When I first entered the cryptocurrency market, I was still a student, starting my journey with 2000 USDT. The reason it was 2000 USDT was due to the OKEx USDT + the remaining balance with an annual interest of 10%. However, each account could only invest a maximum of 2000 USDT, which could be termed as simply earning coins. At that time, I hoped to earn some money, and my friend suggested I convert the money to USDT and deposit it in the remaining balance on OKEx.
This friend of mine is a rich second generation who got involved in cryptocurrency trading early on. He often brags about how much he earned yesterday and how much he made today, showing us his profit charts, which often show multiple returns. In fact, I knew about virtual currencies quite early and decided to trust him and give it a try. At that time, I thought the interest was three to four times higher than that of savings accounts.
By coincidence, I had gathered all my savings, relying on my frugal lifestyle, just enough 2000 USDT, leaving 1000 for meals.
I registered an account on OKEx, converting all the money in my Alipay into USDT and depositing it into the remaining balance. At that time, the crypto market was booming; I noticed that almost all coins on the software were dropping daily, while my friend kept shouting to short, and he made quite a bit of money. Although the remaining balance had a high interest rate, since the principal was only over 10,000, my daily profit was just enough to buy a drink.
Seeing a friend earn big money from shorting, I asked him to teach me how to trade contracts. In fact, contracts are very simple, like gambling on guessing sizes. At that time, I was also a gambler; after learning, my first operation was to max out leverage. My first trade was shorting a poor-quality altcoin; after placing the order at night, I went to sleep. When I woke up and saw profits in my account, I immediately closed the position, earning over 200 USDT, which was more than the interest from the remaining balance for a year.
At that time, I felt the money came as easily as if it had fallen from the sky. I immediately transferred all the money in my remaining balance to the contract account, beginning my contract trading career. At that time, I studied candlestick patterns and technical indicators, browsed various news, joined various contract groups, and listened to the ramblings of those who provided signals. Besides sleeping, attending classes, and eating, I spent all my time watching the market.
My position management is to operate with 25% position size and 10x leverage. Besides opening positions based on candlesticks, I have a special way of opening positions: following a friend's account on OKEx; I can receive notifications whenever he opens a position. My friend is actually a mediocre trader; when he makes money, he brags to me, but when he loses, he stays silent. Overall, he hasn't really made money, but rather has suffered more losses.
If you follow him in trading, you will generally lose more than win, but I do not operate in reverse; instead, I prefer to enter when he is losing and cutting losses. I must say, this strategy has a pretty good win rate, and I can say that I started using reverse indicators early on. I am no different from the average person and am not suited for trading; I not only like to trade but also prefer to increase positions when in loss and rarely stop loss.
However, I might be in a new player protection period; I was quite lucky. Every time I held onto a position, I managed to break even, maintaining a win rate of over 90% (at that time, I particularly focused on win rate), and even thought about making money by copying trades. After about a month, my 2000 USDT multiplied by 30 times to reach 60,000 USDT.
I went from a novice to the point where my friend, a veteran in the field, wanted to learn a few tricks from me. But my friend tends to learn the bad habits and not the good, ignoring technical indicators and just going with his gut. However, he learned to copy my trades somewhat well! Soon, you all will?
I also knew how the end of contracts would turn out. My initial goal was to reach 100,000 USDT and then stop trading contracts, only buying spot. After successfully reaching 100,000 USDT, the next goal was to reach 300,000 USDT and then stop trading contracts, only buying spot. The third goal was to reach 500,000, and finally, the fourth goal would be even higher.
Late at night, a friend suddenly messaged me saying all the USDT in his account had exploded, and he didn't even have time to add collateral before getting liquidated.
I could only offer some consolation, glanced at the altcoin he was trading, and immediately opened a 20x short position above his liquidation price. Soon after, that coin dropped significantly, and I continued to short it. A week later, my assets nearly increased tenfold, reaching 600,000 USDT.
