Dedicated to all retail investors who are up and down in the cryptocurrency circle: Believe it or not, this is the crypto market!

If your capital is less than 500,000 and you want to succeed quickly in the cryptocurrency circle through short-term trading, then please read this post carefully. I believe that after reading it, you will suddenly understand the essence of short-term trading!

I am 34 years old this year, have been in the market for 10 years, and have been a professional cryptocurrency trader to support my family for 6 years!

Not choosing finance as my major in college is one of the biggest regrets in my life. I started to learn about stocks/finance/foreign exchange, etc. on the Internet in my freshman year. The red and green screen was full of the colors of life and fascinated me. With infinite longing for the market, I opened an account in my sophomore year. Later, I gradually learned about the currency circle and Bitcoin. Then, through the introduction of a classmate, I learned more and more, and I became very interested, so I started my investment career.

Like most friends who have just entered the market, they are fascinated by technical indicators at the beginning, constantly using currencies to backtrack and find patterns; they are keen to enter the market with low-priced currencies, or currencies that have fallen sharply, thinking that they are safer. In fact, these perceptions of the market are completely wrong.

Later I realized that if you want to make quick profits in the market, you have to do short-term trading. Medium- and long-term compounding is the way to go!

The conclusion is: Don't be carried away by the pursuit of profit. You should know that the most difficult thing in the world is how to make continuous profits. You must carefully review your past performance to find out whether it is luck or strength. A stable trading system that suits you is the key to continuous profits.

There is a sentence that impressed me deeply: Ideology is something that if you don’t occupy it, others will occupy it.

The cryptocurrency trading philosophy I am sharing with you today is the essence that has enabled me to stand firm in the market for a long time. If you study it seriously, you will definitely gain huge benefits, and your understanding of cryptocurrency trading will undergo a drastic change!

How to manage positions in different market conditions? Customize your holding ratio (with diagrams)

I believe that many people will encounter a problem when trading: they cannot grasp the cycle well.

For example, I'm used to trading on the one-hour chart, but when it doesn't offer any profit margin, I'll look for opportunities on the five-minute chart. When I switch from a larger to smaller timeframe, I'm still accustomed to placing orders based on my previous position size. This creates a problem: small profits lead to large losses. Furthermore, I don't know how to manage my position size and don't know how much to place at a time.

So let’s learn today how to calculate the size of a position, as well as how to use and obtain a free calculator.

1. The conversion of trading cycles can easily lead to small profits and large losses

Why is it that even though the profit-loss ratio remains the same, the profit on the five-minute chart is less than that on the one-hour chart? Let’s use Figure 1 as an example.

Figure 1

On the one-hour chart, we can make more than 400 points using a profit and loss ratio of 1:2, but on the five-minute chart in Figure 2.

Figure 2

We can only get 153 points. Given the same position, the profit earned from the five-minute chart and the one-hour chart is different. If you convert the one-hour chart to the five-minute chart, you will get small profits and large losses.

2. Position management

Many people don't know anything about position management beyond their profit-loss ratio. For example, if you go long at the position in Figure 3, your profit-loss ratio is 2.41. Other than using the profit-loss ratio calculated using the TradingView tool, you're left with no idea where to start.

Figure 3

Some people max out their positions every time they trade, placing bets based on their account balance. They often can't clearly determine their correct position size, or how much leverage to use. They don't even understand what stop-loss trading is.

So for ease of use, I made a calculator myself, as shown in Figure 4.

Figure 4

We will explain how to obtain and use this calculator later.

In fact, we trade based on volatility. If we trade low-leverage contracts at the daily level, we will suffer a lot of losses if we don’t control our positions well.

The positions you place on the daily chart and the hourly chart are different. Let's compare them. Assume that you are only willing to lose $1,000 at most each time.

Daily chart:

As shown in Figure 5, the stop loss percentage on the daily chart is 7.52%, and the take profit percentage is nearly 30%.

Figure 5

One-hour chart: In the one-hour chart in Figure 6, the profit and loss ratio is set at 1:2.

Figure 6

The stop loss ratio at this time is 1.22%, and the take profit will be stopped as long as the price rises to 2.55%.

Five-minute chart:

Then under the same conditions in the five-minute chart, my profit and loss ratio will be as shown in Figure 7.

Figure 7

The stop loss is only 0.45%, and the take profit is 1.06%.

So, after comparing these three periods, do you still think it's appropriate to open the same position across different periods? Of course not. This is because we rely on volatility. The profit-loss ratio remains the same across each period, but the magnitude of the volatility varies. Therefore, given the same expected loss and gain, our position should be inversely proportional to the volatility.

3. Calculator Usage and Instructions

For ease of use, I made a calculator to calculate position size. You can use this calculator in Figure 8 before entering the market.

