In a bull market, effectively reducing the risk of being trapped (liquidation) is a key concern for investors. The following will analyze multiple key aspects in depth:
1. Cryptocurrency Selection Strategy
- Mainstream Coins, Leading Coins, Potential Coins (suitable for medium to long-term investment): For investors leaning towards medium to long-term operations, mainstream coins, leading coins, and potential coins are relatively ideal choices. Mainstream coins usually have a solid market foundation, widespread recognition, and relatively stable value support, such as Bitcoin and Ethereum. They have withstood long-term tests in the market and have strong risk resistance. Leading coins often dominate their respective fields, leading industry development trends, and their market performance is characterized by strong coherence and stability. Potential coins are those that, while currently small in scale, have considerable growth space based on good project backgrounds, innovative technology applications, or potential market demand. Choosing such coins for long-term holding in a bull market is likely to yield doubled or even higher profits, relying on their intrinsic value and growth potential to withstand short-term market volatility risks.
- Hot Coins (suitable for spot short-term investment): If investors prefer spot short-term operations, hot coins can be a focal point for consideration. Hot coins are often closely related to current popular industry topics, emerging technology applications, or specific market events, making them susceptible to market funds’ enthusiasm, resulting in rapid price increases in the short term. As long as the entry timing is chosen correctly, investors can quickly achieve profits. However, the enthusiasm for such coins may also fade quickly, so accurately grasping entry and exit timing is crucial.
2. The Importance of Position Management Explained
Rational position allocation plays a crucial role in the investment process, whether in contract trading or spot trading.
- In Contract Trading: Due to the leveraged nature of contract trading, if position allocation is unreasonable, a slight market fluctuation, such as a ‘spike’ (a sudden large price fluctuation), could cause the investor’s margin to be wiped out instantly, triggering liquidation. The amplification effect of leverage brings high return expectations while also magnifying risks exponentially. Therefore, scientific position control is the key defense against liquidation risks.
- In Spot Trading: If position allocation is improper, once a heavy position is held in a particular cryptocurrency, when the market trends go against expectations, investors can easily fall into a deep trap. At this point, investors with insufficient resolve often face a dilemma: either passively wait for the price to recover to break even or suffer the pain of cutting losses, which undoubtedly has a significant impact on investment returns.
3. Detailed Rules for Rational Position Distribution
- Spot Position Distribution: In spot trading, an important principle is ‘Do not put all your eggs in one basket,’ commonly referred to as a diversified investment strategy. This strategy is not only for newcomers to the investment circle but is actually applicable to all types of investors. Because regardless of the size of the capital, holding a heavy position in a single cryptocurrency carries a high risk of being trapped. For investors with large capital (such as hundreds of thousands or even millions of dollars), this risk is even more significant, as the period of being trapped often lasts longer. Therefore, it is generally recommended that the position of a single cryptocurrency should not exceed 50% of the total position, with a more suitable range around 20%-30%, diversifying across different cryptocurrencies to reduce the impact of a single cryptocurrency's volatility on overall assets.
- Contract Position Allocation:
- Avoid Excessive Long Positions: Holding too many long positions can quickly magnify losses once the market turns bearish. Therefore, it is essential to cautiously control the scale of long positions and avoid excessive exposure to one-sided upward expectations.
- Avoid Heavy Positioning: Heavy positioning in contract trading is like walking on a tightrope; any unexpected adverse fluctuations could lead to devastating consequences. It is necessary to allocate positions rationally according to one’s financial capacity.
- Set Reasonable Stop-Losses and Do Not Hold Positions: Stop-loss is a key means of controlling risk. When the market trends reach the preset stop-loss price, decisive stop-loss actions should be taken to avoid holding positions out of wishful thinking, which could lead to continuous losses.
- Grasp the Market Pattern in a Timely Manner: In the trading process, one should make timely judgments on whether to continue holding or take profits based on overall market trends and changes in fundamentals. It is crucial not to be overly fixated on short-term fluctuations and to have a certain perspective to cope with complex and changing market conditions.
- Avoid Hedging Positions as Much as Possible: Although hedging theoretically can mitigate some risks, it requires high levels of professional judgment, timing, and fund management skills from investors. A small mistake could lead to a situation of losses on both sides, so it should be used cautiously.
4. Key Points for Entry Position Selection
- Spot Entry Position Selection:
- Old Coin Operations: If an old coin is at the price bottom range, one can consider entering the market in one go from an investment cost-performance perspective to acquire relatively low-cost chips. However, if the price is not at the bottom and investors wish to participate, a laddered approach to building positions is more prudent. By buying in batches, one can gradually accumulate chips, ensuring that market opportunities are not missed while also reducing average costs to some extent and buffering risks from price fluctuations.
- New Coin Operations: For newly launched cryptocurrencies, if one chooses to hold them from the early stage of their launch, given that new coins typically have significant price volatility, investors need to closely monitor the overall market trend and adjust their investment strategies timely. If not planning to hold long-term, when the expected profit target is reached, one might consider recovering the principal first and holding the remaining profit to seek higher returns while locking in some profits. If entering the market only after the new coin has surged, it is also recommended to adopt a laddered position-building strategy, which helps reduce investment risks and lower the average position price.
- Contract Entry Position Selection:
- Prioritize Setting Stop-Loss: Regardless of the situation, setting stop-loss is the primary principle of contract trading. It is essential to clarify the stop-loss price before opening a position, and once the market trends are unfavorable, stop-loss must be executed resolutely to prevent unlimited loss expansion.
- Operate Based on Trends: Closely observe the trends presented by candlesticks. When the candlestick indicates a dominant bullish trend, one may consider going long; conversely, if a bearish trend is evident, one may attempt to short. However, attention must be paid to the accuracy of trend judgments and timely risk response measures.
- Key Point Level Play: When the price reaches a relatively high point (resistance level), one may consider attempting short positions; conversely, when the price is at a relatively low point (support level), one may consider going long. However, this requires investors to possess precise point judgment abilities and good risk control awareness.
- Drawing and Using Trend Lines: Learning to draw simple trend lines is an important technical analysis tool, especially when analyzing trend lines based on 4-hour candlesticks. This helps to grasp short-term market trend changes more clearly and provides strong reference for entry timing.
While there is a certain degree of speculation and uncertainty in the investment market, as long as investors can scientifically manage positions, carefully plan operational strategies, and maintain a rational and steady investment mindset, even in a bull market full of opportunities and challenges, they can expect to achieve considerable investment returns. At the same time, it is essential to remember to invest within one’s means and not to harbor unrealistic dreams of sudden wealth, as those seemingly legendary stories of getting rich often involve various accidental factors and exaggerations.
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