Hello coin friends, I am Awen.
Friends who trade contracts should have heard a saying: the analysis is perfect, but the execution is a mess. After trading for a while, you should find that analysis and trading are two different things. Do a good analysis before opening an order, but when holding a position, there will be various unexpected situations that affect your original judgment. It may be that the direction or rhythm of the market itself has changed, causing the market to go against expectations or move slower than expected, repeatedly tormenting people. It is also possible that the market is still going as expected, but sudden news or the opinions of other traders affect their trading views. So how do we prevent these situations in actual combat, or how do we deal with emergencies?
Trading practice is a course that a trader can't finish learning in a lifetime, so in this brief sharing, I can only give a few very typical links or scenarios that newcomers are most likely to be confused about for analysis.
I. Selection of Objectives
Choose good coins and be a good person. As a leveraged trader, volatility can be amplified by leverage. The primary consideration during the trading process is not volatility but certainty.
1.1 Leveraged trading should not choose the currency with the strongest volatility, but choose the target that is easiest to grasp the law. Of course, these two do not conflict. If you find a currency with large volatility and easy to grasp the law, that is the best.
For example, EOS. EOS is a coin that contract retail investors like to play with because it has large fluctuations and sufficient wealth effect. But EOS is only good to trade when there is a one-way market because it has a strong trend. Once it starts, it will not look back. Most of the time, EOS is in a state that is difficult to grasp. Participating in trading when EOS fluctuates irregularly will only cause a double loss of money and mentality.
1.2 Select the currency type according to the market and trading direction.
Go long on strong coins in an upward market, and vice versa, short the weakest coins in a downward market.
For example, at the beginning of the new quarter, the strongest gains are EOS and ETH. The first choice for buying back is these two currencies. The first choice for shorting when the price falls is Bitcoin. Even if the final result is that the decline of mainstream currencies is greater than that of Bitcoin, only shorting or chasing Bitcoin can greatly avoid the risk of violent counter-pumping.
II. Opening a Position
Most people in the currency circle are short-term traders. When trading, it is difficult to have the opportunity to stick to the ideal point to close the position. At the same time, they are not very proficient in position control, and they can't rely on the shock to make up the position to pull the average price. Based on this situation, for most traders, a good opening price is better than everything.
2.1 Wait
An old saying, wait a little longer. According to the current market, what you can wait for are good positions, and those who get on the market price are in awkward positions. If you are doing short-term market, even under the current slow pace, a short-term opening price with a considerable profit-loss ratio will inevitably appear within 2-3 days. If you wait a little longer, you will definitely earn the safest and most comfortable money. On the contrary, many people are impatient to chase ups and downs. The current market is moving very slowly. If you get on the market price and are trapped, most of the time you are waiting to get out of the trap, which not only affects your mentality but also affects your life.
2.2 Abandon uncomfortable orders
After opening a position, if the market is not going smoothly, you can drop it first and pick it up again when you get a chance. Some people have 'attachment' to the positions in their hands. Once they open a position, they have to be responsible to the end and keep watching the market until they make a profit. This is wrong. It is wrong in two points. First, the expectation of guaranteed profit is wrong. It is impossible to make 100% money by opening an order. Be prepared to stop the loss or exit at the same price. Second, Bitcoin is 7*24 non-stop, but we can't sleep 7*24 hours. The difference between currency circle traders and traditional futures traders is that we have to learn to save our energy. If it has been a long time since opening a position and it is still at a standstill, with an unclear direction, and you don't have enough energy to wait for the moment when the market breaks out, then give up the position and have a good rest.
2.3 Think twice before opening orders with a mobile APP
The mobile APP of each exchange is very convenient and has a very smooth experience, but think twice before opening orders with the APP. Trading is a serious matter. The mistake that many traders make is that they glanced at the chart on the APP and thought it was 'almost' and then started trading. But if you take the computer and mobile phone charts out for comparison, you will find that the same chart gives people different visual feelings on different sizes of screens. Mobile phone charts are more likely to give people the illusion that 'the increase is a bit too much' and 'the drop is almost there'. Opening positions based on mobile phone charts is likely to open in an up-and-down position.
