Brother Sheng is an experienced full-time cryptocurrency trader. Over the past ten years, I have always adhered to the ten unbreakable rules of the crypto world. Even if I read these rules repeatedly, I never feel tired of them; instead, I increasingly feel the need to deeply engrave them in my heart.
Looking back at the first three years in the crypto world, I entered the market with a capital of two hundred thousand but unfortunately suffered a heavy blow, with my funds shrinking to only ten thousand.
Friends and family have all advised me to give up. They believe my trading behavior in cryptocurrencies is no different from gambling, displaying selfishness, a lack of responsibility, and a lack of ambition.
Those harsh words pierced my heart like needles, once leaving me disheartened and even starting to doubt myself. However, the stubbornness within me did not extinguish. I made a vow to my family to challenge myself again with the remaining ten thousand!
So, I calmed down and delved deeper into market research. Unexpectedly, it was this ten thousand that miraculously accumulated to 25.6 million in wealth over the next three years!
I am not exaggerating. When you truly find a trading strategy that suits you and steadfastly implement it, then you absolutely have the ability to turn the tide and achieve a turnaround in life!
Capital management methods and principles for trading in the crypto world:
Trading is like running a business; capital management is a critical factor that can determine survival, and stability is the first element you need to consider.
Traditionally, capital management generally includes the profit-loss ratio of individual trades, the overall risk level of trades, and the issues of increasing positions and exiting during the trading process.
We can summarize it into a few points:
1. Combination: Investment direction. 2. Position: How much to invest. 3. Timing: When to enter and exit. Trading is like running a business; capital management is a critical factor that can determine survival, and stability is the first element you need to consider.
Traditionally, capital management generally includes the profit-loss ratio of individual trades, the overall risk level of trades, and the issues of increasing positions and exiting during the trading process.
We can summarize it into a few points:
1. Combination: Investment direction.
2. Position: How much to invest.
3. Timing: When to enter and exit.
Question: Is it related to the small capital scale that trading achieves nothing?
Answer: The size of trading capital does not necessarily correlate with whether you are a successful trader. Many people cannot even manage a small account well; why should they think they can manage a large account?
Accounts of different sizes require different strategies and methods. Many people fail to manage small capital accounts mainly due to improper methods.
Large capital account: has a stronger ability to withstand drawdowns, can set wider stop-loss limits, and once a stop-loss is triggered, the loss can be significant; profit potential is greater, and the return cycle is longer; more suitable for trend trading.
Small capital account: has a weaker ability to withstand drawdowns, with smaller stop-loss space, generally close to the current price, so absolute losses are also smaller, and the profit cycle is shorter. Quick returns can provide emotional satisfaction for traders. More suitable for swing trading.
In short, based on the characteristics of accounts of different sizes, large capital is suitable for big trends, while small capital is suitable for swing trading.
Second question: Most people have small capital accounts; can you introduce management methods that are more suitable for small capital accounts?
Answer: If you want a small capital account to grow rapidly in a short period, you may need to pay attention to the following issues.
1. Survival first. Regardless of the size of the account, this is the first principle.
2. Only engage in short-term swing trading. The biggest drawback of a small capital account is its very weak ability to withstand drawdowns; even a slightly larger drawdown may lead to liquidation. Therefore, it is best to engage only in intraday short trades.
3. Regardless of profit or loss, limit the number of trades you make each day. It is best not to exceed three trades per trading day. If the first two trades hit stop-loss, it is better not to continue trading to avoid being affected by your mindset.
Moreover, one should take profits in a timely manner; do not continue trading just because you made profits on that day.
4. Only trade one asset at a time. For a small capital account, do not think about diversifying investments; it is unrealistic.
Because the account capital is already limited, if you then trade multiple assets at the same time, it will only lower your risk tolerance and may lead to greater losses.
5. Be good at seizing significant opportunities. Small accounts need to grow capital; relying only on small daily profits takes a long time, similar to the previously mentioned compounding model.
Therefore, for a small account to grow quickly, one must be good at seizing opportunities, catching a significant opportunity from time to time, and then patiently waiting for the next opportunity to arise. This can also be understood as winning with quality rather than trading frequency.
6. Increase position size, be bold but cautious. I have told everyone many times not to over-leverage. But to rely on a small amount of capital to gain huge profits in speculative trading, one still has to be bold with position sizes.
If you want a small capital account to grow quickly, you must seize opportunities while increasing position sizes. At this time, do not fear large positions, and do not equate large positions with liquidation. The core reason most people get liquidated is not because their positions are too large, but rather because they enter the market too easily, frequently stop-loss, or even do not stop-loss.
Someone once asked me what is the most important thing in investing. I answered with four words - capital management.
My answer surprised my friends. As someone who studies trends and technical analysis, almost everyone would think I would say that the most important thing in investing is to grasp trends and follow the market.
These days, I am preparing for the launch of a miraculous trade!!!
