in a one-sided direction, making previous high/low positions too far to serve as references, Fibonacci retracement levels can be used to set trailing stop loss points. For example, during a sharp rise, retracing to the 0.382 or 0.5 level can serve as a basis for moving the stop loss, balancing safety and flexibility.
4. In normal market conditions, use previous highs/lows as a reference.
In normal market conditions, using previous highs (for long positions) or previous lows (for short positions) as new stop-loss positions is the most prudent approach. Only when the price effectively breaks through previous highs/lows should you move the stop-loss point upwards in line with the trend, ensuring that market structure supports your position direction.
5. Do not set stop losses on pending orders; confirm exit at the closing price.
It is not recommended to pre-set trailing stop orders to avoid irrational stop-loss exits due to false breakouts during trading. The effectiveness of breaking down or breaching the stop-loss level should be confirmed with the closing price of the candlestick before deciding whether to exit; this can filter out most 'false breakouts'.
Why must your position size remain consistent?
Most amateur traders do not spend enough time considering the issue of position size because they do not truly understand its importance.
Maintaining consistent position sizes in each trade can help you steadily grow your account and avoid excessive fluctuations. A trader lacking consistency in position sizes may unknowingly assign more weight to certain trades.
We do need to take some time to calculate the correct position size for buying or selling, but if a trader skips this step, it indicates a lack of the correct trading mindset, making it hard to survive long-term in this industry.
Position size is the only variable you can fully control in trading, so you must take this topic seriously, familiarize yourself with it, and master it.
Fallacy: Is it possible to trade without setting stop losses?
As you can see, without setting a stop loss, you cannot reasonably determine position size. Many traders believe that not setting a stop loss has certain 'advantages', but this idea is fundamentally flawed. Without a stop loss, you cannot reasonably set position sizes, and your trades will become chaotic.
Even a slight deviation in position size or stop loss level can lead to huge changes in risk and actual loss amounts. If you want to achieve consistency in trading outcomes, maintaining consistency in position size is essential.
If you lack insight, you must follow!
