I have been trading cryptocurrencies for 10 years, starting with a principal of 68,000 from my job; now my assets exceed 70 million. I quit my job to trade cryptocurrencies full-time, relying solely on cryptocurrency trading to support my family, primarily focusing on spot trading, with occasional contracts. Although I didn't achieve the same results as some who turned 10,000 into two small targets, I am very content, stable, and hopeful that by the end of this year, my account can reach one target, allowing for more capital and profit next year.
If you are determined to make cryptocurrency trading your primary career, this article will serve as your stepping stone—short yet profound!
My core trading secret for stable compounding over 10 years in cryptocurrency trading.
In the cryptocurrency space, many newcomers may not know how to read the MACD indicator, and those who do understand it only a little. Few people can see the details and technical patterns clearly. As the saying goes, mastering a single skill can lead to great success. It is not difficult to master a technical method that you can understand; the challenge lies in the unwillingness to learn. Trading cryptocurrencies is for oneself, not for others. If you are willing to put in the effort to master it, trading will not be as difficult as you imagine.
Before discussing technical strategies, I strictly adhere to the following 24 iron rules that inform my trading strategy:
1. Don't go all in; divide your capital into 10 parts, and don't exceed 1 part per trade.
2. Always set a stop-loss when opening a position; set the stop-loss 3-5 points away from the transaction price.
3. Don't open positions too frequently; frequent trading can disrupt your funds and trading plan.
4. Move the stop-loss; if you've made over 3 points, adjust the stop-loss to protect your profits.
5. You must follow the trend; if you can't see the trend clearly, don't buy. It's safer to follow the trend.
6. Don't open a position when confused; if you don't understand the market, wait for confirmation before entering.
7. Buy mainstream and popular cryptocurrencies; choose actively traded coins, and avoid obscure ones with no activity.
8. Don't put all your capital into one; diversify large amounts into 2-3 cryptocurrencies, and for small amounts, stick to one.
9. Trade at market prices; don't set fixed prices for buying; following the market is more flexible.
10. Let profits fly; setting a trailing stop-loss can protect profits, so don't close positions prematurely.
11. When you profit, turn it into cash; save the portion of profit for critical moments.
12. Don't trade impulsively for staking rewards; the temptation of rewards is great, but don't buy recklessly because of it.
13. Don't lower the average cost; if you open a position at a loss, don't think about averaging down. This is a major taboo.
14. Choose the best entry points; don't trade impulsively due to impatience, only trade at key positions.
15. Don't chase small profits at the risk of big losses; small gains aren't worth the gamble, so don't risk for trivial profits.
16. Stop-loss orders cannot be canceled; if a trade is at a loss, don't change the pre-set stop-loss, and stick to the rules.
17. Don't trade all day; trading too frequently can lead to losses. Leave enough time for review.
18. You should profit from both rises and falls; go long when prices rise and short when they fall, following the trend.
19. Don't make trades based solely on price levels; low doesn't necessarily mean it's worth buying, and high doesn't necessarily mean you should sell.
20. Look for opportunities to increase or decrease positions; add to positions after breaking resistance, and clear out positions when breaking support.
21. Choose the right cryptocurrencies based on market cap; small-cap cryptocurrencies are suitable for shorting, while large-cap cryptocurrencies are suitable for going long.
22. Don't hedge losses; if the cryptocurrency you bought drops, don't sell others to cover; directly accept the loss and exit.
23. There's no reason to change direction randomly; switching between long and short positions should have a basis, and don’t act without signals.
24. Don't get inflated from trading profits; after consecutive wins, don't increase your position size. Treat every trade with equal importance.
Trading is a long-term practice. To thrive in trading, you must follow the rules and build your own trading system!
So how can you excel in cryptocurrency trading? Once a person enters the financial market, it's hard to turn back. If you are currently losing and still confused, but plan to treat cryptocurrency trading as a second career, you must understand the 'simplest MACD strategy.' Comprehending it can help you avoid many pitfalls. These are personal experiences and insights; I recommend saving them and reflecting on them repeatedly!
Bitcoin K-line MACD reference material
1. The MACD calculation is: fast exponential moving average line (EMA12) minus slow exponential moving average line (EMA26) to get the fast line DIF, and then using 2 × (fast line DIF - the 9-day weighted moving average DEA) to get the MACD bar.
2. Basic usage of MACD: The MACD indicator is formed by two lines and a bar; the fast line is DIF, the slow line is DEA, and the histogram represents MACD.
(1) MACD golden cross: DIF crosses above DEA from below, indicating a buy signal.
(2) MACD death cross: DIF crosses below DEA, indicating a sell signal.
(3) MACD turns from green to red: the MACD value changes from negative to positive, indicating a shift from bearish to bullish market.
(4) MACD turns from red to green: the MACD value changes from positive to negative, indicating a shift from bullish to bearish market.
(5) When both DIF and DEA are positive, meaning they are above the zero line, the market is in a bullish state. If DIF breaks above DEA, it can be a buy signal.
(6) When both DIF and DEA are negative, meaning they are below the zero line, the market is in a bearish state. If DIF breaks down below DEA, it can be a sell signal.
(7) When the DEA line diverges from the K line trend, it is a reversal signal.
MACD is a very practical technical indicator used by most stock traders and cryptocurrency enthusiasts, yet very few can use it effectively. In fact, if used well, MACD can successfully capture the turning points at relatively low prices. It has significant reference value in practical trading.
The MACD indicator, known in Chinese as the Exponential Moving Average Convergence Divergence, is a trend-following momentum indicator. It consists of five parts: the long-term moving average MACD, the short-term line DIF, the red energy bar (bearish), the green energy bar (bullish), and the O-axis (the dividing line between bullish and bearish). It uses the cross between the short-term moving average DIF and the long-term line MACD as a signal. The crossover signals generated by the MACD indicator are relatively lagging, but they work well for formulating corresponding trading strategies.