I thought there was risk in shorting, so I closed my positions and withdrew the initial 2000 USDT capital I had invested in the crypto market, indulging in lavish meals for a few days and even bought an iPhone. Originally, I had withdrawn my principal, at least avoiding losses, meaning I wasted a few months for nothing. But at that time, I felt like a gambler, losing sight of everything, and immediately sold my newly bought phone and the laptop I had previously purchased on Xianyu to gather some cash.
Listening to a group friend's advice, I jumped into a ten-dog investment, and the outcome was naturally zero. At that time, I was completely dazed, just coinciding with the final exams of university; when a test paper was handed out, my mind went blank. When it was time to submit it early, I randomly guessed the multiple-choice questions and directly handed it in, forgetting even to fill in my exam number. Basically, I failed all the subjects I was supposed to fail, and my life instantly lost direction. Fortunately, I have never liked borrowing money from others; I have never gotten involved with online loans, which is a key reason I could rise again.
Surviving great difficulties brings future blessings. After enduring the low period, I began to seek other opportunities. By chance, I met a group of friends in an airdrop group who specialize in earning USDT through arbitrage and running errands, which introduced me to the industry of settlement agents. Through gradual learning, I gained a lot. So I prepared several thousand USDT, earned USDT daily through errands, bought some spot assets, and saved some money. Just from USDT, I earned 200,000 USDT.
Sharing this experience is to say that failure is not scary, and there are many opportunities in this circle. It’s not just about contracts; if one doesn’t work, switch to another sector, and never give up. Airdrops, NFTs, holding coins, DeFi, quant trading, various arbitrage, arbitrage running, settlement agents running errands, etc. In contrast, gambling and contracts are indeed last-ditch strategies, especially for newcomers!
I have been trading cryptocurrencies for over ten years, from liquidation to achieving financial freedom through crypto trading. By 2024, my capital multiplied by 50 times. If it weren't for withdrawing funds twice to buy a house, it should have multiplied by 85 times. Today, I share my trading strategies and insights with my fellow stock investors. There is a saying, standing on the shoulders of giants allows you to work less for ten years. At the end of the article, I will also discuss the most important aspect of position management.
After much struggle, I summarized 8 iron rules. The content is brief but very valuable. If you feel there is no reasoning after reading, feel free to say whatever you want!
1. Divide your capital into 5 parts, entering only one-fifth each time! Control a 10% stop loss; if you make one mistake, you only lose 2% of your total capital. If you make 5 mistakes, you only lose 10% of your total capital. If you're right, set a take profit of more than 10%. Do you think you’ll still get trapped?
2. How to further increase the win rate? Simply put, it’s about going with the trend! In a downtrend, every rebound is a trap for the bulls, and in an uptrend, every drop creates a golden opportunity. Do you think it's easier to make money buying the dip or waiting for the bottom?
3. Do not touch coins that have experienced a rapid short-term surge, whether mainstream or altcoins. Very few coins can go through several major upward waves. The logic is that it is difficult for coins that have surged in the short term to continue to rise. When high prices stagnate, they will naturally fall later; it's very simple reasoning, yet many still want to take a gamble.
4. You can use MACD+ to determine entry and exit points. If the DIF line and DEA cross to form a golden cross below the zero axis, and break through the zero axis, it is a stable entry signal. When MACD forms a dead cross above the zero axis and runs downward, it can be seen as a signal to reduce positions.
5. I don't know who invented the term 'averaging down,' but it has caused many retail investors to stumble and suffer huge losses! Many people keep averaging down as they lose, which is the most taboo in cryptocurrency trading, putting themselves in a dead end. Remember, never average down when you're at a loss; rather, average up when you're in profit.
6. Volume-price indicators are paramount; trading volume is the soul of cryptocurrencies. When price shows a breakout at low levels, it deserves attention; when it shows a stagnation at high levels with increased volume, it’s time to decisively exit.
