After ten years of trading cryptocurrencies, during the first three years, I lost 70%, experiencing various pressures, pains, and confusion. Eventually, I had a major realization: simplify trading techniques and achieve six years of consistent profits. If you plan to stay in the stock market for the next three years and aspire to make cryptocurrency trading your second career, you must read these 10 rules; they are valuable insights for making a living from trading.
Ten core suggestions for trading cryptocurrencies
1. Confront human weaknesses: Use discipline to combat retail instincts.
The cryptocurrency market is highly volatile, and retail investors' instinct to 'hold on during losses and run during profits' will be amplified. You must establish strict stop-loss and take-profit rules: for example, if a single loss reaches 5% of your capital, stop-loss immediately (to avoid small losses turning into big losses), and set 'trailing stop-loss' after profits exceed 15% (for instance, exiting if there is a 10% retracement). 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 lacks capital that has not been destroyed by major losses.
2. Volume and price are core: Trading volume is more honest than K lines.
Cryptocurrencies have no limits on price fluctuations, and trading volume is a 'mirror' reflecting capital trends.
New highs on low volume (volume below the recent average by 50%): If in an upward trend (such as stabilized above the 20-day moving average), it indicates that selling pressure is exhausted, and the market maker has high control; you can try a small position.
Volume spikes with price stagnation (volume suddenly increases by more than 1.5 times but price remains flat): Beware of top signals, especially at historical highs or significant resistance levels.
Low volume pullbacks (after breaking key moving averages, volume shrinks to half of previous levels): If the trend is not broken, it may indicate a washout; you can add to your position after the pullback stabilizes. Stay away from coins with low volume declines or sudden volume drops (often indicating capital flight).
3. Simplify your holdings: Less is more to 'watch closely and hold firmly.'
80% of cryptocurrencies in the market lack liquidity. Retail investors often hold more than five types of coins due to 'greed for more,' resulting in scattered attention and missed opportunities. Holding suggestions: 1-3 core targets + 1 observation position, which must meet:
Focus on the top 50 by market capitalization (to avoid the risk of small-cap coins going to zero).
Look for coins with clear application scenarios or institutional funding interest (such as mainstream coins like Bitcoin and Ethereum, or leading ones in sectors like Layer 2 and AI).
Strictly enforce 'sell when breaking the point' (for example, if it drops below the 5-day moving average and cannot recover quickly), and decisively go to cash in a weak market instead of averaging down.
4. Respect daily rules: 24-hour trading does not equal all-day operation.
Cryptocurrency is traded 24 hours a day, but there are hidden laws in the fluctuations of funds.
Asian trading hours (9:00-18:00) have smaller fluctuations, while European and American trading hours (20:00 to 2:00 next day) see increased trading volume, with many market movements occurring during this time.
If there is a sharp drop during the day (over 10%) but the trend is not broken, you can wait for a rebound before reducing your position (to avoid emotional selling).
A sudden surge in volume at the end of the trading day (after 23:00): If there are no positive news, it is often 'baiting buyers,' and the probability of a low opening the next day is very high, so timely profit-taking is necessary. 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 in cryptocurrency are evident, and 'going with the trend' is the only correct direction.
Short-term trends (1-3 days): Look at 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 trends (1-3 months): Look at the 20-day moving average + MACD golden cross. If the 20-day line is upward and the price is above the moving average, you can hold a small position.
Never 'catch the bottom' in a downtrend (for example, when Bitcoin drops from $60,000 to $30,000, any 'catching the bottom' in between is like catching falling knives), nor should you 'catch the top' in an uptrend (trend reversals require clear signals, such as a sharp drop below the 20-day line).
6. Divergence and consensus: Trading opportunities against human nature.
'Divergence buying, consensus selling' is a classic logic in the cryptocurrency market.
Divergence buying point: For strong cryptocurrencies (such as those that increase more than 20% for three consecutive days), if divergence signals like 'volume explosion' or 'long upper shadow' appear, and if the subsequent 1-2 days do not break the starting point, and trading volume gradually decreases, it may indicate a washout; you can try a small position.
Consensus selling point: When the community and media collectively shout bullish (e.g., 'this coin will definitely reach $100'), the exchange ranks first in hot searches, and even those who do not understand cryptocurrencies begin to discuss it, it is often a top signal, and you should decisively reduce your position.
Beware of the 'first bearish engulfing' trap: Cryptocurrency volatility is extremely high, and the success rate of a 'first bearish' engulfing pattern is much lower than in the stock market. Unless it's a major coin like Bitcoin or Ethereum, small-cap coins' 'first bearish' patterns are often for unloading, so avoid heavy speculation.
7. Empty positions after large profits: Locking in profits gives room for cognitive growth.
In a cryptocurrency bull market, 'continuous profits' can lead to the illusion of 'being a god,' causing blind leverage and chasing junk coins. After a big profit, enforce a forced empty position for 1-3 days.