Figure 8

For all transactions, you must first think about how much money you are prepared to lose. The "expected loss" in the calculator is the risk control ratio, and the position risk adopts a fixed percentage model.

You only need to fill in the numbers corresponding to the yellow boxes in the calculator. The other numbers will be automatically calculated according to the numbers entered. Do not manually change any numbers except the numbers corresponding to the yellow boxes.

For example, if I have $1,000 in my account and only want to lose 5% each time, I'll have to lose 20 times in a row to lose all my money. Then, multiply the risk ratio by the current account balance (5% * 1,000) to get the number (50) that should be filled in the "Expected Loss" blank.

Five-minute chart:

As shown in the figure, the stop-loss ratio is 0.19, the take-profit ratio is 0.31, and the profit-loss ratio is 1.66. Based on the profit-loss ratio, this trade is feasible. So, fill in the corresponding information in our calculator.

Enter 0.19 for the Stop Loss Ratio and 50 for the Expected Loss. You can calculate that the actual position you need to open is $26,315, which is the number corresponding to the "Actual Position." If you're trading futures and need leverage, you'll need to look at the following data. The leverage you need will depend on the number, but I recommend using a small amount of leverage.

So how much money can we make? From Figure 9, we can see the opening price and the take-profit price (the latest price). So, the corresponding opening price is 16494, and the latest price is 16546.

That is, if the market rises to 51.26, the expected profit of this transaction is $82.96. The opposite is true for short selling. The actual profit is calculated by deducting the commission.

Enter 6.61 as the stop loss ratio, 16444 as the opening price, and 18254 as the latest price (take profit price). The result is shown in Figure 13.

No matter which cycle we are in, as long as we control the position, we can ensure the same profit and loss. Especially for beginners, don't make the position too complicated, using this calculator is enough

Of course, this calculator is for my own convenience and does not take into account the issue of margin calls. Our old version of the calculator can calculate margin calls.

Price Action K-by-K Analysis - Trading Within a Trading Range (with diagrams)

If you frequently trade short-term, you're bound to encounter trading ranges. Today, we'll analyze each candlestick chart to learn how to trade within a trading range.

Let's use the 15-minute chart of Ethereum as an example. The first thing to do is to look at the overall trend of the market.

We can see that the market as a whole is in a downward trend, a big bearish trend, and has just experienced a round of rapid decline.

We can see that the first candlestick line that just appeared is a doji with volume. A single doji during a decline doesn't indicate anything, but a doji with volume could signal an impending reversal (a key point in volume-price analysis). From a volume-price analysis perspective, the first candlestick line represents a stop.

At this time we need to pay special attention. A reversal will not occur immediately, nor can we "go all in" as soon as we see K-line No. 1. At this moment we need to pay close attention to the market, as the short position may be suspended.

Next, let's look at the K-line 2 in Figure 3. The K-line 2 is still a doji with a long upper shadow, so is the K-line 2 considered higher than 1?

K-line 1 is a bullish signal candlestick, and K-line 2 is indeed higher than 1 because the high point was broken. However, K-line 2 is a non-trending candlestick, not a bullish trend candlestick.

The bullish signal candlestick must be followed by a bullish trend candlestick, so the 2nd candlestick is an invalid high 1. According to price behavior, the 2nd candlestick is not a good entry candlestick, so we do not enter the market and continue to wait.

The candlestick following line 3 also breaks through the high point, but it is not an entry candlestick and is invalid. Furthermore, line 3 and the preceding candlestick do not constitute a bullish candlestick.

K-line 4 appears. It's a strong bullish candlestick, swallowing up the three previous bearish candlesticks and nearly breaking through the previous high. Therefore, K-line 4 serves as both a signal candlestick and an entry point.

First, K-line No. 4 and the previous K-line form a bullish engulfing pattern, and then the high point of K-line No. 4 breaks through the high point of the previous K-line at a long distance, so K-line No. 4 is both a signal K-line and an entry K-line.

If you only regard it as a signal K-line, and want to be safe and wait for another bullish trend K-line as an entry K-line, that is also fine.

Next, let's look at the K-line No. 5 in Figure 6. Why does such a large negative line appear at position No. 5?

Smart money also knows that this is the take-profit point, so it's crucial to take profits in the short term. We're following the smart money's lead. K-line 5 is the signal for the first short position.

But based on my own trading habits, I will not enter the market here. I will wait for the second signal to appear.

？

Interpreting this from the perspective of raw candlestick charts, the bears continued to exert their strength and broke through the low point of the previous bearish trend candlestick (candle #5), attempting to extend their momentum. However, the trend stagnated after only one candlestick. Therefore, this candlestick is not a good entry candlestick and is not a bearish trend candlestick.

