Some fans reported: trading cryptocurrencies always leads to losses. Today, I will teach you step-by-step how to build your own 'anti-explosion trading system'!
The answer is actually just one sentence: you lack a complete trading system!
Don’t think this sounds like a textbook; it’s just like equipping your character in a game. Once you gather five core pieces of equipment, you can evolve from 'the chives slaughtered by the traders' to 'the cold-blooded profit-making machine'. Let's get to the core content!
1. Trading strategy: First, clarify whether you are a cheetah or a turtle.
'Going all in' is not a strategy; 'adding to losses' is gambling!
Trend following (suitable for those who are impatient): Keep an eye on BTC, ETH, and other major coins, using moving averages and MACD to determine bull markets; when the trend comes, enter directly (for example, ETH breaking $3000 with trading volume doubling).
Swing trading (suitable for those with more time): Focus on altcoins, exit after a 10%-20% rise, cut losses at a 5% drop, quick in and out (refer to the Shiba Inu project on the SOL chain).
Arbitrage hedging (suitable for tech enthusiasts): Cross-exchange arbitrage, contract and spot price difference arbitrage, earning money from market loopholes (for example, when the price difference between Coinbase and Binance suddenly widens).
Bitter lessons: In 2024, a brother went long on BTC using a trend strategy, but encountered a drastic drop due to the US raising interest rates. He stubbornly held on and ended up liquidated; strategies must match the market phase!
2. Entry signal: Don't rely on your 'feelings', pull the trigger like a sniper.
'Feeling like it will rise' is mysticism; 'condition triggered' is science! Technical indicators: RSI++ below 30 (oversold) + sudden increase in volume, go long blindly: MACD death cross + large on-chain transfers to exchanges, rush to sell.
News front: If the Federal Reserve goes dovish or a country passes a Bitcoin law, decisions must be made within 5 minutes (refer to the 2024 Salvador second BTC DCA causing a surge).
On-chain data: Whale wallet activity (for example, Vitalik's address transferring 100,000 ETH), immediately check major holders' movements on the tracking website.
Real-life case: My neighbor, Lao Wang, last year relied on the strategy of 'buying long when Coinbase's premium rate exceeds 2%', and doubled his money in three months -- simple signals repeated use are better than aimlessly analyzing!
3. Exit signals: Those who can buy are apprentices; those who can sell are masters.
'Double before you exit' is a fairy tale; 'capital preservation first' is the reality!
Hard stop-loss: If your principal loses more than 5%, even the king himself must cut losses! (Don't believe in 'averaging down', how many people thought like this before LUNA went to zero?)
Dynamic take-profit: After a 50% floating profit, move the stop-loss line to the cost price to protect subsequent gains (for example, if BTC rises from $40,000 to $60,000 and drops back to $55,000, it will automatically close).
Time stop-loss: If there is no movement after three days of buying, even if you haven't lost, exit; you can't waste capital efficiency (especially applicable to altcoins).
Counterexample warning: There was a girl who went long on ORDI+, made 80% profit but didn't sell, thinking 'I will reach $1000', but the project team dumped the price, and now she is stuck at the peak -- greed is a disease, it must be treated!
4. Position management: Don’t put all your eggs in one basket, and especially don’t drop them all on the ground!
'All in for instant wealth' is a TikTok script; 'splitting positions to control risk' is the way to survive!
Total position red line: Use at most 50% of your principal for trading, keep the other 50% in USDT to earn interest (isn’t an annualized 8% appealing?).
Maximum limit for a single cryptocurrency: No matter how optimistic you are about a coin, don’t let it exceed 20% of your total position (think about how many people went all in on SOL when FTX collapsed?).
Leverage ratio: Leverage above 10 times is suicidal; 3-5 times with stop-loss is the way (100 times leverage can gain ten times, but one liquidation can wipe you out). The mathematical truth: If you bet 2% of your principal each time, even losing 50 times won't knock you out; but if you bet 50% each time, losing just twice leaves you with only 25% -- surviving is key!
5. Risk management: You are not just preventing losses; you are preventing yourself.
Market risk is not to be feared; failing to control your actions is what truly matters!
Black Swan checklist: Think ahead about what to do if 'Musk suddenly turns bearish' or 'a hacker attacks Anan' (for example, immediately close 50% of your positions).
