In the cryptocurrency sphere, I started with a principal of 100,000, at one point bringing my account balance quickly close to 10 million, but due to subsequent mistakes, it nearly went to zero twice. This rollercoaster experience made me deeply aware of the enormous risks involved in cryptocurrency investment and allowed me to summarize a series of methods to avoid risks.

Common risky behaviors in the cryptocurrency sector
Overtrading
Many investors are eager for quick profits, frequently buying and selling. In this process, trading costs continue to rise, and fees increase, ultimately leading to a significant increase in overall investment costs, severely impacting final returns. This seemingly proactive operation is actually consuming one’s profit margin, making investments unworthy of the effort.

Blindly chasing new investments
When a new cryptocurrency is launched, it often attracts the attention of many investors. Many people blindly follow the trend and buy in just because they have heard that a certain cryptocurrency is newly launched, completely ignoring in-depth research on the project and team behind the new cryptocurrency. It is important to know that the uncertainty of new cryptocurrencies is extremely high, and many projects may have various problems. Once the price drops rapidly after listing, investors can only suffer the bitter fruit of losses.

Lack of stop-loss strategy
Setting stop-loss points during the investment process is an important means of controlling risk. However, many investors lack this awareness, or even if they set stop-loss points, when they actually face losses, they often hesitate to cut losses and miss the best exit opportunity. As a result, losses continue to grow, and what could have been a small loss ultimately evolves into an unbearable setback.

Emotional trading
The cryptocurrency market is highly volatile, and many investors can easily be influenced, resulting in chasing highs and selling lows. When the market is at a high point, they are blinded by greed and buy blindly; while when the market is at a low point, they are reluctant to sell out of fear. Or, due to inner fears and greed, they frequently adjust their positions, and this irrational trading behavior often leads to repeated investment mistakes.

Never satisfied
When seeing project prices rise, many investors have their greed magnified infinitely, wanting to gain more profit and continue to increase their positions without timely reducing their holdings or taking profits. Once the market trend reverses and turns against them, they realize that it is too late to cut losses, and previous profits vanish in an instant, leading to serious losses.

Lack of market research
Many investors have a too casual attitude when choosing which cryptocurrencies to invest in and do not conduct in-depth research on project backgrounds, technical white papers, market liquidity, etc. They blindly invest based only on feelings or hearsay rumors. This lack of fundamental and technical analysis in their investment approach is like groping in the dark, making it easy to fall into the trap of losses.

Cryptocurrency risk avoidance strategies
Do not go all in
Investment itself is full of uncertainty and enormous risks, and the extreme investment method of going all in is especially inadvisable. Putting all funds into one investment is like going all out at the gambling table; eventually, there will be a time when one loses everything. I am a painful example of this. Shortly after entering the cryptocurrency sphere, I went all in on BTC and BNB multiple times. Fortunately, my account balance quickly approached 10 million. However, later I went all in again on a metaverse project and contracts, which nearly led me to zero twice.

Actually, not going all in is basic common sense in the investment field; many investment bigwigs and professional books repeatedly emphasize this point from the start. However, I still made this basic mistake. Generally speaking, investment newcomers do not go all in directly; I initially only invested 100,000. But when small-scale investments yield high returns, the demon of greed quietly begins to take effect, gradually consuming rationality, ultimately leading to the irreversible path of going all in.

Cautious use of leverage
Unlike going all in, leverage is not completely unusable in investments. In the face of relatively certain opportunities, especially when encountering major uptrends, decisively using leverage may indeed allow funds to achieve a qualitative leap, similar to those who took out loans to invest in real estate twenty years ago, seizing the dividends of the real estate market.

But it must be clear that using leverage is a high-risk operation among high risks. Moreover, when there is a general phenomenon of leverage in a certain investment field, it often indicates that this field is in a phase of long-term rapid growth. At this time, those around you who are using leverage may seem to be making a fortune, even becoming rich, while those who are not using leverage may appear out of place, as if holding cash or qualifications without borrowing is a mistake. This is similar to the real estate investment sector in China over the past few decades, where many people blindly followed the trend of using leverage.

Such situations attract a large number of blindly following investors who lack basic understanding of investments, just like I did six years ago. When you tell them about the risks of leverage, they impatiently respond, "Real estate prices absolutely won't drop," with the only reason being, "China won't allow real estate to fall." Regardless of the actual trends of China's real estate market, from the perspective of having no awareness of leverage risks, they are already standing on the edge of a cliff; when they fall is just a matter of time.

So, how can we achieve cautious use of leverage? I believe the key points are as follows:
1. Use leverage in familiar fields: Only by being sufficiently familiar with the investment field can one have a higher success rate. Moreover, using leverage poses a significant test of mindset for most people. If one is not well acquainted with the investment field, it becomes very difficult to maintain a steady mindset, and it is easy to make erroneous operations, leading to worsening situations.
2. Assess risk tolerance: Before using leverage, one must repeatedly ask oneself whether they can bear the worst-case scenario. Only with a definite answer can one proceed to use leverage. It is crucial to maintain absolute rationality and extreme conservatism; one must not deceive oneself, blindly follow trends, or harbor a gambling mentality. For most people, a more reliable approach might be to use small positions with leverage to achieve larger outcomes while reducing risk.
3. Respond to risks in a timely manner: Once any signs of risk are detected, even if only slight, one should immediately reduce leverage or cut losses. The feeling of losing money while using leverage is something that anyone who has experienced it will remember painfully; that kind of suffering and pressure is hard to bear.

Finally, I want to emphasize again that I am not encouraging everyone to use leverage; I just hope that everyone fully recognizes the risks of leverage and the issues that need to be considered during operations. As for whether to use leverage, everyone should make careful decisions based on their actual situation.
Every day, I am arranging for Shen Dan! Uncertainty brings! Comment below 138! Welcome to discuss together.

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