I have been navigating the cryptocurrency market for ten years. Looking back, with a capital of 1 million, I stepped into this unpredictable world, only to lose over 700,000 in the first three years! The despair and collapse felt like a bone-chilling wind piercing my soul in the dead of winter. Just imagine, if I had invested that million in real estate back then, I would probably have doubled my worth by now, which is quite regrettable! Even worse, my partner almost left me due to this heavy blow.
However, after enduring the pain, I did not sink into despair. After a long period of deep reflection, I vowed to rise again and fight back. Although my heart was filled with reluctance, starting from the fourth year, I resolutely used the remaining 300,000 as a new starting point, gradually accumulating profits year by year until I finally saw the light.
To this day, that initial 300,000 has transformed into over 34 million, with steady profits that are gratifying. Throughout these long years, I have compiled ten unshakeable rules and a uniquely crafted trading strategy. Today, I am willing to share these precious experiences with everyone.
Ten core suggestions for trading cryptocurrencies
1: Overcome the common pitfalls of retail investors; reverse operations can lead to profits
The common pitfall of retail investors is also evident in the cryptocurrency market: they hold onto losses while selling at the first sign of profit. They do not look at trends or trading volume, only focusing on account gains and losses, which often leads to unlimited losses and limited profits. You must trade in reverse: when in profit, hold firm and let profits run; when in slight loss, cut losses decisively. My principles for taking profits and cutting losses are: take profits at 15%, and if profits fall back to 10%, then exit; if the price continues to rise, hold to maximize profits. After buying, if the price drops, cut losses if the loss exceeds 5% of the principal. If you can ensure a profit of 10% and a loss of 5% each time, even with a win rate of only 50% over 100 trades, you can achieve a total return of 800%. The challenge lies not in the method, but in overcoming greed and fear to achieve unity of knowledge and action.
2: Pay attention to trading volume to outmaneuver most traders
I have always believed that trading volume is a crucial indicator in the cryptocurrency market; mastering it can allow one to outperform 80% of traders. If the volume is less than 50% of the usual, it indicates a significant decrease in volume. If a new high is reached in this state, it suggests that the market is highly controlled by the main players, making it unlikely to sell off. If the price is in an upward channel, the probability of profit is extremely high. If a cryptocurrency surges while the volume is less than 1 times the usual, it indicates that there is still considerable upside potential, making it highly likely to continue rising the next day. If the volume exceeds 1.5 times the usual and the price retraces after breaking an important resistance level (such as the 20-day moving average), it becomes a rare buying opportunity.
3: Holding 2-3 cryptocurrencies is optimal; streamline positions to enhance efficiency
Common pain points for retail investors: they do not hold cash when needed, rush to average down during weakness, hold too many cryptocurrencies with limited capital, and cling to hope stubbornly. If you hold more than five cryptocurrencies and most are in the red, the priority should be to reduce the quantity and sell those that have broken their trend (such as the 20-day moving average). I never hold more than four cryptocurrencies, even in a bull market.
4: Grasp the patterns of intraday fluctuations and follow the volume-price principles
The cryptocurrency market trades 24 hours a day. Do not rush to cut losses after a significant drop during the day; rebounds often follow. A large rise in the last trading session of regular trading hours usually indicates a high probability of a pullback the next day. A rise with decreasing volume can still rise; a drop with decreasing volume can still fall; a sudden rise with increasing volume indicates the formation of a top, while decreasing volume at the bottom indicates that the bottom is near. After a sudden large increase in volume, a pullback is inevitable. These rules have a success rate of up to 85% and are worth remembering.
5: Trends are king; follow the trend instead of going against it
Once a trend is established, there is no need for excessive analysis; you must follow it. Follow the flow of funds, do not speculate, predict, or hypothesize. To judge the trend, refer to moving averages: for short-term, look at the 5-day moving average; if it breaks out with volume, follow it; for medium to long-term, look at the 20-day moving average; if it breaks out with volume, enter, and exit if it breaks down.
6: Buy on divergence, sell on consensus, and seize reversal opportunities
'Divergence creates premium' is also a classic concept in the cryptocurrency market. When a strong cryptocurrency shows divergence, it is a buying point, characterized by consecutive sharp rises followed by price 'explosions' and significant volume changes. If the upward trend continues, when all investors become bullish, it becomes a selling point. To successfully do a first bearish reversal, it must meet the following conditions: 1. The cryptocurrency has risen sharply and has strong popularity and interest; 2. The first bearish drop is severe, indicating significant market divergence with low reversal expectations; 3. When a giant bearish drop occurs, there must be sufficient turnover, with positions concentrated at relatively low levels on that day to avoid concentrated selling when the reversal occurs the next day; 4. The next day, the giant bearish drop should open significantly higher or flat, indicating a reversal; 5. After the first bearish drop, the adjustment should not exceed two trading days; otherwise, enthusiasm will dissipate. Meeting these conditions results in a high success rate for reversals.