Emotional switch: If you have three consecutive losses, take a mandatory one-day break, uninstall the app for safety.
Environmental isolation: Don't check the community during a crash (panic is contagious), turn off price alerts (indiscriminate trading will lead to losses).
True story: During the 312 crash, some group members avoided losses by using the rule of 'automatic shutdown when falling over 30%'; a week later, they profited from the rebound - you don’t need to predict the storm, just build a safe harbor.
Conclusion: Making money relies on a system; getting rich relies on luck.
How to manage positions well:
1. Control risks from both strategy and operation.
Don't rush to buy; optimize by splitting your investments. Follow buying rules like 334, 433, etc., and enter in batches to avoid losses.
Necessary take-profit and stop-loss for opening positions: When the price shows a clear break, technical indicators form a top, or your profit from holding assets decreases significantly, or you are already facing losses, you need to take necessary protective measures. Protect profits by taking timely profits, and prevent further losses by stopping losses in time.
2. Adhere to the principle of risk diversification.
Diversify sectors and coins, control risks regarding the types of coins held. For each account, avoid holding a single coin, but also don't have too many types, which can lead to difficulties responding to sudden market changes.
Reasonably distribute long and mid-term positions; this is like deploying troops in war. Your capital is your soldiers; long-term Bitcoin or Ethereum allocation should first ensure guaranteed profit.
Other cryptocurrencies should ideally be 3-5 types. Mid-term positions should focus on current hot sectors, while short-term primarily targets speculative rapid rises. Long, mid, and short-term positions should be allocated reasonably in a 5:3:2 ratio.
3. Position risk control.
Control the position progress well. Keep the accumulation period under 30%, increase to 50% during the initial stage of a bull market, and maintain over 70% once a bull market is confirmed. Remember, never operate with full positions; otherwise, you won't be able to respond to sudden market changes.
Limit total position size; larger positions yield great returns but also carry great risk. Trading should be based on market changes; when the trend is favorable, you can take heavy positions; when the market is unstable, you should appropriately reduce positions and hold a small amount of coins for flexible operations.
4. Capital management and profit management.
Reasonable profit management is the best way to ensure you earn and take profits. We should first treat the crypto market as a cash machine, not a deposit machine; as long as you don't exit, your money is just a number. The money you earn must be realized, not just reinvested blindly. Only when you put that money in your pocket is it truly yours.
And don’t use the money you earned to keep rolling it. At least half of the profits earned should be kept in the capital account as reserves. You can also withdraw all your profits. Even if the funds in this trading account lose, you still have capital to recover.
Never roll your profits together with your principal every day; after all, no one is perfect, and mistakes can happen. One day you might face liquidation, and then you will have nothing left, not even the chance to break even.
5. How to control positions when following trades.
How to handle buying positions depends on the market situation. For example, if the current market calls for heavy positions, you must also leave some positions for risk management. This chapter is entirely about controlling short-term positions.
First, let's talk about the position control for Bitcoin futures.
Using 100X leverage, small positions of 2%-2.5%, normally controlled at 3-5%.
Liquidations in contracts are common; friends following trades must use stop-loss orders, and holding positions is strictly prohibited.
Entry points that are not far apart can be entered directly, as there may be price discrepancies on exchanges.
When the price approaches the first take-profit level for each trade, you can reduce or take profits directly.
Taking altcoins as an example:
For a single cryptocurrency, the combined total of three positions should not exceed 30%; at most, hold 3-5 cryptocurrencies, with the combined total not exceeding 70% of the overall position (normal position). For a single cryptocurrency, the combined total of three positions should not exceed 20%; at most, hold 3-5 cryptocurrencies, with the combined total not exceeding 50% of the overall position (conservative position).
Then, as an example of leverage:
10x leverage, the best is 2-3 layers of positions; exceeding 30% already begins to have risks. Larger sizes can't withstand sudden drops, making the margin of error too small. This is a summary of years of experience; don’t take it lightly.
If you increase leverage, you can simultaneously reduce positions; if you reduce positions, you can simultaneously increase leverage. This ensures you remain closely aligned with the market.
For a single cryptocurrency, the combined total of three positions should not exceed 30%; at most, hold 3-5 cryptocurrencies, with the combined total not exceeding 30% of the overall position (normal position). For a single cryptocurrency, the combined total of three positions should not exceed 20%; at most, hold 3-5 cryptocurrencies, with the combined total not exceeding 20% of the overall position (conservative position).
