After ten years of trading, I lost 70% in the first three years, experiencing various pressures, pain, and confusion. Ultimately, I gained profound insights, simplified trading techniques, and achieved six years of consistent and stable profits. If you plan to stay in the stock market for the next three years and aim to make trading cryptocurrencies your second career, you must read these 10 ironclad rules—valuable nuggets for making a living through trading, and I recommend saving them!
Ten core suggestions for trading cryptocurrencies.
1. Confront human weaknesses: Use discipline to combat retail instincts.
The cryptocurrency market is highly volatile, and the instinct of retail investors to "hold on when losing and run when making a profit" will be amplified. It is essential to establish strict stop-loss and take-profit rules: for example, if a single loss reaches 5% of the principal, stop loss immediately (to avoid minor losses turning into major losses), and set "trailing stops" (such as exiting after a 10% pullback) once profits exceed 15%. The key is not the technique but mechanically executing rules to overcome "wishful thinking" and "greed and fear." Remember: the market lacks opportunities, but it is the capital that has not been destroyed by significant losses that is missing.
2. Volume and price are core: Trading volume is more honest than K-line.
Cryptocurrencies have no price fluctuation limits; trading volume is the "litmus test" of capital dynamics:
Low volume but new highs (volume below the recent average by 50%): If in an uptrend (such as stabilizing above the 20-day moving average), it indicates exhausted selling pressure, and the market maker has high control, you can try a light position.
High volume but stagnant price (volume suddenly increases more than 1.5 times but price stagnates): Beware of head signals, especially at historical highs or significant resistance levels.
Low volume pullback (after breaking key moving averages, volume shrinks to half of the previous level): If the trend is not broken, it may be a washout. After stabilizing from the pullback, you can add positions. Stay away from coins with no volume decline or sudden high volume crashes (often indicating capital outflow).
3. Streamline holdings: Less is more to "watch closely and hold firmly."
80% of coins in the cryptocurrency market lack liquidity. Retail investors often hold more than 5 coins due to "greed for more," resulting in scattered focus. Holding suggestions: 1-3 core targets + 1 observation position, meeting the following conditions:
Market cap ranked in the top 50 (avoid the risk of small-cap tokens going to zero).
There are clear application scenarios or institutional capital attention (such as mainstream coins like Bitcoin and Ethereum, or leading projects in sectors like Layer 2 and AI).
Strictly execute "sell on breakdown" (for example, if it drops below the 5-day moving average and cannot quickly recover), decisively go to cash in a weak market rather than averaging down the cost.
4. Respect daily patterns: 24-hour trading does not equate to all-day operations.
Cryptocurrencies are traded continuously for 24 hours, but capital fluctuations have hidden rules.
The Asian session (9:00-18:00) has less volatility, while the European and American sessions (20:00 to 2:00 the next day) see increased trading volume, with many trends breaking out during this time.
If there is a sharp drop during the day (more than 10%) and the trend is not broken, wait to reduce positions after a rebound (to avoid emotional selling).
In the tail end (after 23:00), if there is a sudden increase in volume leading to a price rise: if there is no positive news, it is mostly "a trap for buyers," and the probability of a low open the next day is very high, so you need to take profits promptly. Most of the time, "not trading" is more important than "frequent trading."
5. The trend is your friend: do not go against the trend.
The bull and bear cycles of cryptocurrencies are evident; "going with the trend" is the only correct direction.
Short-term trend (1-3 days): Observe the 5-day moving average + trading volume; if the volume stabilizes above the 5-day line, go long; if it breaks below, exit.
Medium to long-term trend (1-3 months): Observe the 20-day moving average + MACD golden cross; if the 20-day line is upward and the price is above the average, hold a light position.
Never "catch the bottom" of a declining cryptocurrency (for example, when Bitcoin drops from $60,000 to $30,000, any attempt to "catch the bottom" in between is akin to catching a falling knife), and do not "touch the top" in an uptrend (a clear signal is needed for trend reversal, such as a significant drop below the 20-day line).
6. Divergence and consensus: Anti-human trading opportunities.
"Divergence Buy, Consensus Sell" is a classic logic in the cryptocurrency market:
Divergence buying point: Strong coins (such as those that have risen more than 20% for three consecutive days) show divergence signals like "increased volume and stuck limits" or "long upper shadows". If they do not fall below the starting point in the next 1-2 days and the trading volume gradually shrinks, it may be a washout; you can try a light position.
Consensus selling point: When the community and media collectively shout bullish (for example, "this coin must go to $100"), and it ranks first in the exchange's hot search, even those who do not understand tokens start discussing it, it is often a top signal, and one should decisively reduce their position.
Beware of the "first dark candle reversal" trap: The volatility of cryptocurrencies is extreme, and the success rate of a reversal after the "first dark candle" is far lower than in the stock market. Unless it's a major coin like Bitcoin or Ethereum, the "first dark candle" of small-cap coins often indicates unloading; do not go heavily into speculation.