7: After making a significant profit, learn to hold cash to avoid arrogance and loss of judgment
Retail investors often become arrogant after making significant profits, and an arrogant army is bound to fail. They need to rest and regroup. Cryptocurrencies have cycles; after a big profit, it is easy to overlook the value of time. One success can boost confidence, but continuous success may lead to overconfidence and blind buying. It is only after significant losses that confidence is shaken, and trading behavior becomes distorted. Do not attempt to chase every opportunity in every sector while simultaneously pursuing multiple cryptocurrencies, as this may lead to losing everything.
8: Stay calm during difficult times; endure the challenges to welcome rebirth
When trading is not going well, it is even more important to remain calm. The difficult path is not for everyone; enduring the pain of rebirth is necessary to welcome a new beginning. When the profit effect in the cryptocurrency market appears, making money is easy; when the loss effect shows up, losing money is also easy. The key is to be brave in taking action and to know when to withdraw.
9: The original intention of choosing to trade cryptocurrencies is to break through difficulties and pursue freedom
I choose to trade cryptocurrencies because I was born ordinary and do not wish to be trapped in poverty. The unknown is not frightening; what is frightening is a life where one can see the end at a glance. Painful trading experiences are the ladder to achieving financial freedom. Although the barrier to entry in the cryptocurrency market is low, it offers opportunities to change one’s destiny.
10: Profit comes from understanding, success lies in persistence
Trading cryptocurrencies is both simple and difficult; the challenge lies in continuous learning and the unity of knowledge and action. Successful individuals are always the minority, and their success is built upon the failures of the majority. If you can succeed, remember to do something meaningful for society; whether large or small, contribute to making society better, either by giving back or by supporting your family.
1. SAR indicator: a 'lifeline' for beginners
Many investors mistakenly believe that the more complex the indicator, the more effective it is. In reality, the SAR indicator is a 'hidden master.' Its form consists of small dots that follow the price movements: when the price is above the dots, it indicates an upward trend, and when below, a downward trend. It is simple and easy to understand; you can master it in 5 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 indicates a 'bull market.' At this time, one should not rush to sell. Even if a pullback occurs along the way, as long as it does not break the SAR points, one should continue to hold. During the period when Ethereum rose from $2000 to $4000 in 2021, the SAR points were always below, enabling me to earn an additional $1 million by following the principle of 'don't sell if it doesn't break the points.'
When the price drops below the SAR points (the dots move above the K-line), it means entering a 'bear market,' and one must sell decisively. Last year, when Bitcoin dropped from $69,000 to $30,000, the SAR points were above $50,000, indicating a 'bearish trend.' I promptly liquidated, successfully avoiding the subsequent halving market.
(2) Focus on angle signals to avoid most traps
When the angle of SAR points upward exceeds 45 degrees, it indicates a strong upward momentum, and one should not sell easily. For instance, when SOL rose from $20 to $100 in 2023, the SAR points were almost vertical. Selling at that time would have meant missing out on profits.
When the angle of SAR points downward exceeds 45 degrees, it indicates a significant downward trend, and one must not try to catch the bottom. For example, during the collapse of LUNA in 2022, the SAR angle approached 90 degrees, and those who tried to catch the bottom all faced liquidation.
It is important to note that the SAR indicator may become ineffective in 'volatile markets' (the dots change back and forth). At this time, trading is not advisable; it is better to wait for the trend to clarify before taking action, as its strength lies in 'grasping trends,' not 'guessing volatility.'
2. Support and resistance levels: The key to maximizing profits
Many investors feel confused when buying and selling cryptocurrencies, not knowing when to trade. The key is to understand 'two points': support level (the price that doesn't fall) and resistance level (the price that doesn't rise).
(1) The relationship of point transformations
Once a support level is broken, it becomes a resistance level; once a resistance level is breached, it becomes a support level. For example, if a cryptocurrency fails to break through 6800 multiple times, this position becomes a 'resistance level'; later, if it falls below 6000 (support level) accompanied by heavy volume, then 6000 becomes the new resistance level. When the price rises back to 6000, it will encounter significant selling pressure and struggle to break through.
Last year, when trading FIL, I utilized this principle: FIL had three support points at $40 (it rebounded each time it fell to this level). I bought each time it reached $40 and sold at $50 (the resistance level), making a profit of 60% over three trades.
(2) Judging real and false breakouts, trading volume is key
When a resistance level is breached, the trading volume must increase (by more than twice the usual volume) for it to be a 'true breakout'; only then can one increase their positions. If there is no increase in volume, it is a 'false breakout,' and one should sell quickly. For instance, this year when BTC broke through $40,000, the trading volume was three times the usual, allowing me to increase my position and later profit when it rose above $50,000.
