After 8 years of trading coins, I blew up 3 times in the first 3 years while trading contracts, losing up to 500,000 in a week at most. Later, relying on a 'trend + position + discipline' iron triangle strategy, I not only recovered my losses but now earn a stable profit of around 200,000 each month.
Many people think trading contracts is like gambling, but they simply don’t understand its essence — contracts are not for betting on direction; rather, they are tools to amplify 'certain opportunities' with leverage. Today, I will break down this contract strategy I have practiced for 5 years; even beginners can avoid 80% of the pitfalls by following it.
1. Trading targets: Focus only on 'the two giants', reject flashy options.
The first principle of contract trading: liquidity is more important than price increase. This is a lesson I learned after being liquidated twice.
Only trade BTC and ETH: These two cryptocurrencies account for over 70% of the entire crypto market value, with extremely high liquidity; even with 100x leverage, you can easily close positions without being 'caught' by the market makers.
Why not trade altcoins: In 2021, I once traded SOL contracts; the volatility was high, but one night when I wanted to close the position, there were only 5 BTC buy orders in the entire market, and I watched the price drop by 20% before I sold, resulting in a liquidation. Altcoins have poor depth and clear market control; trading contracts with them is just giving away money.
Practical advice: Hide all other coins in the trading software and only keep BTC/USDT and ETH/USDT perpetual contracts to reduce distractions.
2. Long strategy: Confirm with 3 signals; do not be a 'bag holder'.
The most feared situation when going long in contracts is chasing highs; I use 'support level + moving average + trading volume' as a three-fold filter, which can raise my win rate to over 60%.
1. Find support levels: Look at 'previous lows + low points'.
Effective support levels must meet two conditions: 1) There have been more than two instances of price stopping at this level (for example, BTC rebounding twice at $30,000); 2) Recently there has been a 'lower wick' (price briefly dipping below before quickly pulling back, indicating there is capital bottom-fishing).
Example: In March 2024, BTC had a downward wick at $40,000, with the low point at 39,500, and this position also had previous support in February, making it a qualified support level.
2. Wait for the moving average to pull back: MA30 is a 'safety belt'.
In an uptrend, prices won’t just keep rising; they will always pull back to the moving average. MA30 (30-period moving average) is a magical line; if the trend isn’t broken, after a pullback, it’s likely to continue rising.
Operation: When BTC pulls back near MA30 and hasn’t broken the previously identified support level, that’s the first long signal.
3. Volume verification: decrease in volume during pullbacks followed by increase in volume.
During pullbacks, trading volume should shrink (indicating few sell orders), and when rising again, trading volume should expand (buy orders coming in); only such signals are reliable.
Counterexample: In November 2023, ETH tested MA30, but the trading volume kept shrinking, later breaking the support level; in this situation, you shouldn’t trade.
Opening position steps:
Near support level + MA30, initially open 30% position.
If the price stabilizes at the support level and the trading volume increases, then add 30%.
Set stop loss 1% below the low point (for example, if the low is 39500, set stop loss at 39100).
3. Short strategy: Catch 'resistance levels + moving average pressure', don’t guess the top.
Shorting tests patience more than going long; I only go short under 'dual pressure', better to miss an opportunity than to make a mistake.
1. Confirm resistance level: previous high + high point.
Contrary to support levels, resistance levels need to have more than two instances of price rising before falling back, and there should be 'upper wicks' (price quickly falling after spiking high, indicating funds are being offloaded).
Example: In May 2024, ETH had an upward wick at $3000, with the high point at 3050, and it also pulled back here in April, making it an effective resistance level.
2. Moving average pressure: MA60 is a 'high pressure line'.
In a downtrend, MA60 will become a strong resistance level; every time it rebounds to this level, it gets pushed down.
Operation: When ETH rebounds near MA60 and touches the previous resistance level, that’s the first short signal.
Opening position steps:
Near resistance level + MA60, initially open 30% position.
If the price falls below the recent small support (like the previous pullback low), then add 30%.