7. Go to cash after significant profits: Lock in profits, leaving room for cognition.
In a bull market, continuous profits can lead to the illusion of "being a god," which can result in blind leverage and chasing junk coins. After significant profits, enforce a cash position for 1-3 days.
Review trading records to confirm whether profits come from logic (such as trend + volume) rather than luck.
Observe market sentiment: if "the group chat is full of trading records" or "new investors are entering crazily," it indicates that the market is overheated and risks are accumulating.
Remember: The bear market cycle of cryptocurrencies is much longer than the bull market; a single blind operation may wipe out all profits.
8. Stop trading when it's not favorable: Trading is a probability game; accept "temporary failure."
If you incur continuous losses more than 3 times (or a single-day loss exceeding 10%), stop trading immediately.
The "loss effect" in the cryptocurrency market is contagious; forcing trades in unfavorable conditions will only lead to increasing losses.
At this time, reflect: Is it a misjudgment of the trend? Or is it a lack of position management? Or were emotions in control?
The essence of trading is "surviving to wait for opportunities," rather than proving oneself in adversity.
9. Original intention and risk: Do not confuse the "gambler's mentality" with the "dream of financial freedom."
Cryptocurrencies have indeed created wealth myths, but 90% of participants end up losing money and leaving the market.
If you enter the market with a "get rich quick" mentality, you are likely to be harvested by high volatility (such as contract liquidation or chasing worthless tokens to zero).
"Trading cryptocurrency" is essentially a high-risk investment, and one should participate with "spare money" (losses should not affect life), not exceeding 10% of investable assets.
True "financial freedom" stems from cognitive realization rather than luck. If you lack a basic understanding of blockchain and token economics, it is advisable to learn first rather than blindly follow trends.
10. Cognition and persistence: The market always rewards "rational and patient people."
The core of making profits in cryptocurrency is **"Cognitive Gap" + "Execution Power"**:
Cognition: Understand blockchain technology, token models, regulatory policies, and capital dynamics (such as the impact of Federal Reserve interest rate hikes on cryptocurrencies).
Execution: Trade strictly according to rules, not swayed by FOMO (fear of missing out) or FUD (fear, uncertainty, doubt).
Long-termism: The bull and bear cycles of the cryptocurrency market are about 4 years. Patiently wait for the bottom of the bear market (for example, when Bitcoin falls below mining cost), and exit at the peak of bull market sentiment, which is far more reliable than day trading.
Trading cryptocurrencies is not about who has more indicators but about who uses them more effectively.
Today, I want to share with you sincerely, after 15 years of market beating, the 6 life-saving indicators that I ultimately retained.
1. SAR Indicator: The "lifeline" for beginners.
Many investors mistakenly believe that the more complex the indicator, the more effective it is, but that is not the case. The SAR indicator is considered "a hidden expert among the masses." Its form consists of small dots following the coin price; if the price is above the dots, it indicates an upward trend, while below indicates a downward trend—simple and easy to understand, it can be mastered in 5 minutes.
(1) Judging bullish and bearish is more reliable than MACD.
When the price is above the SAR point (the dots are below the K line), it is in a "bull market," and one should not rush to sell. Even if there is a pullback along the way, as long as it does not fall below the SAR point, one should continue to hold. During Ethereum's rise from $2,000 to $4,000 in 2021, the SAR point remained below, adhering to the principle of "do not sell if the point is not broken," which allowed me to earn an additional $1 million.
When the price drops below the SAR point (points move above the K line), it means entering a "bear market," and you must sell decisively. Last year, when Bitcoin dropped from $69,000 to $30,000, the SAR point moved above at $50,000, allowing me to liquidate in time and successfully avoid the subsequent halving market.
(2) Pay attention to angle signals to avoid most traps.
When the SAR points operate at an angle greater than 45 degrees upward, it indicates a strong upward momentum, and one should not sell easily. For example, when SOL rose from $20 to $100 in 2023, the SAR points were almost vertical. Selling at this time would undoubtedly mean missing out on gains.
When the SAR points operate at an angle greater than 45 degrees downward, it indicates a significant decline, and one must not attempt to catch the bottom. For instance, during the LUNA crash in 2022, the SAR point angle approached 90 degrees; those who tried to catch the bottom all faced liquidation.
It is important to note that the SAR indicator may fail in a "volatile market" (the points change repeatedly). During this time, it is advisable to wait for a clear trend before taking action, as its advantage lies in "grabbing trends" rather than "guessing volatility."
2. Support and resistance levels: The key to enhancing profits.
Many investors feel confused about when to buy and sell coins. The key lies in grasping "two points": support levels (where the price does not fall) and resistance levels (where the price does not rise).
(1) The relationship of point conversion.
Once a support level is broken, it will turn into a resistance level; once a resistance level is broken, it will become a support level. For example, if a certain coin repeatedly fails to break through $6,800, this position becomes a "resistance level"; later, if it is accompanied by a massive drop below $6,000 (the support level), then $6,000 becomes the new resistance level. When the price rises back to $6,000, it will meet a lot of trapped selling pressure, making it difficult to break through.