3. Bollinger Bands: A magical tool for grasping market direction
Sideways markets can be frustrating: when you buy, the price doesn't rise, and when you sell, it goes up. However, the Bollinger Bands can help detect major market movements in advance; it acts like a 'stretch band'—narrowing indicates an impending change, while widening shows that a trend is forming.
(1) Narrowing signal
When the price of a cryptocurrency is sideways, and the upper, middle, and lower bands of the Bollinger Bands converge into a line, it indicates that the bulls and bears are evenly matched, and a decisive outcome is imminent. At this time, do not use leverage, and do not engage in short-term trading (as transaction fees may not even be recouped); wait for a breakout before taking action. The larger the breakout movement, the stronger the subsequent trend. For instance, Bitcoin was in a sideways trend for a month in 2023, and after the Bollinger Bands narrowed, it surged by 30%.
(2) Opening signal
A high opening that starts to contract is a 'sell signal.' For example, after a cryptocurrency price rises threefold, if the Bollinger Bands reach their maximum opening and then suddenly contract, a significant drop is likely to follow. Conversely, a low opening that expands, and the price moves upward from the middle band, is a 'buy signal.' For instance, after a 50% drop, when the Bollinger Bands contract and then suddenly open, and the middle band tilts upward, the probability of a successful buy is relatively high.
It is worth noting that Bollinger Bands have a lagging characteristic (they change only after price movements), so do not use them to predict 'reversals'; use them only to judge 'whether trends will continue.'
4. Volume: Judging the true signals of the market
Many focus on the rise and fall of K-lines but ignore 'trading volume' (the red and green bars below). In reality, 90% of the 'sharp rises and falls' in the cryptocurrency market are determined by 'volume.' Price movements without volume support often indicate that the market is 'self-directed.'
(1) Four practical maxims
A high volume increase indicates a drop: when the price rises significantly (for example, by 5 times) and the volume suddenly increases (bars are three times higher than usual), regardless of how attractive the K-line patterns appear, one should sell quickly, as this may indicate that the main players are selling off.
A low volume increase is a buying opportunity: when the price has fallen significantly (for example, by 70%), if the volume suddenly increases and does not reach a new low, it indicates that funds are entering, and one can buy in increments. When Bitcoin dropped to $15,000 in 2022, I increased my position and made threefold profits.
A price increase without volume is a 'trap': the price rises but the trading volume does not increase (the bars remain short), which may indicate that the market is 'self-pulling'. The price may rise quickly and fall quickly, so do not chase after it.
Be cautious of volume-price divergence: if the price reaches a new high but the trading volume is lower than the last peak (bars become shorter), it indicates 'insufficient buying power' and should prompt a sale. For example, when Bitcoin rose to $69,000 in 2021, the volume was lower than the previous high, and I avoided the crash by selling.
5. 'Fool's Trading Method': Newbies 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 SAR, only go long; if below, only go short.
Use support/resistance levels to find entry points: buy near support levels when SAR is below; sell near resistance levels when SAR is above.
Use Bollinger Bands to wait for opportunities: when in sideways trends, wait for a breakout; during trends, follow the direction of the opening.
Use volume to verify authenticity: check trading volume before buying; if it hasn’t increased, abandon the trade and act only after volume increases.
I applied this method last year in SOL, executing 4 trades, each yielding a profit of 15%-30%, doubling my investment overall. Complex indicators only lead to hesitation; simple rules enable decisive action. From liquidation to doubling my investment, my greatest insight is that the cryptocurrency market never lacks opportunities; what it lacks is 'practical methods.' Tools like SAR, support and resistance levels, Bollinger Bands, and volume may seem simple, but they can help avoid most traps. As long as you master these simple techniques and strictly adhere to them, even beginners can find success in the cryptocurrency market.
In cryptocurrency investment, many people often fall into the trap of losses, either due to blindly following trends or lacking effective analytical methods. In fact, investing in cryptocurrencies is not out of reach. By mastering some simple and practical technical indicators and practical skills, even beginners can gain something in the market. This article will introduce you to four 'fool-proof' technical indicators and a set of 'fool's trading methods' to help you avoid traps and seize opportunities in cryptocurrency investment.
I am the Senior Brother, sharing valuable content for friends in the cryptocurrency space every day! If you are also a tech enthusiast researching cryptocurrency technical analysis and trading strategies, I will update real-time learning exchanges in the future, helping you clarify market directions and strategies in advance. No matter the market style, being able to gain insights early allows you to grasp opportunities steadily!
Feel free to follow me @加密大师兄888 , and give me a thumbs up with your wealth-generating hands 👍