Set stop loss 1% above the high point (for example, if the high is 3050, set stop loss at 3080).
4. Capital management: The core of survival is more important than technology.
I’ve seen too many technically skilled people fail due to poor position management. These 3 rules are my 'lifelines':
1. Leverage choice: Never touch 100x.
Using 5-10x leverage for BTC/ETH is enough; anything above 20x is considered gambling. In 2022, I used 50x leverage for BTC, and a small fluctuation led to liquidation; later I reduced it to 5x, which was much more stable.
Principle: The greater the volatility, the lower the leverage. For example, use 10x leverage if BTC's volatility is within 5%, and 5x if it exceeds 5%.
2. Stop loss iron rule: If you lose 10% in one day, stop trading.
Single stop loss should not exceed 2% of capital (for example, with a capital of 100,000, a single loss can be a maximum of 2,000).
If cumulative losses reach 10% in one day, immediately close the software; even if there’s a big opportunity later, don’t trade. Once I lost 10% for 3 consecutive days and stopped; on the 4th day, there was indeed a big market movement, but I saved my capital to seize the opportunity.
3. Position allocation: 'Three-thirds system', never fully invested.
Total position should never exceed 60%, divided into 3 batches (20% each time).
Only increase your position after making a profit; never average down when in loss (averaging down is just increasing your losses).
5. Take profit techniques: Let profits fly, but don’t let them fly away.
If you make money on contracts but can’t hold it, it’s equivalent to doing it for nothing. I use 'trailing take profit' to lock in profits, allowing me to take advantage of big market movements without riding a roller coaster.
1. Break-even take profit: First, get back your capital.
When going long, if profit reaches 2% of the opening price, adjust the stop loss to the opening price (for example, if opening long at 40,000 and rising to 40,800, set stop loss at 40,000).
This way, regardless of how much it drops later, at worst you won't gain or lose, and your mindset will be stable.
2. Partial take profit: Do not pursue selling at the highest point.
When profit reaches 5%, take profit on 30% of your position.
When profit reaches 10%, take profit on another 30%.
Use the remaining 40% for a trailing stop (for example, move stop loss up 3% for every 5% increase).
Case study: In April 2024, I went long BTC from 40,000 to 42,000 (5%) and took profit on 30%, then increased to 44,000 (10%) and took profit on another 30%, leaving the remaining 40% with a stop loss at 42,000, and finally rose to 48,000, gaining 8,000 points in profit.
6. Responding to extreme market conditions: Learn to 'lie flat', don’t operate randomly.
In the crypto circle, there are often sudden market movements (like Fed interest rate hikes or regulatory policies); during these times, follow this set of rules:
When crashing: Regardless of long or short positions, first close 50% of your position, and set a break-even stop loss on the rest. During the LUNA crash in 2022, I did just that and only lost 5%, while many others were completely liquidated.
During a surge: Immediately stop loss on short positions, don’t chase long positions; wait for a pullback to MA30 before reassessing, as pullbacks after surges are often severe.
When consolidating: Reduce position to within 20%, quick in and out, take profit at 3-5% and run, don’t be greedy.
In the end: The core of making money in contracts is not technology, but discipline.
I’ve seen the most powerful traders; their skills aren’t top-notch, but they can strictly execute strategies. Remember these 3 sentences:
Opportunities are always there; if you lose your capital, it's really gone.
Don’t trade in markets you don’t understand, and don’t place orders after midnight (staying up late can lead to impulsive decisions).
Spend 10 minutes every day reviewing, see where you violated the strategy; it’s more useful than staring at the screen for 10 hours.
I’ve used this strategy for 5 years, turning losses into stable profits, relying on 'doing simple things repeatedly and doing repeated things seriously'. Save it for next time before trading contracts; slowly you will realize that earning steadily feels more secure than making big profits.
Follow me, next week I will share the specific steps on 'How to trade contracts with $1,000 and turn it into $10,000 in six months'; even beginners can copy the homework!