Margin replenishment operations.
Adding positions is an important part of normal operations.
When you buy one, you should first have a concept of how much you plan to buy in USD. For instance, if I want to buy BTC, I plan to buy $1000; if I want to buy ETH, I plan to buy $2000; if I want to buy ORDI, I plan to buy $500.
Secondly, there should be a rule for buying progress, typically a three-position system, 4.3.3 or 3.4.3 process.
If the price starts to rise during your buying process, don’t add to your position. If all three positions are in and it still drops, don’t add any more.
First, set a stop-loss. This is a must, not optional.
Two, if you have already added positions but it is still dropping, it means you made a judgment error; you can proactively reduce your positions. Wait for it to turn around before adding positions.
Three, turn around and add positions. Adding positions is not about adding more as it drops; that will make your position heavier. Instead, wait until it turns around to add positions.
Four, there are 2 types of margin replenishment:
One type is to lower costs; this type of replenishment should exit once the cost price is reached. Of course, sometimes it may drop after adding, follow the second rule.
Another type is to increase profit, also called dynamic positions. This part can be reduced according to your profit space. Exit once you reach your profit target. You can also exit based on resistance levels, first, second, third resistance levels, reducing positions in batches or all at once.
I generally consider the first position as the basic position. Of course, this is not fixed. If the market is good, the proportion can be increased; if the market is poor, the basic position should be smaller.
Five, the issue with adding large positions. It’s still an overall position planning issue. If you find that your position is accidentally too large, actively reduce it; don’t gamble!
Six, issues with transferring positions.
If we have a group of 3-5 cryptocurrencies.
If you don't want to increase your position size, you need to exit one before entering another; no exit, no entry.
If controlling positions during a downturn, always reduce the weakest position first.
If you don't want to increase your overall positions but want to buy strong cryptocurrencies, you can reduce the holdings of weak cryptocurrencies or sell the weakest ones to transfer the positions to the stronger ones.
Observe the tops and bottoms to avoid risks.
Before making a trade, check Bitcoin and see if the recent Bitcoin trend is good or bad. If Bitcoin is about to drop, everything else will likely fall. If you think today’s market is dangerous and might drop, you should reduce or clear your positions.
In a potentially peak market, people should know how to operate. Most of our losses come from this area; when trading, we must first check the Bitcoin trend to see what kind of trend it is in.
It may be at the peak or already in a downward trend. Positions should be reduced, and normal trading positions should also be reduced. As Bitcoin drops, gradually decrease long positions, ensure you keep in line with the major trend, waiting for key support or reversal signals to increase positions again.
It may be the bottom of the market, and discussing bottom fishing is unnecessary; the bottom is gradually formed. Even short-term rebounds should control positions, with proper take-profit and stop-loss unless a significant reversal signal appears.
When entering a rebound or upward trend, you can make normal trades in the early stages, but be increasingly cautious as time goes on, especially during key turning points. Gradually reduce both position size and trading frequency.
Assess the time period the market is in; this is essential for every investor's market awareness. If you can't even see if the market has risks or how significant the risks are, that indicates a lack of fundamental knowledge, which can't be explained in a few words. Such friends should go learn the basics of market observation well; Bitcoin's market is the most standard and straightforward among all cryptocurrencies.
The mentality lost during trading that you will encounter:
1. Profitability is not judged by a single trade.
As long as you learn to protect your principal, you will naturally have opportunities to make money. As the saying goes, 'As long as the green mountains remain, one does not have to worry about firewood.' In investing, as long as you protect your principal, maintain reasonable confidence, and keep a good attitude, sticking to prudent and rational trading will make success just a matter of time. In the contract market, always remember the three priorities: safety first, capital preservation first, survival first.
2. Abandon greed, discard speculation, and let go of fantasies; always maintain a calm mind.
Greed, ignoring rules, is a major investment taboo: you need logical analysis of market trends and regular pattern analysis, and market psychology insights, not gambling or guessing; don’t have too many fantasies about market conditions, trades, or profits, as the market is very realistic; unrealistic ideas can easily backfire; maintain a normal attitude toward gains and losses, especially during the learning phase.