7. Only trade coins in an upward trend, as this maximizes your chances and saves time. If the 3-day moving average is turning upwards, it indicates a short-term rise; if the 30-day moving average is turning upwards, it indicates a medium-term rise; if the 84-day moving average is turning upwards, it indicates a major upward trend; if the 120-day moving average is turning upwards, it indicates a long-term rise!
8. Insist on reviewing weekly, checking if the holding logic has changed, technically checking if the weekly candlestick trends match your judgment, whether the direction has changed trends, and promptly adjust trading strategies!
Precautions for newcomers in the cryptocurrency space
1. Start by only buying Bitcoin and Ethereum; other coins are highly volatile and can bring you great psychological pressure. Bitcoin and Ethereum can also experience a situation where they drop 20% in a day.
2. Try to avoid buying from small exchanges. If certain coins are not available on platforms like OKEx and Huobi, they are likely to be very high-risk coins. No matter how much others entice you to buy, do not go for it. If you really must, feel free to ask me first.
3. Don't go all in at once; do good position management. Even in a bull market, there are many opportunities for a spike that could catch you off guard.
4. Do not engage in contracts; contracts are tools for risk hedging, not for gambling.
5. Do not transfer coins casually; there’s no need to buy coins worth several thousand and then withdraw to wallets. Newcomers are much more likely to lose their coins than to be stolen. The method and underlying logic for screening hundredfold coins:
1. The circulating market cap and total market cap should be low. Ideally, the total market cap of public chains should be below 50 million, and DApp protocols should be below 5 million.
It’s easy to understand that the value must be low. If the market cap is too high, there is not enough room for growth, so the lower the better. Why must the total market cap be low? That's because in the next 1-2 years, tokens will gradually be released. If the total market cap is too high, it means the project party (whales) does not need to pump the price; they can become rich by dumping directly. Or even if it drops tenfold, there is still a high price and profit.
2. The ceiling of the sector must be high. At least in a bull market, valuations should reach over 1 billion USD. If it’s a meme coin, reference Dogecoin; if it’s a public chain, reference ETH, SOL, MATIC; if it’s a DApp or protocol, reference UNI, AAVE, LDO, etc.
3. New narratives; do not participate in overly niche sectors. It is best to solve real problems. New narratives must be about long-term value discovery, not short-term cyclical speculation. For example, AIGPU computing power narrative, safer, faster, and more decentralized public chains, spanning infrastructure for metaverse, chain games, AR, etc.
4. Hundredfold dark horse coins must be in places that nobody cares about. Because coins that are well-known across the network usually have high openings (like ICP) or normal valuations (like ARB), do you think their unit price can rise a hundredfold? At the time of opening, the total market cap is often in the hundreds of billions or thousands of billions. Not to mention a hundredfold increase, even a tenfold increase would catch up to ETH or BTC.
5. The liquidity of early hundredfold coins is generally poor, mostly found on-chain or small exchanges. Therefore, many newcomers see others recommending early coins without researching their value and keep saying they don’t want to go to small exchanges, which look like '土狗' (low-quality coins), making purchases too troublesome, as there are no apps, hence they don’t participate. These are all superficial phenomena, not seeing the essence of value. When I bought MAGIC in 2021, cross-chain was very troublesome, and it later grew tenfold in a month. When I bought PPI in February 2023, it also required two wallets for cross-chain. After trying many exchanges that didn’t support it, Gate later supported Espace withdrawals. Later on, BRC20 tokens also had high barriers to entry, requiring points and OTC, which was very troublesome. In summary, high barriers are the necessary path to block retail investors. However, exchanges with no barriers are often difficult to make money on; it's all about dumping after listing.
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6. The best time for token launches is either late in a bull market or early in a bear market. When researching or buying, the launch and washout time should ideally be 6-12 months, and the circulation rate should ideally be above 50%. KAS was launched in May 2022 and underwent deep washout for about 6 months, with this year's maximum increase being over 100 times.
PPI launched in May 2022, after a deep washout of 9 months, began to surge, currently with a circulation rate of about 60%. This year, the maximum increase was about 50 times.
