In the cryptocurrency world, one day is equal to a year in the stock market. Those who engage in cryptocurrency trading will no longer have any interest in stock trading. The all-day trading and unlimited price fluctuations in cryptocurrency fulfill many people's dreams of getting rich overnight. This is also one of the reasons why virtual currencies are so popular, making losses in the cryptocurrency world a very normal phenomenon.
Every investor who comes to the cryptocurrency world will experience significant losses, bankruptcy, and the transition from profit to loss in their trading career. In the vast army of cryptocurrency trading, only one type of person can get rich: those who have experienced bankruptcy and then summarize their experiences with a great mentality.
Without experiencing a catastrophic loss, one will never understand what a stop-loss means; without experiencing profits turning into losses, one can never appreciate the mindset shift from heaven to hell.
1. Survival is the first principle
Sun Tzu said: Those who are good at warfare first make themselves invincible and then wait for the enemy to be vulnerable. Avoiding significant losses is simple: make survival your top priority. When a danger arises that threatens this principle, abandon all other principles. Because no matter how many 100% excellent performances you have had in the past, if you lose 100%, you will have nothing. Once your capital is wiped out, you are doomed to be eliminated. If you want to play this game well and achieve ultimate victory, all systems and rules must prioritize the preservation of capital.
2. Proper capital management:
Every success will only take you a small step forward, but a single failure can take you a big step back. This big step hinders the accumulation of capital, which requires opportunities and time. Human nature is always like this: the pain of losing 1,000 yuan is far greater than the joy of gaining 1,000 yuan. A significant loss of funds can easily affect an investor's mindset. A loss of 1 million becomes 500,000, while increasing 500,000 to 1 million requires a 100% profit. It takes an hour to walk from the first floor of the Empire State Building to the top, but it only takes 30 seconds to jump from the roof and return to the ground.
You cannot control the direction of the market, so do not waste your energy and emotions on situations you cannot control. Do not worry about what changes the market will undergo, but rather about how you will respond to the market's changes. It is not important to judge right or wrong; what matters is how much profit you gain when you are right and how much loss you can withstand when you are wrong. I often see many people in the market haggling over the price of a piece of clothing for a long time or shopping for half a day, while the investors think about their buying decisions for no more than a few minutes. This is a common trait among many people and is not what someone who wants to make a significant impact in the investment market should do. To earn big money in the market, investors must be cautious and carefully protect their accounts.
When entering the market, have a clear operational system:
(1) How much do I plan to earn in this market wave?
(2) What is the maximum loss I can accept? If the market retraces, I must exit immediately when I incur losses.
(3) Every time I make a profit, I must secure a portion of it.
(4) Gradually increase your positions to avoid full-margin trading, and continuously raise the profit stop-loss level as profits increase, ensuring that the profits already gained do not turn into losses; (5) Always give yourself another chance to trade and strictly operate according to your trading system.
3. The trend is the best friend
The biggest enemy in trading is the impatience to wait for clear market trends and overtrading. A bull market does not end in a day, nor does a bear market. Trading in the cryptocurrency world is like a place that can go three years without opening and then eat for three years once opened. As long as you have patience, wait for the clear market trends to arrive, find the leading stocks, and hold on until the end of the bull market without over-trading, you can achieve unexpected profits.
When a trend comes, respond to it and follow it. When there is no trend, observe it and remain calm.
Overtrading is also a major enemy of investing. Those who engage in arbitrage trading can only earn a small profit and cannot make big money. Let's calculate the transaction fees incurred from overtrading: current virtual currency exchanges charge a 0.2% fee for buying and selling. Completing a transaction costs 0.4%. If a trader operates once a day, over a year, this trader loses 4/1000 * 365 = 140% due to transaction fees. You are not mistaken; it is 1.4 times. Think about it; Buffett strives for 30%, and what about you? Your annual transaction fees are 140%; there is another trader who often overlooks this.
The more frequently a person enters and exits the market, the more easily they change their mind. As the saying goes: do more and you will make more mistakes, do less and you will make fewer mistakes. Not doing anything means not making mistakes, but excessive trading can also cause you to miss out on major market movements.
Plan before acting. Based on the obvious price breakpoints, market sentiment, trading conditions, and capital inflow, determine the arrival of the trend. Maintain a broad perspective on market trends and do not be deceived by short-term fluctuations.
4. Psychological quality is the core
Cryptocurrency trading goes against human nature; it is a game that determines that only a few people can profit, while the vast majority only provide capital to play.
In trading, one must have strong psychological qualities and must possess a mindset and perspective that can withstand catastrophic losses. If you enter the market with 10,000 yuan and your heart races for a mere fluctuation of 100 yuan, I advise you to leave the market early; this also ensures your personal safety.
If you have the mentality to earn 100 million, then fluctuations within 1 million will not affect your mindset because what I ultimately want is 100 million; 1 million is not within my consideration range. Only then do you have the opportunity for significant profits.
Trading is not just about competing against large institutions, speculators, and retail investors; it is also about competing against oneself. As the ancients said: competing with heaven is enjoyable, competing with the earth is enjoyable, and the highest realm of struggle is competing against oneself. Trading cryptocurrency is a constant psychological struggle where you continuously question yourself: should I sell at this price or hold? What should I do? This is a psychological game that requires strong psychological qualities. Additionally, maintaining good physical health is crucial. Why do people live? People live to have a healthy body and to continuously refine their souls in this world.
5. A trading path suitable for oneself
The path represents the logic of things, while the technique represents the methods and ways.
As the saying goes:
Having a method without a principle is still possible; having a principle without a method leads to problems.
The birth of a trading path represents the combination of a person's knowledge, insight, and courage. Through the constant ups and downs in the market, one ultimately grasps the basic logic of trading, which is in accordance with the laws.
The biggest enemies of investors are: hope, fear, and greed. Having your own trading path also requires overcoming human weaknesses: hope, fear, and greed.
At the moment when the market is about to decline, when one should be filled with fear, investors feel that there is still hope.
When the market is rising, fearing a pullback, one should be filled with the greatest hope in the world, but instead becomes full of fear. This is why traders cannot make significant profits.
Having your own trading path and forming a trading system helps you overcome human weaknesses. When the market comes, let the profits run, and when losses occur, let yourself exit with a stop-loss. This is fundamental for someone to obtain great wealth.
I am Mu Qing, having experienced multiple cycles of bull and bear markets in cryptocurrency. I entered the industry three years ago, mastered it in five years, and dominated it for ten years. I possess rich trading experience in various areas of the cryptocurrency field. Follow Xiao Yan to cut through the fog of information and gain insight into the real cryptocurrency market. Seize more opportunities for wealth growth and discover truly promising cryptocurrencies. Don't miss good opportunities!