In the cryptocurrency world, there are some obscure knowledge or skills that are often unknown to people, which are crucial. Today, I will share a few:
1. Cost averaging is not as simple as imagined
For example, if you invest 10,000 U when a cryptocurrency is priced at 10 U, and then invest another 10,000 U when the price drops to 5 U, your average additional cost is actually 6.67 U, not the 7.5 U that many people think. This situation is very common in market fluctuations, and understanding this cost calculation method is helpful for managing positions.
2. The compounding effect is amazing
Assuming you have 100,000 U and earn 1% daily before cashing out. If you can maintain 250 trading days in a year, your assets will grow to 1,323,200 U after one year. Continuing for another two years, your assets could even reach the tens of millions. Of course, this result is based on stable performance, but the challenge behind it is how to continuously achieve this compounding.
3. The relationship between probability and profit-taking/stop-loss
If your investment success rate is 60%, and you set a 10% profit-taking and stop-loss for each trade, after 100 trades, your total return can reach 300%. But this premise is that you strictly adhere to your trading plan without being influenced by market volatility emotions, especially maintaining composure in a highly volatile market.
4. Greed is the greatest enemy
Assuming you start with 10,000 U and earn 10% each time, by the 49th day, your assets could reach 1 million U, on the 73rd day, it could exceed 10 million U, and by the 97th day, there is a chance to surpass 100 million. However, in reality, almost no one can achieve this because most people cannot control their greed during this process, leading to failures along the way. This is why many traders find it difficult to maintain profits over the long term, even when they are profitable.
Contract trading and position management
In contract trading, position management and capital management are the keys to success or failure. Many people use 20%-30% of their capital as the base position, but I personally prefer to use only 2%-5% and employ 20x leverage, which can effectively control risk and avoid emotional decisions triggered by excessive volatility.
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