Let's look at K-line 6 in Figure 8. After the appearance of K-line 6, can we consider the decline from K-line 5 to K-line 6 as a simple correction of the rise from K-line 4 to K-line 5?

Yes, but you need to be careful.

The signal candlestick of candlestick number 6 is very long. To place an order like this, you either need to wait for an entry candlestick. Furthermore, the take-profit position only looks at the previous high point, with no room above it. The take-profit position only looks at the high point of candlestick number 5. Only after it breaks through candlestick number 5 can we see the next take-profit level.

The 7th candlestick is short-lived and doesn't exceed 61.8%, so it can be considered a complex pullback. Let's look at Figure 11.

K-line No. 7 plus the following K-line tell us that this section of complex callback has been completed, and now the entire trend 2.0 is about to start, and ideally it should move equidistantly.

Next, let's look at K-line 8 in Figure 12. The rise from K-line 7 to K-line 8 is the 2.0 era of the trend from K-line 4 to K-line 5. But did this 2.0 era fail?

Actually, it is too early to say this. But we can draw a preliminary conclusion first. It may be a failure, and we still need to wait for verification.

Again, smart money knows to take profits at the right place, so it will definitely bring a wave of supply power, and it is itself a big short trend.

When we see K-line No. 9 in Figure 13, are we sure that this trend 2.0 has failed?

It is indeed a failure. In the structure from K-line 8 to K-line 9, K-line 8 is the first short-selling signal, and K-line 9 is the second short-selling signal.

If you are trading on the right side, be cautious and wait for another bearish trend K-line; if you are trading on the left side, enter the market at the market price now.

Logically speaking, K-line No. 9 is both a short signal K-line and a short entry K-line.

Either place an order to enter the market, or wait for a good-looking entry K-line.

Three-line stop loss uses the three latest closing K-lines, and selects the lowest price among the three K-lines as the long stop loss level or the highest price as the short stop loss level.

Since the trend structure is larger than the K-line pattern, the structural stop loss is more reliable than the signal stop loss and the three-line stop loss. Therefore, in general, we try to choose the structural stop loss as our main entry stop loss.

A capital-protected stop-loss is a technique where you move the stop-loss line to your entry point to protect your capital. This is a technique you can use after the price breaks away from your cost zone and there is a certain profit margin.

Combined with the characteristics of price trend operation, generally in the latest price trend, the K-line pattern will precede the structural trend. Therefore, in the "strict entry" stage, we can generally use signal stop loss, three-line stop loss and break-even stop loss. In the "loose exit" stage, we mainly use structural point stop loss.

So the question is, how to distinguish whether the current price trend is in the "strict entry" stage or the "loose exit" stage?

The "strict entry" phase primarily refers to our entry phase. Assuming we're long, we're still in the entry phase if the first recent structural low hasn't formed after opening a position. Generally, the latest structural low is established only when the price breaks through structural high 2. In the figure, the range from structural low 1 to structural high 2 is considered the "strict entry" phase, while a breakout of structural high 2 is considered the "loose exit" phase. This shows that structural high 2 is a demarcation point.

Next, we will deepen our understanding of the “strict entry and loose exit” stop-loss technique through case review.

Enter the market to go long when the bullish engulfing line signal closes. The entry stop loss can be selected below the lowest point of the signal. Since the structural low point 1 is close to the signal, we can also choose below the structural low point 1 as the entry stop loss, which is the best choice.

When the price reaches K3, having already left our opening cost zone and showing a certain profit margin, we will consider moving the stop-loss to the opening point or adopting a three-line stop-loss, moving the stop-loss line below the lowest price of K1. This stop-loss is relatively aggressive and may easily lead to being stopped out, missing out on the future trend. However, during the "strict entry" stage, our goal is to minimize the loss of our principal.

Structural high point 2 is the dividing point between the "strict entry" stage and the "loose exit" stage. When the price breaks through the structural high point 2 and establishes the structural low point 1, which is the first and latest structural low point formed after entering the market, the price enters the "loose exit" stage. We move the stop loss point to the structural low point 3. Although the price falls back from the structural high point 3 and just touches our stop loss point to exit the market, this situation is a normal price behavior and there is no need to worry. The bullish engulfing line signal at the structural low point 4 can then re-enter the market.

Enter the market by going long on the bullish engulfing line. The entry signal stop loss is close to structure point 1. We use the relatively stable structure low point 1 as the entry stop loss.

When the price reaches K3, it has already left our entry cost area and has a certain profit margin. At this time, move the stop loss to the opening point to protect the principal or use the three-line stop loss method to move the stop loss below the lowest price of K1. This can not only ensure that the principal is not damaged, but also lock in some profit margin.

