In the cryptocurrency world, one day is equivalent to a year in the stock market. Those who have engaged in trading cryptocurrencies will no longer have any interest in stock trading. The 24/7 trading and the lack of limits on price fluctuations fulfill many people's dreams of getting rich overnight. This is also one of the reasons why virtual currencies are so popular, and experiencing losses in the cryptocurrency world has become a very normal phenomenon.
Every investor who enters the cryptocurrency world will experience significant losses, margin calls, and the transition from profit to loss in their trading career. Among the multitude of cryptocurrency traders, only one type of person becomes wealthy, and that is someone who has experienced bankruptcy, learned from it, and has a resilient mindset.
Without experiencing liquidation and significant losses, one will never know what stop-loss means; without experiencing profits turning into losses, one can never understand the mindset shift between heaven and hell.
First, survival is the primary principle.
Sun Tzu said: Those who are good at warfare prepare for the invincible to await the enemy’s vulnerability. It is simple to avoid significant losses; survival is the first principle. When dangers that impede this principle arise, abandon all other principles. Because no matter how many 100% excellent performances you have had in the past, if you now lose one 100%, you will have nothing left. Once your capital is eliminated, you are destined to be eliminated. To play this game well and achieve ultimate victory from it, all systems and rules must prioritize protecting the principal.
Second, correct capital management:
Every success only allows you to take a small step forward, but one failure can make you step back a big step. This big step hinders capital accumulation, which requires opportunities and time. Human nature is always like this: the pain of losing 1000 yuan far exceeds the joy of gaining 1000 yuan. A significant loss of capital can easily affect an investor's mindset. Losing 500,000 from 1 million 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 jumping from the roof back to the ground only takes 30 seconds.
You cannot control the direction of the market, so there is no need to waste energy and emotion on situations you cannot control. Don’t worry about what changes the market will undergo; worry about what response strategies you will take to respond to market changes. Judging right from wrong is not important; what matters is how much profit you make when you are correct, and how much loss you can bear when you are wrong. Every time I see many people in the crowd bargaining for the price of a piece of clothing for half a day or shopping for half a day, while the time an investor thinks about buying does not exceed a few minutes, this is a common trait among many; it is certainly not the behavior of someone preparing to make a big splash in the investment market. To earn big money in the market, investors must be cautious and protect their accounts as if they are walking on thin ice.
When entering the market, there should be a clear operational system:
(1) How much money to earn in this wave of the market;
(2) How much loss can I accept? If the market pulls back, how much loss will force me to exit immediately?
(3) I must secure a portion of the profits from each operation;
(4) Gradually increasing positions to avoid all-in trading; continuously raise profit stop-loss levels as profits rise, never letting already obtained profits turn into losses; (5) Always give yourself another trading opportunity, strictly adhere to your trading system.
Third, the trend is the best friend.
The greatest enemies in trading are patience to wait for clear market trends and overtrading. A bull market does not end in one day, nor does a bear market. The cryptocurrency trading world is a place I have seen where businesses do not open for three years, and when they do, they eat for three years. As long as you have patience and wait for the market trend to become clear, find the leading stocks, and hold on until the end of the bull market without overtrading, then you can achieve unexpected profits.
When the trend comes, respond to it; when there is no trend, observe it and remain still.
Overtrading is also a major enemy of investment. Those traders who chase price differences can only earn a little sweet profit, yet cannot make big money. Let’s calculate the fees from overtrading: currently, virtual currency exchanges charge a trading fee of 0.2% for buying and selling, making a total of 0.4% for a completed transaction. If a trader operates once a day for a year (365 days), due to fees, this trader loses 4/1000 * 365 = 140%. You didn’t read it wrong; it’s 1.4 times. Think about it, Buffett works hard for 30%, yet your annual trading fees are 140%; another trader often overlooks this.
The more frequently a person enters and exits the market, the more easily they change their mind. As the saying goes, the more you do, the more mistakes you make; the less you do, the fewer mistakes you make; doing nothing means making no mistakes, but too much trading can lead to missing significant market movements.
Plan carefully before acting; based on the clear price points, market sentiment, trading conditions, and capital inflows provided by the market, determine the coming trend, and maintain a broad perspective on market movements, avoiding being confused by short-term fluctuations.
Fourth, psychological quality is the core.
Cryptocurrency trading goes against human nature; it is a game that determines that only a few can profit, while the vast majority are merely providing funds to play.
In trading, one needs to have a solid psychological quality, must have a perspective and mindset of a cosmic liquidation; if you enter the market with 10000 yuan and your heart races for a fluctuation of 100 yuan, I advise you to leave this market as soon as possible, which also ensures your personal safety.
If you have the mindset to earn 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 range, only then can I have the opportunity for substantial profits.
Trading is not only about battling large institutions, with dealers and retail investors, but also about battling oneself. As the ancients said: Fighting with heaven is enjoyable, fighting with earth is enjoyable; the highest realm of struggle is to fight with oneself. Trading cryptocurrencies is a process of constant psychological struggle, continuously questioning oneself whether to sell or hold at this price level, and how to act. This is a psychological game that requires solid psychological quality, and also good physical condition; good health is key. Why do people live? Living is merely a process of having a healthy body and continuously honing one’s soul in this world.
Fifth, the trading philosophy that suits oneself.
The Dao represents the logic of things, while the skill represents the methods and ways.
As the saying goes:
There is a way without skill, skill can still be sought; there is skill without the way in skill.
The birth of a trading philosophy represents the combination of a person's knowledge, vision, and courage. Through constant ups and downs in the market, one ultimately understands the basic logic of trading, which is in accordance with the rules.
The greatest enemies of investors are: hope, fear, and greed. Even with one’s own trading philosophy, one still needs to overcome human weaknesses: hope, fear, and greed.
When the market is about to decline, one should be filled with fear, yet investors feel there is nothing wrong and remain hopeful;
And when the market is rising, fearing a pullback, one should have the greatest hope in the world, but instead begins to feel fear; this is the reason traders cannot make big money.
Having one's own trading philosophy, forming a trading system, helps one overcome human weaknesses; when the market comes, let profits run, and when losses appear, let oneself stop-loss and exit; this is fundamental for a person to achieve great wealth.
I am Aze, having experienced multiple rounds of bull and bear markets, entering the industry for three years, mastering it in five years, and dominating it for ten years. I possess rich trading experience in many areas of the cryptocurrency world. Follow Xiao Yan to clear the fog of information and gain insight into the true cryptocurrency market. Grasp more opportunities for wealth growth and discover truly potential coins; do not miss good opportunities again!