Review trading records to confirm whether profits are based on logic (such as trends + volume) rather than luck.
Observe market sentiment: If 'the group chat is full of trading signals' or 'new investors are entering crazily,' it indicates that the market is overheated and risks are accumulating.
Remember: the bear market cycle in cryptocurrencies is much longer than the bull market; a blind operation can wipe out all profits.
8. Stop trading when it’s not the right time: Trading is a probability game, accept 'temporary failures'.
If you suffer three consecutive losses (or a single day loss exceeding 10%), immediately stop trading.
The 'loss effect' in the cryptocurrency market is contagious; forceful operations in unfavorable conditions will only lead to greater losses.
At this time, you need to reflect: Was the trend judgment wrong? Was position management out of control? Or were you influenced by emotions?
The essence of trading is 'surviving to wait for opportunities,' not proving oneself in adversity.
9. Original intention and risk: Do not confuse 'gambler's mentality' with 'dreams of financial freedom.'
Cryptocurrencies have indeed created wealth myths, but 90% of participants end up losing and exiting.
If you enter the market with the mindset of 'getting rich overnight,' you will likely be harvested by high volatility (such as liquidation of contracts or chasing zero-value coins).
'Trading cryptocurrencies' is essentially high-risk investment; you should participate with 'spare money' (losses should not affect your life), and invest no more than 10% of your investable assets.
True 'financial freedom' comes from cognitive monetization, not luck. If you lack a basic understanding of blockchain and token economics, it is advisable to study 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 difference' + 'execution ability'**:
Cognition: Understanding blockchain technology, token models, regulatory policies, and capital trends (such as the impact of the Federal Reserve's interest rate hikes on cryptocurrencies).
Execution: Strictly trade according to the rules, not being swayed by FOMO (fear of missing out) or FUD (fear, uncertainty, doubt).
Long-termism: The bull and bear cycles in the cryptocurrency market last about four years. Patiently wait to position at the bottom of a bear market (for example, when Bitcoin drops below mining cost), and exit at the peak of bull market sentiment is far more reliable than short-term day trading.
Trading cryptocurrencies is not about who has more indicators, but who uses them more effectively.
Today, I want to share with you my heartfelt insights after 15 years of market trials: the six life-saving indicators that I ultimately retained.
1. The SAR indicator: A 'lifesaver' for beginners.
Many investors mistakenly believe that the more complex indicators are, the more effective they are. In reality, the SAR indicator is a 'hidden expert.' Its form consists of small dots that follow the price movement; when the price is above the dots, it indicates an upward trend, and when below, it indicates a downward trend. It is simple and easy to understand, and can be mastered in five minutes.
(1) Judging bullish and bearish trends is more reliable than MACD.
When the price is above the SAR points (the dots are below the K line), it belongs to a 'bull market,' and you should not rush to sell. Even if there is a correction along the way, as long as it does not break the SAR point, you should continue to hold. During Ethereum's rise from $2,000 to $4,000 in 2021, the SAR points remained below, and adhering to the principle of 'not selling below the point' helped me earn an extra $1 million.
When the price drops below the SAR points (the dots are above the K line), it indicates entering a 'bear market,' and you must decisively sell. Last year, Bitcoin fell from $69,000 to $30,000, and when the SAR point was at $50,000, it 'flipped above.' I promptly liquidated my holdings and successfully avoided the subsequent halving market.
(2) Pay attention to angle signals to avoid most traps.
When the SAR points are running upward at an angle greater than 45 degrees, it indicates strong upward momentum, and you should not sell easily. For example, when SOL rose from $20 to $100 in 2023, the SAR points were almost vertical. Selling at that time would undoubtedly mean missing out on profits.
When the SAR points are running downward at an angle greater than 45 degrees, it indicates a significant drop, and you must not catch the bottom. During the collapse of LUNA in 2022, the SAR point angle approached 90 degrees; anyone trying to catch the bottom at that time ended up getting liquidated.
It is important to note that the SAR indicator may fail in 'volatile markets' (the points change repeatedly), and it is not suitable to operate at this time. You should wait for a clear trend before acting, as its advantage lies in 'grasping trends' rather than 'guessing volatility.'
2. Support and resistance levels: The key to increasing profits.
Many investors feel confused when buying and selling cryptocurrencies, unsure of when to enter or exit. The key actually lies in grasping the 'two points': support level (the point where it won't drop further) and resistance level (the point where it won't rise further).
(1) The relationship between point conversions.
Once a support level is broken, it turns into a resistance level; once a resistance level is broken, it becomes a support level. For example, if a certain coin repeatedly fails to rise above 6,800 yuan, that position is a 'resistance level'; later, if it drops below 6,000 yuan (the support level) with huge volume, then 6,000 yuan becomes a new resistance level. When the price rises back to 6,000 yuan, it will face a massive sell-off from trapped investors, making it difficult to break through.
