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The three dimensions of the Wan Bei Zheng Tu trading system: Perceiving market temperature (strategy) + individual coin lifecycle (tactics) + mindset.
Lang Ge is undoubtedly the first mentor I had when entering the crypto space. Although I only participated in a few of his live streams, they have significantly deepened my understanding of practical trading and have had a profound impact on building my trading system. The following content has been organized and summarized from Lang Ge's live streams and his posts on a certain platform (please delete if infringing).
There are several dimensions to trading; if you can manage all of them, trading becomes easier.
The first dimension - Observing the market cycles (strategies for the market)
What is a 'cycle'? A cycle is often referred to as 'market sentiment', which indicates when there is a lot of money in the market and when there is little money, when the market is hot and when it is cold. This is something you should prioritize in all your judgments.
Making money has its cycles, just like the market's highs and lows, akin to spring, summer, autumn, and winter. There are times when it's hot and times when it's cold. If we correlate the ease of making money with 'market temperature', it means that during 'spring', making money is average, during 'summer' it is easiest, and during 'autumn' and 'winter', it becomes progressively harder. This cyclical nature exists because of human nature. Just like when everyone is making money, they will eventually take a break, and after resting for a while, the hot money will refocus, creating an ongoing cycle.
Taking the earlier period (February-March 2024) as an example. In fact, this market has risen from 40,000 to 70,000, and it has gone through the three segments marked in the above image, including subsequent derivative segments. Each cycle includes four stages - 'spring', 'summer', 'autumn', 'winter', each with different characteristics and corresponding strategies.
• 'Spring': A period of blooming (positioning phase)
'Spring' is the market's initiation point, at a time when the market is just starting up, and only a few people have predicted that a market movement will occur; the sentiment is not that strong.
When Bitcoin rises, many coins resonate with it, but it's hard to distinguish which one is leading (most coins are moving, making it difficult to find a strong one).
• 'Summer': The rise of the leading coins (explosive phase)
'Summer' is a position of intense profit-making. After the market has pulled back in 'spring', more funds and outside investors have taken notice and started focusing on this middle segment. Everyone has expectations that after an adjustment, there will be a strong rally. The market sentiment at this point is at its peak, which is 'summer'. At this time, everyone enters the market, and a high point will be established.
'Summer' will see some coins resonate and separate. During the separation phase, some altcoins that fell behind during Bitcoin's adjustment will rally back together with Bitcoin. Often, the leading altcoins are the strongest during 'summer'.
• 'Autumn': Fluctuating catch-up (catch-up phase)
'Autumn' is the later stage of the market, where strong coins have already risen significantly, and the market begins to weaken and shift to fluctuations. However, due to active sentiment, it does not immediately turn down but requires a process of consolidation.
In the 'autumn', the coins that were supposed to rise have already done so, and what follows are some catch-up rises. Some worthless coins that didn't rise earlier or those that performed poorly on the daily chart will catch up during autumn. Due to the fluctuations of Bitcoin during 'autumn', all the catch-up rises do not go smoothly.
At this point, many false breakouts can occur; if stop-loss levels are not set wide enough, it’s easy to get stopped out repeatedly. Although there may be some amplitude in these catch-up rises, they are hard to grasp, unless you are positioned in the spot market.
Additionally, during the catch-up phase, funds can easily create activities in the primary market, where new speculative coins often appear.
• 'Winter': Market quiet (defensive phase)
'Winter' is the stage when everything comes to a halt; the market is quiet, with hardly any good opportunities—it's a void, empty. During the gradual consolidation process, the market slowly becomes stagnant and generally cold and indifferent, before brewing a new wave of market activity.
Therefore, the best times to make money are in 'spring' and 'summer'. If you can't identify it accurately, you can discard the other phases and only trade during 'summer'. Specifically, if you're not accurate and have missed 'spring', you at least can sense when Bitcoin is rising and the market is hot. If the market is rallying, and you know there will be more activity, your best strategy should be to find the leaders and focus on them.
Everything in the crypto world, all market movements, revolve around Bitcoin's price action, following Bitcoin's trends. During a market phase, when funds should attack, which sectors should catch up or ambush, the funds are all based on expectations and plans. In other words, if we compare a cycle to a battle, everyone has a direction, not mindlessly acting. This gives everyone a market guide, indicating what actions to take at each stage.