When I traded FIL last year, I utilized this principle: FIL had 3 support levels at $40 (it bounced back whenever it fell to this level). I bought every time it reached $40 and sold at $50 (resistance level), executing this back and forth 3 times for a total profit of 60%.
(2) Judging true and false breakouts, trading volume is key.
When a resistance level is broken, the volume must increase (more than double the usual) for it to be a "true breakout"; at this point, you can add positions. If there is no increase in volume, it is a "false breakout," and you should sell quickly. For example, when BTC broke through $40,000 this year, the volume was three times the usual, and I decisively added positions, resulting in a subsequent rise to over $50,000, earning an additional $200,000.
3. Bollinger Bands: The magic tool to grasp market direction.
Sideways markets can be frustrating: prices do not rise after buying, and they rise after selling. However, Bollinger Bands can help detect major trends in advance; they act like an "elastic band": narrowing indicates an impending reversal, while widening shows that a trend is forming.
(1) Contraction signal.
When the coin price is sideways, and the upper, middle, and lower bands of the Bollinger Bands converge into a single line, it indicates that both bulls and bears are evenly matched, and a decisive outcome is imminent. At this point, do not use leverage or engage in short-term trading (the fees would be hard to recover), and wait for a breakout above or below before taking action. The larger the breakout, the stronger the subsequent trend; for example, Bitcoin traded sideways for a month in 2023, and after the Bollinger Bands narrowed, it surged 30%.
(2) Opening signal.
After a high opening and widening, if it starts to shrink, it is a "sell signal"; for example, after the coin price rises threefold, if the Bollinger Bands open widely and then suddenly shrink, it is highly likely to drop thereafter. Conversely, if the low bands widen, and the coin price moves up from the middle band, it is a "buy signal"; for example, after the price drops by 50%, if the Bollinger Bands shrink and then suddenly widen, with the middle band turning upward, it is a high-probability buying opportunity.
It should be noted that the Bollinger Bands have a lagging effect (they only change after price movements); do not use them to guess "reversals" but only to judge whether "trends will continue."
4. Trading volume: The true signal to assess market conditions.
Many focus on the ups and downs of K-lines but ignore "trading volume" (the red and green bars at the bottom). In reality, 90% of "violent ups and downs" in the crypto space are determined by "volume." Without support from trading volume, the price movements are often orchestrated by market makers.
(1) Four practical phrases.
High volume at high levels will lead to a drop: When the coin price rises significantly (for example, by 5 times), if the trading volume suddenly increases (the bars are 3 times higher than usual), regardless of how good the K-line appears, sell quickly—this may indicate that the market maker is unloading.
High volume at low levels can be a buying signal: if the coin price has dropped significantly (for example, by 70%), and trading volume suddenly increases without hitting new lows, it indicates that capital is entering the market, and you can buy in batches. When Bitcoin dropped to $15,000 in 2022, I increased my position and made threefold profits.
Rising without volume is "a trap": When the coin price rises but the trading volume does not increase (the bars are still short), it is likely that the market maker is "pulling and singing"; the rise is fast, and the fall is also fast—do not chase the rise.
Beware of volume-price divergence: When the coin price hits new highs, but the trading volume is lower than the last peak (the bars are getting shorter), it indicates "insufficient buying power," and one should sell. For instance, when Bitcoin rose to $69,000 in 2021, the volume was lower than the previous high. After liquidating my position, I avoided the subsequent crash.
5. "Fool's Trading Method": Even beginners can operate easily.
Combining the above tools forms a simple and feasible trading process:
Use the SAR indicator to determine direction: If the price is above the SAR, only go long; if below, only go short.
Use support/resistance levels to find points: Buy near support with SAR below; sell near resistance with SAR above.
Use Bollinger Bands to wait for opportunities: When sideways, the bands narrow, waiting for a breakout; in a trend, the bands open, and you operate in the direction.
Use volume to verify authenticity: Check the trading volume before buying; if there is no significant increase, give up and only act after a spike.
I applied this method and traded SOL 4 times last year, making a profit of 15%-30% each time, doubling my total investment. Complex indicators only lead to hesitation; simple rules allow decisive action. From liquidation to doubling, my biggest realization is: the crypto market never lacks opportunities; what it lacks is a "practical method." Tools like SAR, support and resistance levels, Bollinger Bands, and volume may seem simple but can help avoid most traps. As long as these simple techniques are mastered and strictly executed, even beginners can gain something in the crypto space.
Many people often fall into the trap of losses in crypto investments, either due to blindly following trends or lacking effective analytical methods. In fact, crypto investment is not out of reach; mastering some simple and practical technical indicators and practical skills allows even beginners to gain something in the market. This article will introduce you to four "foolproof" technical indicators and a "fool's trading method" to help you avoid traps and seize opportunities in crypto investing.
If you currently feel helpless and confused in trading and want to learn more about cryptocurrency knowledge and cutting-edge information, click on my profile and follow me, so you won't get lost anymore! Clear market observations give you the confidence to operate. Consistently making profits is far more practical than fantasizing about getting rich.