What you need to pay attention to when using the three-line stop-loss method is: if the latest three K-lines are just narrow small Yin, Yang and small star lines, there is no need to use these three K-lines as stop-loss, because it is easy to be stopped. Ideally, at least one of the three K-lines has a certain amplitude and the trading direction is in the opposite direction.

The structural high point 2 is broken through, establishing the first latest structural low point 3 after entry. At the same time, the price also enters the "wide-out" stage defined by us. At this time, the stop loss position can be moved below the structural low point 3.

After moving the stop loss to the structural low point 3, the principal is preserved and part of the profit space is locked. The future market trend is nothing more than a matter of how much profit you can make, so there is no need to follow the stop loss operation of the price trend. You only need to track and observe the price trend to determine whether the trend is reversing, whether you need to reduce your position and take profit and exit, etc.

During the "wide-out" phase, when reducing positions, taking profits, and exiting a position, we should focus primarily on key turning points and strong reversal signals. During the wide-out phase, if we trail our stop-loss closely to a structural low, we are vulnerable to being stopped out. This is because the higher the price reaches or the more volatile it is, the more likely it is that the price will break through the latest structural low, forcing us to take profits. Therefore, it is best to place your stop-loss at a key structural low that is not easily touched by the price.

Back to the gold case review, high point 4 did not break through high point 3, which may form a small M top. Low point 4 is the key position of the neckline of the small M top. Due to the small amplitude of the range, it is regarded as a secondary structural low point. When the price falls below low point 4, we can consider manually reducing positions or taking profits and exiting.

The price fell to low 5, but still did not touch our stop loss low 3, so if we still have positions, we can continue to observe the price trend. High 5 tested the resistance levels of high 3 and high 4 but did not break through. It was just a false break to form a hammer line with a long shadow, which is a strong bearish reversal signal. At this time, we go long and exit the market to take profit.

In conclusion, the "strict entry, loose exit" trading philosophy involves relatively aggressive stop-loss orders during the entry phase, which somewhat violates normal price fluctuations. However, this is done to maximize the safety of principal. Switching stop-loss orders during the exit phase is actually a way to follow the normal rhythm of price fluctuations, allowing for better capture of market trends.

The 80/20 rule in the cryptocurrency world: How to become one of the few who make money?

In the cryptocurrency world, there's a well-known "80/20 rule." This rule states that within any group of things, only a small fraction, approximately 20%, is most important, while the remaining 80%, though the majority, is secondary. In the investment world, this rule is most vividly demonstrated: 20% of investors make money, while 80% lose. So, how can one become one of the 20% who profit in this turbulent cryptocurrency market?

First, you need a deep understanding of the market. Unlike traditional investment fields, the cryptocurrency market is characterized by greater volatility and uncertainty, requiring investors to possess a higher risk tolerance and keen market insight. Before entering the market, you need to have a thorough understanding of blockchain technology, digital currency issuance mechanisms, and market trends. Only with a comprehensive understanding of the market can you remain calm and make rational decisions amidst market fluctuations.

Secondly, you need a unique investment strategy. The volatility of the cryptocurrency market presents tremendous opportunities for investors, but it also carries significant risks. To be among the few who profit, you need a unique investment strategy. Don't blindly follow the crowd or rely on rumors. You can develop a strategy that suits you by observing market sentiment, analyzing project value, and tracking capital flows. Remember, investing is a zero-sum game. Only by being smarter and more perceptive than most can you stand out.

Furthermore, you must have a firm investment conviction. In the cryptocurrency market, investors often face various temptations and challenges, such as greed during a boom and fear during a crash. These emotions can often interfere with your investment decisions and lead to misjudgments. Therefore, you must have a firm investment conviction, trust your investment strategy, and not be easily swayed by market sentiment.

Finally, keep learning and accumulating experience. The cryptocurrency market is constantly changing, with new projects and technologies emerging all the time. To gain a foothold in this market, you need to maintain a continuous learning attitude and accumulate experience. You can continuously improve your investment skills and knowledge by reading relevant books, taking online courses, and keeping up with industry trends.

In short, if you want to be among the few who make money in the cryptocurrency market, you need to have a deep understanding of the market, develop a unique investment strategy, maintain a firm investment conviction, and continue learning and accumulating experience. Only in this way can you remain invincible in the cryptocurrency market and become one of the 20% who make money.

However, it's important to remember that investing carries risks, so caution is advised when entering the market. While pursuing wealth, we must also remain rational and avoid blindly pursuing high returns while ignoring potential risks. After all, only sound investments can bring long-term returns.

Even the most diligent fisherman won't go fishing during a stormy season. Instead, he'll carefully guard his boat. This season will eventually pass, and a sunny day will always arrive! Follow me, and I'll teach you how to fish. The door to the cryptocurrency world is always open. Only by following the trend can you have a smooth life. Save this and keep it in mind!