DIF line: the difference between the closing prices of short-term and long-term exponential moving averages
DEA line: the M-day exponential smoothing moving average line of the DIFF line
MACD trading practical skills:
1. Escape the peak with MACD divergence
Before trading cryptocurrencies, first assess the trend of the Bitcoin MACD indicator. If the MACD is moving in the same direction as Bitcoin, meaning Bitcoin is rising and MACD is also increasing, Bitcoin is in a healthy state, and you can hold your position with confidence. If the market is rising but MACD is decreasing, indicating a divergence in movement, you must sell your cryptocurrency after three divergences.
2. MACD bottom divergence to buy the dip
If Bitcoin and other coins experience a decline over a period, and you wish to buy the dip, you must first investigate whether there is any bottom divergence between the MACD movements and the price movements of Bitcoin and other coins. This means that while Bitcoin and other coins are falling, the MACD shows an upward trend. Generally, significant divergences last longer, and the first divergence does not necessarily indicate a bottom. Sometimes, there will be a further decline, which may be more severe and deeper, but the MACD will stop declining, indicating that the real bottom has arrived, and it is time to buy.
3. MACD, zero line buying method
If the MACD white line and yellow line form a golden cross above the zero line (preferably close to the zero line) or form a golden cross just below the zero line, there is a high chance that the market will strengthen, and buying can be profitable.
4. Golden cross below the zero line followed by a death cross and then another golden cross
After the DIF forms a golden cross with the DEA line below the zero line, it does not cross above the zero line or briefly crosses and then returns below the zero line, subsequently forming a death cross with the DEA. A few days later, it forms a golden cross with the DEA line again. This pattern signifies that after a downward price exploration, it is a bottom pattern, indicating a bottom rebound signal, and you can consider entering the market.
5. Golden cross below the zero line without death cross pullback reversal
The golden cross below the zero line without a death cross pullback reversal refers to the DIF forming a golden cross with the DEA line below the zero line, then not crossing above the zero line before pulling back to the DEA line. The MACD red bars shorten, but there is no death cross with the DEA, and it reverses upward again, accompanied by lengthening MACD red bars. This pattern mostly forms at the bottom, indicating that after a downward price exploration, it is the time to enter when selling pressure has been exhausted.
6. Sell on MACD divergence
If the market strengthens and the MACD white line is far from the yellow line, and both lines are far from the zero line, be cautious of a pullback. If the white line turns, it's time to get out.
7. Sell on MACD double death cross
If the cryptocurrency you hold is stuck, and the MACD white line and yellow line form a death cross with the zero line, or if they form a death cross below the zero line, or if the white and yellow lines below the zero line have not formed a golden cross, and after a slight flattening, they continue to move downward, it indicates that the cryptocurrency is in a weak position, and a significant decline is likely. You must clear out this cryptocurrency according to the 'three absolute rules': absolutely no attachment, absolutely no wishful thinking, and absolutely no heartache.
DIFF line buying pattern: aerial cable
The aerial cable pattern is defined as when the DIFF line forms a golden cross with the DEA line below the zero line, then runs above the zero line, and subsequently, as the stock price pulls back, the DIFF line also begins to pull back. When the DIFF line pulls back to the DEA line, the two lines merge into one, and when they separate again, forming a bullish divergence, it creates the aerial cable pattern. This pattern is as shown in Figure 1.
Figure 1: Aerial cable pattern
The aerial cable pattern is a strong bullish signal. When a golden cross forms below the zero line, and the DIFF line and DEA line successfully break above the zero line, it indicates that a market uptrend has formed. At this point, if the DIFF line pulls back and closely aligns with the DEA line, it shows that the market is actively accumulating momentum. Subsequently, if the DIFF line chooses to move upward, it indicates that the upward momentum is restarting, and a significant price surge is expected. Investors can actively buy when the DIFF line diverges upward.
As shown in Figure 2, on October 14, 2009, the DIFF line of Yaxing Chemical formed a golden cross with the DEA line below the zero line, after which both lines successfully broke above the zero line. This indicates that an upward market trend has begun to take shape.
Figure 2: Yaxing Chemical Daily K-line
On November 3, 2009, the DIFF line of this cryptocurrency surged and then retreated, after which it formed a bullish divergence with the DEA line above the zero line, creating an aerial cable pattern. This indicates that upward momentum is restarting, and a price surge is imminent. Investors should pay attention to this buying point.
In practice, investors should pay attention to the following two aspects:
This pattern, although rare in practice, often leads to rapid price increases once it appears, and it can even lead to consecutive surges over a period.
To grasp the buying point more accurately, investors can combine other technical analysis tools for a comprehensive judgment. In the case of Yaxing Chemical, on November 2, the cryptocurrency's K-line formed a bullish engulfing pattern above the 60-day moving average, indicating that an aerial cable pattern is about to form. Aggressive investors can buy on November 2.
Investing should be as natural as breathing.
The cryptocurrency market is unpredictable; it can only be explored based on past data to discern future trends. To analyze the cryptocurrency market well, it is crucial to study the psychology of other investors. It is well known that technical analysis in the cryptocurrency market is largely based on historical data research. If you blindly follow past patterns without understanding the underlying psychology, you are bound to stumble. In the cryptocurrency market, public psychology has become the most significant force influencing coin prices, so it is essential to study psychological analysis.
Only by relaxing your mindset and maintaining a calm mind, treating investments as naturally as our breathing, can you become a winner in the cryptocurrency space and achieve ideal results.
