The essence of achieving "big losses and small gains" in cryptocurrency trading (i.e., profits covering losses and overall positive returns) is to reduce the probability of losses and magnify profit opportunities through strict risk management, disciplined operations and scientific trading strategies. The following are some key principles and practical methods:
1. Core Principle: Risk First
1. Maximum loss limit for a single transaction
Set a maximum loss for each transaction (such as 1-3% of the principal) to avoid major drawdowns caused by a single mistake.
Example: The principal is 100,000 yuan, and the upper limit of single loss is 2%, that is, the maximum single loss is 2,000 yuan. You must leave the market when the stop loss is triggered.
2. The profit-loss ratio is at least 2:1
The profit target should be at least twice the stop loss point. For example, if the stop loss is set at 5%, the take profit should be at least 10%. A high profit-loss ratio can offset a low win rate.
2. Practical Strategy
1. Position management: diversify risks
Split warehouse operation: Divide funds into 5-10 parts to avoid heavy investment in a single currency.
Pyramid adding to positions: gradually add positions after the trend is confirmed, rather than fully investing at one time.
Be cautious with leverage: Unless you are extremely confident, the leverage should not exceed 2-3 times to avoid liquidation.
2. Technical tools
Stop loss setting: a combination of hard stop loss (such as falling below the support level) and moving stop loss (following profits to move up).
Profit-taking strategy: segmented profit-taking (e.g. 50% of the position is exited at target 1, and the remaining part is used to strive for higher returns).
- Hedging tools: Use perpetual contract funding rate arbitrage, or hold spot and open short orders to hedge systemic risks.
3. Emotions and Discipline
Reject FOMO: Don’t chase rising prices and sell falling prices, and avoid taking over when the market is frenzy (such as when all the good news is exhausted after a sharp rise).
Review log: record the logic of each transaction and analyze the reasons for losses (such as emotionality, misjudgment of trends).
Mandatory cooling-off period: trading will be suspended after two consecutive losses to prevent retaliatory actions.
3. Examples of high win rate scenarios
1. Buy on trend pullback
Conditions: BTC falls back to EMA30 in an upward trend and the trading volume shrinks.
Operation: Buy at current price, set stop loss below 3%, and target higher (profit-loss ratio above 3:1).
2. Panic selling and bargain hunting
Conditions: The market plummets due to a black swan event, the fear and greed index is <10, and on-chain data shows that whales are increasing their holdings.
Operation: Buy in batches (e.g. add positions every time the price drops 5%), and set the stop loss below the bottom support level.
3. Arbitrage opportunities
Cross-exchange spread: Use the BTC spread between Binance and OKX for arbitrage (fees and slippage must be calculated).
Basis arbitrage between futures and spot: When the futures price is significantly higher than the spot price, short futures and buy spot to lock in profits.
4. Pitfall Avoidance Guide
Avoid "holding positions with faith": Do not develop an emotional attachment to any currency, and set a stop loss even if you are optimistic about it.
Beware of contract traps: high leverage + high volatility = extremely high risk of liquidation. Beginners are advised to start with spot.
Ignore noise: Don’t blindly follow KOLs’ orders, and independently verify information (such as project GitHub submissions, on-chain data).
5. Long-term thinking
Compound interest growth: A stable 5%-10% return every month is far better than doubling your money once and then going back to zero.
Bear market layout: Invest in potential currencies (such as ETH and SOL ecological leaders) during the low volatility period and wait for the bull market cycle.