8 Iron Rules in the Cryptocurrency World After 5 Years: The Secrets to Surviving in Contracts!

Avoid frequent trading and holding positions against the trend; a risk-reward ratio of 2:1 and a position not exceeding 10% is key.

After crawling in the contract market for 5 years, I've seen too many people turn tens of thousands into hundreds of thousands, only to be liquidated to zero within a week.

Contracts can indeed leverage small amounts into large ones, but they can also lead to quick liquidations — 90% of losses are not due to poor skills but because of falling into 'human traps' and 'rule loopholes.'

The following 8 iron rules, each accompanied by lessons learned from painful experiences of myself and those around me, can help you avoid most liquidation traps.

1. Don't rush to retaliate after a stop loss! Stop trading after consecutive stop losses.

When I first started trading contracts, the most common mistake I made was 'trying to recover immediately after a stop loss.' Once, when shorting Bitcoin, I hit the stop loss twice in a row, losing 800 USD. In a moment of heat, I thought 'the third time will definitely work,' so I leveraged my position and opened a large order, which resulted in a total liquidation, losing even my principal. Later, I found out that 78% of liquidation cases occurred in impulsive trades after consecutive stop losses.

Now I have a 'dual stop-loss circuit breaker mechanism': after two consecutive stop losses, I immediately close the trading software and spend half an hour reviewing my trades — was the trend misjudged? Or was the stop loss set incorrectly? If I can't find the problem, I stay sidelined for a day. The market is never short of opportunities; once your principal is gone, no opportunity will matter to you. Remember: stop loss is about controlling risk, not about 'failure.' Rushing to retaliate will only increase your losses.

2. Don't believe in 'get-rich-quick' nonsense! Never exceed 10% position size.

Statistics from a certain contract platform sent chills down my spine: 92% of users who trade with full margin will lose all their assets within 3 months. Newbies often treat contracts as 'ATM machines,' thinking 'going all-in on one trade will make them rich,' but leverage is a double-edged sword. With 10x leverage, a 5% fluctuation can lead to liquidation.

The worst case I’ve seen: a friend took 50,000 USD to go long on altcoins. When it rose by 5%, he felt ecstatic, and when it dropped by 5%, he panicked and held the position. As a result, he was liquidated in half an hour, leaving him with less than 1,000 USD. Now, I strictly control my position: I never open a position exceeding 5%-10% of my principal. With 50,000 USD, I only open a position of up to 5,000 USD. Even if I miss out on 10 opportunities, as long as I can avoid one liquidation, I've outperformed most people. Trading contracts is a marathon, not a sprint; only by taking it slowly can you survive.

3. Trading against the trend = going against money! Never force a one-sided market.

Last week, Bitcoin's 4-hour chart plummeted by 15%. Someone in the community shouted 'it's dropped to the bottom,' went all-in to buy the dip, and ended up being liquidated 3 times within 3 hours, crying that 'the market is unreasonable.' But is the market really unreasonable? In a one-sided market, trading against the trend is like an ant trying to stop a chariot.

There’s a golden rule for judging a one-sided market: look at the 1-hour candlestick chart. If there are 5 consecutive bullish (or bearish) candlesticks, and the moving averages are diverging (the short-term moving average is pulling away from the long-term moving average), that signals a strong trend. At this point, don’t think about 'buying the dip' or 'shorting the rebound.' Following the trend or staying sidelined is the right path. Last year, Ethereum rose from 1,800 USD to 4,000 USD; by adhering to the principle of 'not trading against the trend,' I only went long and never shorted, even during pullbacks, and I steadily made a profit of 3 times.

4. Don't trade if your risk-reward ratio is less than 2:1! Don't be a fool who 'makes small profits and takes large losses.'

Countless retail investors have a fatal flaw: they rush to take profits after making 1,000 USD but can only bear to cut losses after losing 2,000 USD. Over the long term, it results in 'making less than they lose.' The scientific trading logic is: before opening a position, you must set at least a 2:1 risk-reward ratio — for example, if you set a stop loss at 500 USD, you must set a take profit at least at 1,000 USD. If this standard isn't met, don't touch it.

I set a rule for myself: before opening the trading software, I first calculate 'how much to stop loss, how much to take profit.' If I find a risk-reward ratio of 1:1.5, I immediately scratch it off without hesitation. Last year, when I was trading the SOL contract, I initially wanted to go long at 100 USD but calculated a stop loss at 95 USD (500 USD loss) and a take profit at 105 USD (500 USD profit), which gave a risk-reward ratio of 1:1, so I decisively gave up. Later, when it retraced to 90 USD, I set a stop loss at 85 USD (500 USD loss) and a take profit at 100 USD (1,500 USD profit), which gave a risk-reward ratio of 3:1, and I entered, making a steady profit of 1,500 USD. Remember: trading isn't about 'being right often,' but rather 'earning more when right and losing less when wrong.'