When I operated on FIL last year, I used this principle: FIL had three support levels at $40 (it rebounded each time it dropped to this level). I bought each time at $40, sold at $50 (the resistance level), and made a 60% profit by trading back and forth.
(2) Judging the authenticity of breakouts, trading volume is key.
When the resistance level is broken, the trading volume must increase (more than twice the usual volume) for it to be a 'true breakout'; at this point, you can increase your position. If there is no increase in volume, it is a 'false breakout,' and you should sell quickly. For example, when BTC broke $40,000 this year, the trading volume was three times the usual, and I decisively increased my position, leading to a rise to over $50,000, earning an extra $200,000.
3. Bollinger Bands: A magical tool for grasping market direction
Consolidating markets can be frustrating; prices do not rise when you buy, and they rise when you sell. However, Bollinger Bands can help you detect significant market movements in advance; they act like a 'stretch band.' When they narrow, it signals an impending change, and when they open, it indicates that a trend is forming.
(1) Converging signals
When the coin price is consolidating, 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, avoid using leverage and refrain from short-term trading (the transaction fees will be hard to recover). Wait for a breakout before taking action. The larger the breakout, the stronger the subsequent trend. For example, Bitcoin consolidated for a month in 2023, and after the Bollinger Bands narrowed, it surged by 30%.
(2) Opening signals
When the upper band expands at high levels and then begins to contract, it is a 'sell signal.' For example, after the price of a coin rises three times, and the Bollinger Bands reach their maximum opening and suddenly narrow, the probability of a subsequent drop is high. Conversely, when the lower band expands at low levels, and the price moves upward from the middle band, it is a 'buy signal.' For instance, after a 50% drop, when the Bollinger Bands narrow and then suddenly open, with the middle band turning upward, the probability of a successful buy is high.
It is important to note that Bollinger Bands are lagging indicators (they change only after price movements), so do not use them to predict 'reversals'; use them only to determine whether 'trends will continue.'
4. Volume: Assessing the true signal of the market.
Many people focus on the rise and fall of K lines but neglect 'trading volume' (the red and green bars below). In fact, 90% of the 'sharp rises and falls' in the crypto market are determined by 'volume.' Without volume support, price movements are often orchestrated by market makers.
(1) Four practical rules.
High volume at high levels must fall: When the coin price rises significantly (for example, by 500%), and the trading volume suddenly increases (the bars are three times higher than usual), regardless of how attractive the K line pattern looks, you must sell quickly, as this could indicate that the market maker is unloading.
Buying on low volume: When the coin price drops significantly (for example, by 70%), and the trading volume suddenly increases without making new lows, it indicates that funds are entering the market, and you can buy in batches. When Bitcoin dropped to $15,000 in 2022, I increased my position and made three times my investment.
Rising without volume is a 'trap': If the coin price rises but the trading volume does not increase (the bars remain short), it is likely that the market maker is 'manipulating the price.' The rise will be quick, and the fall will be quick as well, so do not chase the price.
Be cautious of volume-price divergence: If the coin price reaches a new high but the trading volume is smaller than at the last peak (the bars become shorter), it indicates 'insufficient buying power,' and you should sell. For example, when Bitcoin rose to $69,000 in 2021, the volume was lower than the previous high, and I managed to sell everything and avoided the crash.
5. 'Fool's trading method': Even beginners can operate easily.
Combining the above tools forms a simple and practical 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 entry points: Buy when near the support level and SAR is below; sell when near the resistance level and SAR is above.
Use Bollinger Bands to wait for the right moment: When consolidating, wait for a breakout; in a trend, operate in the direction of the opening.
Use volume to verify authenticity: Check trading volume before buying; if there is no volume increase, give up; take action after volume spikes.
Using this method, I operated on SOL four times last year, each time making a profit of 15%-30%, doubling my investment in total. Complex indicators only lead to indecision; simple rules enable decisive action. From liquidation to doubling my investment, my biggest realization is that the crypto market never lacks opportunities; what it lacks are 'implementable methods.' Tools like SAR, support and resistance levels, Bollinger Bands, and trading volume may seem simple, but they can help avoid most traps. As long as you master these simple techniques and execute them strictly, even beginners can achieve success in the crypto market.
In cryptocurrency investment, many people often fall into losses due to either blindly following trends or lacking effective analysis methods. In fact, investing in cryptocurrencies is not out of reach. By mastering some simple and practical technical indicators and real-world skills, even beginners can gain from the market. This article will detail four 'fool-proof' technical indicators and a 'fool's trading method' to help you avoid traps and seize opportunities in cryptocurrency investing.
If you currently feel helpless and confused about trading and want to learn more about cryptocurrency knowledge and cutting-edge information, click on my profile to follow me, and you won't get lost! @CryptoMaster888 Seeing the market clearly gives you the confidence to act. Steadily making profits is far more practical than fantasizing about getting rich.