2.4 Do not follow the crowd to open positions
Many people have encountered this situation: someone is calling orders in a group chat. Why is this happening? There are several possibilities. First, this person does have unique insights. Second, after opening a position, someone is in a state of tension, excitement, and anxiety and needs to shout to gather courage. Don't think I'm kidding. In reality, when someone encounters great pressure, they will find an open space to shout to relieve their emotions. The trading process is the same. Some traders are in a state of tension for a long time and will use this method to 'shout' to embolden themselves.
So when you encounter someone calling an order, don't follow directly, but ask for the logic and have your own judgment.
2.5 What if I have made a wrong decision?
The above points can only be regarded as general principles. Everyone understands the principles, but in special scenarios, it is still possible to nervously or blindly open a wrong order, and then realize afterwards that the emotion at that time guided oneself to make an irrational decision. That's okay, lose a little handling fee, close the position first.
Those who can buy are apprentices, and those who can sell are masters. Most of us can only be apprentices in our lives, so let's restrain ourselves to be good apprentices, be extremely cautious when opening a position, and then look at the vision and luck when taking profit.
III. Holding a Position
There are too many influencing factors during the position holding process, I will not list them one by one, but only pick out a few points that I think are the most important.
3.1 Use the 'Take Profit and Stop Loss' function instead of manual stop loss
This is a lesson summarized by countless traders with thousands of blood and tears. Do not carry orders, do not test human nature. Many people like to watch the market to stop losses. At the beginning, there is an expected stop loss position, but once the market reaches that position, they have a fluke mentality and are reluctant to stop the loss. The best result is of course to carry it back, with no danger. What about the worst result? Naturally, the hole is getting bigger and bigger, causing several times the loss. Therefore, please use programs instead of manual labor and use programs to restrain human nature.
3.2 No loss is a gain
Once there is a profit, take a part first, lock in the profit, and set a cost price stop loss for the other part. This is what I have been emphasizing in my own community.
The way of trading is to accumulate small things into more, and compound interest is king. If you are away from the cost, you must not become a loss again. If you have a profit, you must take a part to prevent working in vain. To summarize it in one sentence: With a profit, take a bold walk, and the rest is the original price loss.
Being able to see the trend correctly to make a profit on a single order is strength, but how much this order can eventually earn depends on luck. So I suggest you first take the part of the reward you get with strength, and the rest depends on whether the market gives you face.
3.3 A small loss is also a gain
Capital accumulation is moving in the direction of increasing capital. Expanding profits is increasing capital, and reducing losses is also the direction of increasing capital.
This section is actually specifically used to answer a question that a trading newbie often asks: what should I do if I am trapped in opening a long/short position?
There are countless kinds of 'being trapped' scenarios based on different markets and different opening prices, but the only solution I think is: stop the loss at the market price or stop the loss on the rebound/fall back. Don't care where to rebound/fall back, as long as you can lose a little less, it is more gain.
Some people worry that after cutting the meat, the price will rise/fall back. It is of course the best situation to rise/fall back, but the fact is that if the loss expands, the consequences cannot be tolerated. Therefore, abandon the fluke mentality and be cruel to yourself.
3.4 Don't look at news when holding positions
When you have a position, if the concentration is not good, do not deeply participate in group chats or brush Weibo, etc. The order calls in the group, the various gossip news, can always affect your current position. The original holding position for most people is out of a state of high tension, all kinds of external influences are easy to deviate from their own views. Holding positions without looking at news will reduce many troubles.
IV. Position Size
4.1 How much leverage corresponds to how little stop loss
I personally use a very high leverage, but correspondingly, the stop loss is very low.
For example, with the same principal, a 5x leverage with a $200 stop loss, and a 10x leverage with a $100 stop loss, the money lost is the same when the stop loss is actually triggered.
Leverage is not a devil, controlling stop loss is the key.
What point is the most suitable for setting stop loss and take profit?
Regarding take profit and stop loss, I just talked about some when I talked about position size. First, let's talk about stop loss. This depends on the specific position size. If the position is small, the stop loss can be set relatively wide. When the position is large, the stop loss must be small, especially when your stop loss will lose more than 10% of your principal, you must reflect on whether this transaction is wrong. Generally, we set stop losses to consider the technical aspects, and we will stop losses when it falls below the support level or rises above the pressure level. But when the position is too large, we can't only take care of the technical aspects, we should also consider whether a single stop loss will lose too much principal. In other words, it will be more hurtful to lose 30% of the principal, so I think the stop loss pays more attention to this. Take profit is still that sentence, profitable bold walk, the remaining original price loss, making money into the bag is right, the rest depends on whether the market gives face.
