I have been trading cryptocurrencies for 10 years, with 6 years as a professional trader, totaling over 1800 days. Starting with a capital of 200,000, over the years, I have experienced various pressures, pains, and confusions. Ultimately, I achieved enlightenment, simplifying my trading techniques, and in just three years, I was able to withdraw 48 million from the market!
My Cryptocurrency Trading Journey (Five Stages of Trading Growth)
1. [New to the Cryptocurrency Market]
When I first got into the cryptocurrency market, like everyone else, I relied on luck to choose which coins to buy. I didn't know if it was good luck or if beginners had a grace period, but in the first six months, my assets grew by more than ten times. At that point, I became overconfident!
However, the fact proves that when one is too pleased with themselves, it might be the time to stumble; reality will mercilessly slap you in the face. When my assets were halved in one order, I realized that the trading market is ruthless, and good luck will not always be by your side!
2. [Learning the Art]
After the biggest trading failure, I realized that relying solely on luck is not a long-term strategy; Lady Luck will not always be on your side.
At this point, I understood that trading requires solid professional knowledge and analytical skills, and I began to reflect and learn. I read relevant books, became active on various information platforms, sought opportunities and trading insights, and combined them with technical indicators to build my own trading system.
If you are newly entering the cryptocurrency market and have the favor of Lady Luck, this is your best opportunity to learn! During the beginner's protection period, learn more techniques to improve your analytical skills.
However, when I felt that I had learned enough about the art, my assets did not experience explosive growth. But I no longer faced significant losses and had developed the ability to counter risks. Although trading skills are not always effective, they gave me a deeper understanding of the market, and I began to seek the true essence of trading.
3. [The Enlightenment of the Way]
When I realized that different trading indicators and systems are not the key factors determining profit and loss, I began to focus more on trading psychology. I found that many times, profits depend on decisiveness and patience, not on hurried trading and frequent orders. This actually resonated with my mindset when I first entered the cryptocurrency market.
At this point, I realized that predicting the market is extremely difficult, so we need to become an independent trading system that follows our own trading logic. Gradually learn position management and leverage allocation, and calculate returns on a monthly basis, no longer worrying about the gains or losses of single trades.
4. [Gradual Stabilization]
When you have a clear trading logic and a complete trading system, under the adherence to the above principles, you can clearly accept losses and profits. Achieving a net result of small losses and large gains will make you a stable trader and investor. At this point, you will gain recognition and respect from others, becoming a 'teacher' in their eyes.
At this moment, only a few black swan events can impact your trading logic, but such events are always rare. Your trading logic is something you must adhere to.
5. [Adept at Trading]
When trading reaches a state of mastery, handling indicators and market conditions becomes effortless. Profits and losses become a given, and emotions gradually stabilize. You develop an intuitive ability, no longer feeling excitement about trading, but instead focusing on continuous profitability. At this moment, I gradually took on the demeanor of a trader, possessing patience, perseverance, and trading wisdom that surpasses most people.
The trading journey requires continuous learning and improvement. From a beginner to being adept, only through constant honing of one's trading system and understanding of trading principles can one achieve stable profits in the market. No one trades without losses, but being able to incur small losses while making large gains is our learning goal.
The basic principles of Dow Theory combined with the actual situation in the cryptocurrency space can be summarized in the following six points.
First, the average price absorbs and digests all factors. Fundamentals, policies, news, and capital can all affect supply and demand, and all of this will be reflected on the charts, ultimately being digested and absorbed by the market through price changes.
Second, the market has three types of trends. Dow categorizes trends into three types: primary trends, secondary trends, and minor trends. Primary trends are like the tides of the ocean, representing long-term trends, similar to the cyclical nature of the cryptocurrency market. Secondary trends represent pullbacks within the primary trend, typically retracing to the 38%, 50%, or 62% Fibonacci levels. Minor trends are the ripples, indicating subtle fluctuations that are highly uncertain and change rapidly.
Third, major trends can be divided into three stages. The first stage is the accumulation phase, similar to the yin giving rise to the yang, meaning that by the end of the market cycle, although everyone is bearish, the price has fallen as much as it can, and the main players start to accumulate in batches. The second stage is the bullish advance phase, where favorable news begins to emerge, and most retail investors with some technical knowledge gradually enter the market, causing prices to rise. The third stage is the climax sprint, when major media outlets begin to flood the market with good news, boldly predicting further price increases. Retail investors actively buy in, fearing to miss this once-in-a-lifetime opportunity to make money, but in reality, the main players who bought at the bottom have already started to sell.
Fourth, various average prices must mutually verify each other. For example, both Bitcoin and mainstream coins must have a combined increase that exceeds the previous mid-trend peak to be deemed the onset of a large-scale bull market! Similarly, if the combined decrease of Bitcoin and mainstream coins falls below the neckline of the high-level consolidation phase in a bullish trend.
Fifth, trading volume must validate the trend. Dow believed that volume is the second most important factor in technical analysis. When prices are moving along the major trend, trading volume should also increase accordingly.
Sixth, we can only determine that an established trend has ended after a clear and undeniable reversal signal occurs. A major trend has inertia; it generally continues to move along the main direction for a while. Therefore, we must wait for the trend to confirm a reversal, such as confirming a head and shoulders pattern breaking below the neckline to indicate a trend reversal.
Dow Theory is a macro technical analysis system aimed at capturing the largest segment of important market movements in actual trading, which is the most desirable part of the market. Its advantage is that it is relatively successful in determining major bullish trends; however, its disadvantages are also apparent, as signals are usually delayed, often missing out on 20%-25% of profit potential.