7. The unit price should be low, and there should be many zeros after the decimal point. If the unit price starts at several hundred USDT or several thousand USDT, it will scare away over 80% of retail investors. Especially during a bull market, the new investors rushing in only look at the unit price and do not understand market cap. Meme coins and public chain coins typically start with very low unit prices, often having 3-5 zeros.
8. It's best to choose public chains or leading protocols on public chains. The easiest place to make money in the cryptocurrency space is public chains. In the bull market of 2021, over ten hundredfold public chain coins emerged, such as SOL, MATIC, AVAX, and SOLFTM, each with its own advantages. Many leading protocols also emerged, like UNI, AAVE, CAKE, XVS, etc. Why don't I participate in hot coins like ACH, LINA, and KDY? Because they are not public chains, many things have a short life cycle, and once the hype ends, it's over. However, public chains are different; they remain in the spotlight and continuously build ecosystems and market caps.
9. The founder, team background, investment institutions, and financing amounts must be reliable. The founder is best if they are a well-known figure in the crypto space, such as a core team member of Ethereum, or KAS's founder is Y God, and ROSE's founder is Professor Song, etc. Having well-known institutions participate in investment is equivalent to having an endorsement. The financing amount and project valuation are also crucial; good public chain projects generally have very high valuations, often in the tens of billions.
10. Do not participate in things that violate the logic of value investing. What does it mean to violate the logic of value investing? For example, stable coins like AMPL, or a previous deflationary token on ARB that becomes smaller the more you hold. If you see such things, regardless of how innovative they seem, do not participate; they will ultimately lead to disaster, cutting you to pieces. AMPL has cut many influential investors. If you believe you are a natural sprinter, then consider my words disregarded.
11. Old coins should be avoided unless there is a very strong new narrative. For example, RNDR and CFX are both old coins, but their narratives are very compelling, perfectly aligning with the main theme of this new bull market. The former spans several sectors, including AI, GPU, NFT, chain games, AR, and VR, and its foundational features are hard to eliminate. The latter is a better, faster, and safer public chain, and is also supported by resources from the national government. Plus, Hong Kong aims to become the core center of the new round of WEB3.0, making CFX the central target of Hong Kong hotspots. Speaking of this Hong Kong hotspot, it is also a decent public chain, with its own ecosystem and value.
12. Choose leading sectors, and try not to choose trailing ones. For Hong Kong hotspots, I chose CFX, and for ecological tokens on it, I chose the DEX token PPI. The ecological tokens on CFX are all incubated from PPI, so they are the leading ecological tokens.
If you carefully read the above 12 points, you should understand that you no longer need to look at all the coins mentioned above because the market has already passed. The probability of seeing a second wave of a hundredfold market, or even a tenfold market, is very low. What you need to do is use these 12 iron rules to filter out new coins.
Having traded for many years, I've experienced both gains and losses. First, let's summarize the main reasons for losses, some of which I have also committed myself.
Leverage is a double-edged sword. If used well, you will run faster than others; of course, conversely, if used poorly, you will die faster than others. After playing with leverage for a long time, you will find that trading spot becomes very simple. Many newcomers hope for a huge profit from a single trade, turning 10,000 into 1,000,000, then from 1,000,000 to 500,000, losing 50%, back to 1,000,000, needing to double again, returning to 0 is just a single time. Therefore, newcomers easily become self-satisfied, thinking they are gifted after making a few profits in futures, and excitedly go all in, only to end up back at the starting point.
Traders who truly want to survive in the cryptocurrency market will never put themselves in a desperate situation. From the moment you are fully invested or heavily invested, you are destined to be a loser. I hope crypto friends remain vigilant while trading with leverage!
Experienced players choose to remain completely out of the market when the trend is uncertain, waiting and observing, and will not rush to operate. When the trend is clear, they will quickly enter the market. They also enter the market with small positions, while many ordinary players operate frequently with heavy positions in unclear market conditions, resulting in continuous losses. When encountering aggressive market makers, the losses will be even greater.
