In the cryptocurrency world, one day is equivalent to one 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 the unrestricted price fluctuations 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, liquidation, and the journey from profit to loss. In the army of cryptocurrency traders, only one type of person can get rich, which is someone who has experienced bankruptcy, summarized their experiences, and has a strong mindset.
Without experiencing liquidation or significant losses, one will never understand what stop-loss means; without experiencing profit turning to loss, one will never appreciate the mindset shift from heaven to earth.
One, survival is the first principle.
Sun Tzu said: The good warrior of the past first makes himself invincible, and then waits for the enemy to become vulnerable. It is simple to avoid major losses: survival is the first principle. When danger arises that hinders this principle, abandon all other principles. No matter how many 100% excellent performances you have had in the past, as long as you lose one 100%, you will have nothing. Once your capital is eliminated, it is destined for you to be eliminated. To play well in this game and achieve ultimate victory, all systems and rules must prioritize preserving the principal.
Two, correct capital management:
Every success only allows you to take a small step forward, but a single failure can make you take 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 far outweighs the joy of gaining 1,000 yuan. A significant loss of capital can easily affect an investor's mindset. A loss of 1 million with a 50% decline 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 a jump from the roof only takes 30 seconds to return to the ground.
You cannot control the direction of the market, so there is no need to waste energy and emotions on situations you cannot control. Don’t worry about how the market will change; worry about what strategies you will take to respond to the market changes. It doesn’t matter whether you are right or wrong; what matters is how much profit you gain when you are right and how much loss you can bear when you are wrong. I often see many people in market crowds haggling for the price of a piece of clothing for a long time or shopping for half a day, while investors think about buying for no more than a few minutes. This is a common trait among many people, and it is certainly not the behavior of someone who wants to achieve great success in the investment market. To make big money in the market, investors must be cautious and guard their accounts as if walking on thin ice.
There is a clear operational system when entering the market.
(1) How much do I plan to earn in this market trend?
(2) What is the maximum loss I can accept? If the market retraces, how much loss must I exit immediately?
(3) I must secure a portion of the profit from each operation.
(4) Gradually increase positions to avoid full warehouse trading. As profits rise, continuously raise the profit stop-loss level, and never let the profits you have turn into losses; (5) Always give yourself another chance to trade, operating strictly according to your trading system.
Three, the trend is the best friend.
The biggest enemy in trading is waiting patiently for a clear market trend and over-trading. A bull market doesn't end in a day, nor does a bear market. The cryptocurrency trading market is one I’ve seen where you could go three years without any trades and then make profits for three years. As long as you have patience, wait for the market trend to become clear, find the leading stocks, and hold on until the end of the bull market without over-trading, you can achieve unexpected profits.
When the trend comes, respond and follow it. When there is no trend, observe and remain calm.
Over-trading is also a major enemy of investment. Those traders who chase price differences can only earn a little sweet profit but cannot make big money. Let’s calculate the trading fees for over-trading: Nowadays, virtual currency exchanges charge a transaction fee of 0.2% for both buying and selling, which totals to 0.4% for one transaction. If a trader operates once a day for a year (365 days), then due to transaction fees, this trader loses 4/1000 * 365 = 140%. You might not see it as 1.4 times; think about it, Buffett is still working hard for 30%, but your trading fees for a year are 140%.
The more frequently a person enters and exits the market, the more they are likely to frequently change their mind. The more you do, the more mistakes you make; the less you do, the fewer mistakes you make; not doing anything means no mistakes, yet excessive trading can lead to missing out on major market movements.
Plan before acting. Based on the obvious price thresholds, market sentiment, trading conditions, and capital inflow, determine the arrival of a trend. Maintain a broad perspective on market trends and do not be misled by short-term fluctuations.
Four, psychological quality is the core.
Cryptocurrency trading goes against human nature; it’s a game that allows only a few people to profit, while the vast majority are just providing capital for play.
In trading, you need to have strong psychological qualities. You must have the mindset and pattern of a universe of liquidation. If you enter the market with 10,000 yuan and are anxious about fluctuations of 100 yuan, I advise you to leave the market early; this also ensures your personal safety.
If you have a big mindset of wanting to make 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, thus creating opportunities for great profits.
Trading is not just a game against large institutions, brokers, and retail investors, but also a game against oneself. As the ancients said: fighting against heaven is joyful, fighting against the earth is joyful; the highest realm of struggle is to fight against oneself. Trading in cryptocurrencies is a constant psychological struggle, continually questioning oneself whether to sell or hold at this price point, and what to do. This is a process of psychological competition that requires strong psychological qualities. Additionally, good psychological qualities must be matched with good physical condition; being in good health is key. Why do people live? Living is merely the process of possessing a healthy body and continuously honing one's soul.
Five, the trading way that suits oneself
The Dao represents the logic of things, while the Shu represents the methods and techniques.
As the saying goes:
Having the Dao without the Shu means the Shu is still sought after; having the Shu without the Dao means the Shu is meaningless.
The birth of a trading way represents a combination of a person's knowledge, insight, and courage. Through continuous ups and downs in the market, one finally grasps the basic logic of trading, which is in accordance with the rules.
The biggest enemies of investors are: hope, fear, and greed. Having your own trading way also requires overcoming these human weaknesses: hope, fear, and greed.
When the market is about to decline, investors should be filled with fear, yet they feel there is nothing to worry about and remain full of hope.
In a rising market, fearing a pullback should bring the greatest hope. Yet, starting to be filled with fear is why traders cannot make big money.
Having your own trading way, forming a trading system, helps you overcome the weaknesses of human nature. When the market trend arrives, let profits run; when losses occur, let yourself stop-loss and exit. This is the foundation for a person to obtain great wealth.
I am Xiao Xun, who has experienced multiple rounds of bull and bear markets in the cryptocurrency field. After three years in the industry, five years of expertise, and ten years of dominance, I possess rich trading experience in many cryptocurrency fields. Follow closely as Xiao Yan clears away the fog of information and sees the real cryptocurrency market. Seize more opportunities for wealth growth and discover truly potential cryptocurrencies. Don’t miss out on great opportunities!