5. Frequent trading = working for the exchange! Experts wait for the right timing.

Data from a leading exchange is heartbreaking: ordinary users trade an average of 6.3 times a day, while the top 10% of profitable traders only take action 2.8 times a week. When I first started trading contracts, I also loved to 'show my presence,' opening 10 orders a day, paying a lot in fees, but my principal kept decreasing. It wasn't until later that I understood: frequent trading not only wastes money but also exhausts your mentality.

The market fluctuates every day, but 90% of the fluctuations are 'invalid noise.' Experts wait for 'high certainty opportunities'—such as trend breakouts, key support and resistance levels resonating. Now, I only check the market twice a day (half an hour after opening, half an hour before closing), doing what I need to do at other times. Last year, during a 10-day sideways movement in Bitcoin, I didn't open a single position, watching others lose money. I waited for a breakout to enter and ended up making more profit from one trade than they did from ten. Remember: missing an opportunity is not regrettable; blindly entering is what’s scary.

6. You can't earn money outside of your understanding! Only trade cryptocurrencies you have thoroughly researched.

When Dogecoin surged by 300% due to a tweet from Elon Musk, someone in the group chased the trend and ended up buying at the peak, getting liquidated during the drop. They didn't lose due to luck; they lost due to a lack of understanding — how can one expect to make money without even understanding Dogecoin's market cap and distribution?

The core principle of contract trading: only trade cryptocurrencies you understand thoroughly. I currently only trade 3 cryptocurrencies: Bitcoin, Ethereum, and SOL. I've researched their volatility patterns, major players’ habits, and key levels. Even if an unfamiliar cryptocurrency rises sharply, I won’t touch it because I know: money earned by luck in the short term will eventually be lost due to skill. By sticking to my circle of competence, I can avoid the fatal trap of 'trading based on instincts.'

7. Holding positions is a step towards the abyss! Admit when you're wrong; staying alive gives you a chance.

The harsh truth of the leveraged market: holding positions = gambling your principal. Under 10x leverage, price fluctuations are amplified by 10 times, and a floating loss of 5% can turn into liquidation while holding a position. Statistics from a certain contract community show that users who hold positions consecutively 3 times have a liquidation probability as high as 91%.

I've seen the most stubborn brother: he went long on Ethereum, set a stop loss at 3,000 USD, and when it dropped to 2,900 USD, he thought 'it will rebound,' withdrew the stop loss and held the position. It eventually dropped to 2,500 USD, leading to a liquidation, losing 200,000 USD. Now, I always set a stop loss when opening a position, and once it hits, I cut it off immediately, never thinking 'just wait a bit longer.' Admitting a mistake is better; a 5% stop loss is always better than a 100% liquidation — as long as you're alive, you can earn it back on the next trade.

8. Don't get carried away after making profits! Withdraw half of your principal, treat the rest as 'game money.'

Human weaknesses are most easily exposed when making profits: after making money, one might open positions randomly or increase leverage, resulting in losses. I once suffered this myself: after making 50,000 USD, I felt 'like a god,' went all-in on an altcoin contract, and lost not only my profit but also an additional 20,000 USD within three days.

Now I have a strict rule: after every profit, immediately withdraw 50% of my principal. For example, if I make 10,000 USD, I first transfer 5,000 USD to my bank account, treating the remaining 5,000 USD as 'game money.' Even if I lose it, I won't feel bad. This way, I can lock in profits while maintaining clarity — you’ll find that when trading with 'profits,' your mindset is much steadier, and you won’t make reckless moves out of 'fear of losing your principal.'

Finally, I want to say:

Trading contracts is not gambling; it's a 'probability game with controllable risks.' The core of these 8 iron rules is simple: use rules to manage human weaknesses. Stop loss, position control, following trends, waiting for opportunities, not holding losing positions, maintaining understanding, and taking profits…

By doing this, you have already avoided 90% of loss traps.

Remember: the winners in the contract market are not those who 'predict the market most accurately' but those who 'control risks best.' Losing less means earning more, and staying alive allows you to wait for true opportunities. May you walk steadily and profitably in the contract market with these 8 iron rules.

Trading cryptocurrencies is about repeatedly doing simple things, persistently using one method over a long period until mastering it. Trading can be like other industries; practice makes perfect, and you can make every decision without overthinking.

This year marks my seventeenth year of trading cryptocurrencies. With 10,000 USD, I now support my family through trading! I can say that I've tried 80% of the methods and techniques in the market. If you want to treat trading as a second career to support your living, sometimes listening more and observing more can help you discover things outside your understanding, at least saving you 5 years of detours!

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