The crypto market is highly volatile; to achieve stable profits, one must follow certain trading principles to avoid blind operations leading to losses. The following five principles will help you invest rationally and reduce risks, allowing you to navigate the crypto world with ease.
1. Averaging down is only to reduce losses, not for blindly increasing positions.
Many investors, when trapped, easily fall into the psychological trap of 'fantasizing about recovering losses', blindly averaging down, hoping for a market correction to recover or even profit. However, market trends will not cater to personal wishes, and blind averaging down may further exacerbate losses.
The correct averaging down strategy should be:
Only average down when the major trend is upward, not when the market is in a downward trend.
Set reasonable averaging down points, control the proportion of averaging down funds, and avoid getting deeply trapped.
If the market worsens, quickly stop losses instead of continuing to average down and increase loss risks.
The core purpose of averaging down is not to increase investment but to reduce losses and improve capital recovery efficiency.
2. Beware of 'calm markets'; significant volatility often lurks beneath.
When the market trend is stable and price fluctuations decrease, many people mistakenly believe the market is safe and let down their guard. However, calm markets often herald significant market movements; the market may experience severe volatility at any time.
How to respond?
Pay attention to candlestick patterns, especially triangle convergence patterns, which often indicate an imminent trend change.
Observe changes in trading volume; a breakout after a period of low volume may signal an upward trend; a drop after a low-volume consolidation may indicate a bear market phase.
Do not overtrade in sideways markets; patiently wait until the breakout direction is clear before making decisions.
The market is constantly changing; brief calmness may be the calm before the storm. Staying alert at all times can help avoid getting stuck at high positions.
3. Accurately grasp buying and selling opportunities; trading with the trend is the way to go.
Grasping buying and selling timing determines your investment returns. Many investors miss good opportunities or get trapped due to emotional trading.
Golden trading rules:
Buy on down days and sell on up days: enter during market panic and exit during market euphoria.
Don't sell on price spikes, don't buy on price drops, and don't operate during sideways markets: avoid blindly chasing prices and selling during extreme market fluctuations.
Pay attention to key support and resistance levels: consider entering when the price approaches important support levels and consider taking profit when the price approaches resistance levels.
The market is never short of opportunities; what is lacking is patience to wait for the right moment.
4. Never go full position; manage positions flexibly to control risk.
Full position trading is a major taboo in the crypto world. The market is highly volatile; being fully invested means losing the ability to respond to risks. Once the market moves against you, funds may face significant losses.
Scientific position management strategy:
Build positions in batches: avoid putting in a large amount at once, enter the market in phases to reduce market risk.
Position control: adjust positions according to market trends, for example, hold higher positions in a bull market and reduce positions during sideways or bear market phases.
Take profit and stop loss: strictly set stop-loss points (e.g., must stop loss at a 5% loss) to prevent further losses.
Flexible capital management is key to long-term survival in the crypto world.
5. Maintain a calm mindset, avoiding greed and fear from dominating trading.
The biggest enemy in the crypto world is not the market, but the emotions of traders. Many people are greedy during price rises and fearful during price drops, leading to chasing prices and ultimately losses.
How to overcome emotional influences?
Prepare a trading plan in advance: set buy and sell target prices, strictly execute it, and do not be swayed by market emotions.
Rationally view price fluctuations: price movements in the market are normal; do not act blindly due to short-term volatility.
Avoid FOMO (Fear of Missing Out): don’t blindly enter the market due to market frenzy; calmly analyze the situation before making decisions.
Trading is not only a game of funds but also a psychological battle. Overcoming greed and fear is essential to becoming a winner in the market.
Summary: Remember the five trading iron rules for stable profits in the crypto world!
1️⃣ Averaging down is only for stopping losses, not for blindly increasing positions.
2️⃣ Be cautious of calm markets and be ready to respond to significant fluctuations at any time.
3️⃣ Accurately grasp buying and selling opportunities, and go with the trend.
4️⃣ Reasonably control position sizes to avoid full position risks.
5️⃣ Maintain a calm mindset and do not be swayed by market emotions.