Fighting against medium- and long-term trends, trading against the market leads to death. Many people believe that losing money in futures is due to trading cycles being too long, and that playing short lines will avoid issues. However, when losses reach a point that is clearly against the market, they struggle psychologically over whether to stop loss. Sometimes, there is a sense of luck that prices will return; holding positions against the trend for too long leads to death. Even worse, inexperienced newcomers think that averaging down will lower their costs, but later as market trends diverge further from their positions, they end up with heavier positions, leading to faster losses. The first path to death is not over-leveraging, not trading frequently, and not chasing prices.
After many twists and turns, the meat I can cut is getting smaller and smaller, and eventually, there's no meat to cut, leading to death. Most reasons for losses and liquidations can be summarized into the above three types; those who are too greedy are basically over-leveraged.
Whether in the stock market or cryptocurrency, good position management means you will outperform the vast majority of people.
Whether in spot or contracts, how to manage positions directly determines your risk control level, holding average price, and ultimately your returns. This can be said to be the most important point besides direction and mindset.
What is position management?
Position management refers to a specific set of plans for when you decide to trade cryptocurrencies, including opening positions, increasing positions, reducing positions, and how to close positions. Good position management is one of our important means of avoiding risk, allowing us to minimize losses and maximize benefits!
How should positions be managed? Is there a standard? Many traders fail, and one of the key reasons is that they treat market analysis as everything in trading, as if analyzing the market alone can determine success or failure. In fact, market analysis is just the most basic work; what really determines success or failure is the work done after the analysis, which is the issues you consider after entering the market.
Position management includes capital management and risk control. The term 'position' should not be interpreted literally; it expresses when to increase positions, by how much, when to reduce positions, and by how much. It is essentially a roadmap for 'entering, increasing, reducing, and exiting' positions. Thus, a complete trading process should be:
1. Market analysis, you can use any technical analysis.
2. Position management, after entering the market, you need to consider what might happen next, how to handle profits, whether to increase positions, fully take profits and exit, or continue holding. What if profits expand again? What if there are losses? Should you stop loss, hold on, or partially exit first? How much loss will prompt a full exit? Position management will simultaneously consider risk and return factors.
3. Strictly implement your trading plan. Once your plan is clear in your mind, you need to start executing it without letting market fluctuations disrupt your thoughts.
4. Summarize trading.
After completing a trade, it is necessary to review the previous trades over a period of time. The review sample should cover three market conditions: rising, falling, and consolidating. Then, based on this, improve and optimize market analysis, position management, and the trading execution process.
We must first find the entry point based on our trading skills; this position must be a support line. When the market is above the support line, the trend is upward; when the market breaks below the support line, the trend is downward. More importantly, the support line is also our basis for defining potential risk. When the stop-loss is placed below this support line, the potential risk range is determined. If it reaches the initial stop-loss area below the support line, it should first exit or close most positions, then gradually reduce positions as it continues to decline until all positions are closed. Thus, the potential profit range is above the support line, and as long as the upward trend of the market has not ended, the potential profit is theoretically infinite.
After entering the market and rising, we can either hold our original position waiting for a rise or gradually increase our positions based on the original position. We will adjust our stop-loss as the market develops. When the market behaves as we expect, we should move our stop-loss closer to the cost price or below a certain support level. Moving the stop-loss means continuously reducing the risk in the market, which is equivalent to locking in floating profits. When the price rises again to a new support or resistance level, it starts to fall back.
Then, below this support or resistance level is the area for reducing positions. At this time, we should gradually close all positions. In summary: First, we need to find a support and resistance line at the cost price. When the price rises far from the cost line, we gradually increase our positions, which must be incremental. When the price falls further away from the cost line, we gradually reduce our positions, which must also be incremental. Your position management skills must consider both risk and return.
Shendan is still laying out plans every day!
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No long positions!