3. Do not seek immediate results; have foresight and determination.
The principle of 'haste makes waste' is well-known; if you seek to get rich overnight and earn quick money, or if you are obsessed with leveraging small amounts for big gains, this investment mindset is wrong from the beginning. The market is a mature international market, and the price trends of contracts have logical patterns; it is fundamentally different from gambling based on luck. Therefore, the investment perspective needs to be broader, the goals clearer, and the foundation solid. Accumulate learning experiences step by step; once you have enough, success will naturally follow.
4. If you're in a bad mood or not in good shape, don’t look at the market; return to daily life to adjust yourself.
Everyone experiences emotions; a person's mood can affect their state and behavior. Therefore, when feeling down, immediate self-regulation is necessary, or simply take a break from trading to avoid increasing mistakes and creating a vicious cycle. Close all positions, completely detach from the market, return to reality, and do things you enjoy, such as listening to music, reading books, or enjoying the sun and nature; these are all good options. It’s unnecessary to dwell on past mistakes or to blame oneself continually.
After years of trading cryptocurrencies, here are 10 pieces of experience; those who follow the last piece will find freedom!
First, safety of principal is paramount. If you lose all your principal, you will never have another chance to recover. Better to earn less, but first protect your principal. Always keep some reserve.
Two, avoid frequent trading; making a few big trend trades in a year is sufficient. Greed can lead to big losses!
Three, control your emotions: 99% of people lose to their nature; fear and greed are the greatest enemies: the market rises rapidly, and people want to buy more; when it falls, they want to sell more, but truly skilled traders do the opposite.
Four: Be daring to make money in a bull market and be daring to accumulate in a bear market (DCA). In a bull market, be willing to sell; don’t always think about making that last bit of profit. In a bull market, dare to refrain from trading; don’t let market fluctuations wash you out.
Five: Layout cycles are more important than short-term predictions; if you only want to trade short-term, you'll constantly be influenced by market sentiment. However, if you can extend your focus on long-term layouts, you will find market cycles to be more regular than short-term fluctuations.
Six: Mainstream assets are the cornerstone of long-term wealth. Bitcoin and Ethereum have already undergone multiple bull market tests, and holding them long-term is more profitable than trading short-term.
More stable.
Seven: Investing in yourself is more important than investing in coins: The market is always changing; past experiences may not apply to the future. Continuously learning new knowledge is essential to survive longer in the market.
Eight: Do not touch unfamiliar coins; focus on familiar sectors to ensure you can win steadily!
Nine: When most people are optimistic, it is often when risks arise. Remember this and don’t let yourself become a bag holder!
Ten: Making money in cryptocurrency trading isn't due to good luck, but because you are more patient, more knowledgeable about the market, and better at controlling your emotions. The real 'bottom-level wealth code' isn't about one-time windfalls but about surviving long-term. When the bull market comes, you'll naturally become wealthy.
Eleven: The mindset is the most important during trading, but it is also the easiest to be influenced. It's easy to get overwhelmed. When trading heavily, cautious people often stop losses when facing significant losses, while greedy people think they won't get liquidated and hold on. When profitable, cautious people often take profits quickly, fearing a reduction in gains. Greedy people, however, don’t exit at the profit point, wanting to grab every last bit, but often end up facing a reversal. Additionally, when you have no positions, due to greed, you desperately want to enter, neglecting the analytical work done in a rational state. Skilled traders often strictly follow their trading strategies and won't rush into trades due to fear of missing out (FOMO). If you can endure holding positions in a floating loss state for several months and eventually profit, while being able to resist the urge to enter quickly after making a profit, then your mindset will have been trained to adapt to the market's fluctuations.
Twelve: Don't think you can make money every day or every moment. The real money-making operations might only take about 5 minutes; the rest of the time is flexible, and you can play games, work, or relax. Don't trade frequently; it’s meaningless. You can pay more attention to the market or monitor it, but definitely trade less. If you cannot grasp the market accurately, you can enter with a 1% position or even stay in cash while waiting for the market to stabilize.
Even the most diligent fisherman, during the stormy season, will choose to calmly guard his boat, waiting for the storm to pass; sunny days will eventually come. Follow me, I will not only give you a fish but also teach you how to fish. The door to the crypto world is always open for you. By following the trends, you can embrace a prosperous life. Keep this in mind; this is your wealth guide!
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