The explosive earning potential in the cryptocurrency world is often astonishing: some can earn in a day what others make in a month, and some achieve monthly earnings that equate to a lifetime's savings for others.
However, to achieve stable profits in this field, the core principle is not to chase after high profits, but to control drawdowns.
One key logic to understand is: the maximum loss in trading can be designed in advance, but how much profit you can make depends on market luck.
Leverage is precisely the key tool to amplify profits and an important pathway to cross social classes and achieve rapid accumulation —
Not using leverage may make it hard to break free from the ordinary, but using leverage can lead to irreversible ruin.
The premise of using leverage is always to keep drawdowns under control.
Here is a practical approach to using leverage: control drawdowns within 20%, and you can use 5x leverage; within 10%, you can use 10x leverage; if you can reduce it to within 5%, then 20x leverage can be attempted with confidence.
For a specific example: suppose this year your maximum acceptable loss is 100,000, and your trading level could potentially keep the maximum drawdown at 5%, but to be prudent, you plan based on a 10% drawdown.
At this point, you invest 100,000 of your own funds, and with 10x leverage, you can operate with 1,000,000 in funds.
As long as you can achieve a 20% return in two months, your principal has actually doubled.
Ultimately, whether dealing with spot trading or contracts, it all comes down to a game of controlling drawdowns.
Drawdowns not only determine how much leverage you can use but also quietly set the upper limit on profit.
Understanding this point means you have grasped the door to stable profits in the cryptocurrency world.
On the road of compound interest, I can move quickly on my own, but a group can go further; you are welcome to join me.
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