Additionally, the emotional cycle plays a crucial role in guiding your entire position and trading frequency. If it's 'autumn' or 'winter', you must contract and defend. Everything, including your opening positions and others, should be handled with caution; your stop-loss, positions, and leverage should all be lowered. In 'spring' and 'summer', you should be relatively aggressive; this is strategic guidance, including your trading frequency and the intensity with which you watch the market, all should be heightened in these positions, while later, everything should contract. This is the first step in the market; analyze what the current market state is and where the funds' focus will be next. Then adjust and carry out your strategic direction.
The second dimension - Technical (Tactics)
The second step involves the cycle of individual coins. Each coin has its own cycle, which is a technical issue. Technicals are not only about indicators; they encompass the several stages that a leading coin goes through from birth to death. We can delineate the different intervention methods corresponding to each stage, which is the so-called technical issue. This means that aside from the market cycle, the individual coin's cycle and logic for trading are also included.
Each individual coin, apart from its cycle, often starts during a major level of consolidation or a major platform. A breakthrough of a major level often marks the start of a trending market. After the market starts, the main upward wave will usually experience small divergences before reaching its target (which could be a resistance level or a significant figure). This means that after the rise, it will go through a process of rise - small divergence - and then continuous rise.
After constant rising, a small divergence will lead to a larger divergence. After the larger divergence ends, a second wave will follow. The second wave will extend the previous main upward wave until everything reaches its final target, thereby concluding the main upward wave.
① Represents the initiation point, where there is space for a major upward wave, and the overall market atmosphere aligns.
② Represents a small divergence position, with a minor horizontal pullback.
③ Represents a major divergence position.
④ Represents the position where a large divergence adjustment restarts the second wave.
⑤ Represents a complete drop into consolidation, indicating that the main upward wave has finished.
⑥ Finally, there’s a range, which indicates that the main upward wave has completed, has dropped, and has started consolidating. If this position is expected to be a range consolidation, there may be a rebound within the range.
The points mentioned above are logical points. Among these six positions, two are counter-trend trades (positions ③ and ⑤ are counter-trend), and I don't recommend anyone to take them. Position ⑥ is also hard to grasp and has a low win rate. Therefore, the best opportunities are at positions ① and ④, which are points where you should go all in regardless of the time; positions ② and ⑥ are next, and ③ and ⑤ are the worst.
These six points are logical points within the life cycle of a coin, all belong to high win-rate positions, and incorporate some logic; they are not arbitrary trades. These are the best of the best points. 'Logical' means only to trade at these six points; any trade outside of these six is considered illogical.
Moreover, different positions will have different profit-taking and stop-loss strategies. If you're positioned at ①, a major market rally initiation point, and your expectations are substantial, you'll hold through a large divergence before considering exiting at the second wave. If you're in a smaller divergence position earlier on, you may be able to withstand a significant divergence. If you're in a high position during a small divergence, you'll have no choice but to exit in one wave, and you'll only be able to make short-term profits. Because if you've made a high entry during a small divergence, facing a subsequent significant divergence will be very difficult to handle; this is why your profit-taking logic differs significantly from earlier positions.
If you take profit at counter-trend position ③, and you feel you've hit the top, will you just walk away? Definitely not. Such a significant divergence will likely have a continuous downward trend line. You should wait for the trend line to end and start rebounding before trying to exit.
If you trade at position ④, knowing it’s a second wave, if a new high forms, you can still observe the small divergences afterward. Your profit-taking should at least aim for a higher point to consider exiting.
If you trade at position ⑥, this is inherently a rebound within a range. You should definitely take profit when you see gains and not look for more.
Thus, at different points and positions, your logic for profit-taking and stop-loss is entirely different.
The third dimension - Mindset
The first dimension mentioned above is strategic, determining when to act and when to go all-in during the 'spring', 'summer', 'autumn', and 'winter' seasons. The second dimension relates to the decisions you make, understanding where to take profit and where to cut losses. To truly excel in trading, there is also a third dimension - mindset. The most crucial aspect of mindset depends on your position management. Position management means you need to divide your positions, and the core of position management is dividing positions and using low leverage.