4.2 A single loss of more than 30% of the overall position is a serious matter
From my personal observation, a single loss of more than 30% of the total assets is a serious matter. It takes a lot of effort to recover the principal later. Therefore, when setting a stop loss, you need to ensure that a single loss does not exceed 10% of the total position.
If the position has reached 90% and is about to be liquidated, should you stop the loss or let it be liquidated?
The suggestion is to cut it, cut it immediately. I often tell others a joke, cut it, withdraw money and eat something good. In fact, in the case of being about to be liquidated, we should not consider the problem of the market, but the problem of psychological construction next. I ask a question in return, suppose you are liquidated, there is no money in your account, what will you do? Exit the market? Surrendering to reality is also a hero, but most people will not, but will choose to recharge off-site, which is a big taboo in contracts. If you keep recharging and keep being liquidated, I won't mention the consequences anymore, you have all heard of living examples around you. Suppose you still have a part of the position left in the field, then no matter how much or how little money there is, you can make the next plan. So the reason why I suggest cutting the meat when it is about to be liquidated is not really to let you withdraw money and eat something good, but I suggest you keep the fire first and prevent you from rushing to get money from off-site after you are liquidated again, the consequences of which are very serious, all bloody lessons.
4.3 Within a certain capital range, try to use simple interest operation instead of compound interest rolling position
Simple interest operation refers to opening the same size position as last time, no matter how much your funds have increased. If you have a principal of 1000, open a position of 3000 at the beginning. When you have a principal of 2000, it is best to open only 3000, instead of compound interest rolling positions.
Why? Assuming that the profit and loss ratio of each transaction is fixed, the simple interest operation can make money as long as you ensure that the number of correct times is more than the number of wrong times. In the case of compound interest rolling positions, ten correct times and one wrong time may result in a complete loss.
So my suggestion is to use the same position within a certain range of funds. After the amount of funds increases rapidly, increase the position.
V. Psychological Preparation
If the previous points are general principles, then this point must be the most worthwhile thing in this sharing.
Contract trading values trend over price. What does it mean? That is, value the trend and do not have too strong a memory of the current price to prevent being unable to reverse in time when the trend comes.
This involves a term: price anchoring. Price anchoring refers to: the past price affects our judgment of the current price.
For example, this year's first half of the rise liquidated many people who shorted. Because the end of 18 years of Bitcoin lingered around 3000-4000 for a long time, people have a memory of the price of 3000-4000, when Bitcoin rose to 5000-6000, some people can not accept the current price, that Bitcoin is 'expensive', so short. The same reason, after the second half of the fall from near 14000, there are countless people near 10000 bottoming, because relative to 14000, 10000 this price has been regarded as 'cheap'.
Retail investors will make many mistakes because of price anchoring, such as being 'afraid of heights' and not daring to chase highs when the trend is rising, and even retaliatory 'shorting', repeated bottom-fishing in a falling market, etc.
Market makers will also use this anchoring psychology to ship goods. For example, last year's EOS violently rose to more than 20 US dollars, leaving the market's memory at 20 US dollars, and then all the way down, making people think that the price is 'cheap' and they can bottom. Finally, all the goods were shipped between 15-20 US dollars.
Back to the sentence 'value trend over price'. Compared to price, we should value the trend more. When the trend changes, we need to clear our minds in time and follow the trend. For example, many people are bottoming near 10000 this time. In fact, there is no error in trading, and the profit-loss ratio is still reasonable. But once it falls below 9000, we must accept this fact and make good use of the opportunity to short the rebound. The same reason, in case there is a strong rise in this position, breaking through the key position, we should consider turning to embrace the multi-party.
Always clear your mind, eliminate price memory, and be a calm observer. Only then can you embrace the trend when it comes. Otherwise, you may end up revenge trading (buying/selling).
Every decision you make on your investment journey is very important, and it can even change your success trajectory and determine the success or failure of your life. What kind of people you are with will have what kind of life. If you are with diligent people, you will not be lazy; if you are with positive people, you will not be depressed; if you walk with wise people, you will be extraordinary; if you associate with experts, you can reach the peak.