Specifically, for position management, here's the recommendation: If you take out $30,000 for contracts, it's advisable to divide it into three parts, with each part being $10,000. Use one part to open a position at a fixed $10,000. Bitcoin leverage should not exceed 10 times, and altcoins should not exceed 5 times. If you lose money, such as $1,000, add $1,000 from outside; if you gain $1,000, withdraw that $1,000. Ensure that every time you open a position, you can keep it at a fixed $10,000. Until you earn $60,000 from that $30,000 in this way, raise each part's position to $20,000. The benefit is:
- First point, position splitting + low leverage, to avoid the exchange's spikes, which could cause you to lose all your funds.
- Second point, avoid getting overexposed to such issues. If one day you over-expose yourself and lose everything, then at most, you lose 1/3, leaving the rest to give you a buffer.
- Third point, maintain a fixed position. Whether you're in loss or profit, you can keep a relatively calm mindset, which helps stabilize your emotions.
If you are tight on funds or currently facing significant losses or debts, do not inject too much money. Just add $1,000 or $2,000, split it into three parts, and take it slow. Don’t think it’s too little; $1,000 is only $300 per share, and in this market, any amount can work.
Even if I make trades without logic, although the win rate is low if the trades are illogical, if I can control my leverage and keep it low, it won't hurt too much. The most damaging thing is not managing my positions well, so everyone should not underestimate position management. Because even if sometimes your predicted direction is correct, if your position, mindset, or methods are wrong, it will end up in a mess.
Finally, here are three suggestions on how to reduce losses:
First point, do not use high leverage. Altcoins exceeding 5 times and Bitcoin exceeding 10 times is considered high leverage. Using high leverage is always a risky path.
Second point, do not make counter-trend trades. If the market has gone up and you want to short, despite the existence of short opportunities, you must tell yourself that this market is not for you. It’s better to miss an entire cycle than to chase after a top or try to catch a falling knife.
Third point, trades must be logical; don’t just look at the charts.
* Regarding the 'logic' mentioned above, further elaboration means: the correct trading process is far more important than any single 'correct' trading outcome. The scariest thing is winning a 'correct' result through an erroneous process.
If a trade outside your system makes you money and you taste success, it may seem profitable at first glance, but this is often the most dangerous place because you have gained 'rewards' by violating your trading discipline and system. So, next time, you may further deviate from your trading plan, and you will likely pay multiples for the money gained previously in future trades.
Therefore, everyone should adhere to their trading systems. Sometimes earning money is not necessarily a good thing. Bad habits can subtly influence you. Even if you realize it, if you've tasted sweetness before, it will subconsciously urge you to open trades. When that thought crosses your mind, you're already on the path to losing. Sometimes, even if you don't act, the outcome is already predetermined. From the moment you violate your trading system to make a trade, the final outcome of failure has already been set.
As long as everyone understands the three dimensions of trading outlined above and implements them, there will be no issues with trading. If self-assessment for trading skills is rated from 1 to 10, knowing only the technicals (the second dimension, either understanding a little or not at all) means you're only at 1 to 3 points. If you fully grasp the second dimension and mindset, you can achieve at most 4 points. Only by thoroughly understanding the first dimension (what each stage of the market is doing and where the funds are going) can you reach 6 points; combined with a good mindset, you can achieve 7, 8, or 9 points.
Finally, I'll quote a few remarks from Lang Ge to conclude:
-- 'One wave of market, one trade, whether success or failure, in your long career, among millions of trades, it's just a drop in the ocean. Don't be carried away by a single success, nor be overly distressed by a single failure.
A tranquil mind is always the strongest weapon for a professional trader. When you become anxious, blind, fearful, or stressed due to market or asset changes, regardless of gain or loss, you've already lost. The waves of the market will amplify your emotions infinitely, exhausting you before delivering a fatal blow.
-- 'In trading, there is no holy grail, no easy path after enlightenment. Different levels of people face different mindset issues at different stages. Trading is a path of cultivation, requiring constant caution, as if walking on thin ice, and continuous self-reflection and adjustment to counter human nature in order to survive in the market.'
No one can capture the entire market cycle or adapt to all rhythms; what we can do is understand what we are good at and act at the right time.
My current achievements come from adhering to self-discipline and maintaining a stable mindset. It's not about how strong I am or how capable I am; without my own discipline and system, the market can crush me at any time. I must constantly remind myself to avoid arrogance and impatience.
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