Behind every successful man are countless failures. In the cryptocurrency world, apart from those few who stand at the top of the pyramid, possessing both the opportunities of the times and keen business insight, for ordinary people like us, making money in the crypto space is truly difficult, as the past ten years of experience have shown me.
The most difficult part of this is that the cryptocurrency market is a new frontier and opportunity, with not much successful model experience to follow. Additionally, a significant portion of people who made money through luck will eventually lose it back through their own efforts in the next 1 to 3 years.
Overall, very few people truly make money and can hold onto it well.
Why are the people who truly lose money mostly those who entered the market after 2019? Those who entered the market between 2014 and 2017 experienced very few significant losses during this phase because mainstream exchanges began to introduce contract trading in 2018. This is a test of human nature, leading many greedy individuals to end their battles through liquidation.
Today I want to share which foolish trades in contract trading will make you regret for life.
During the period from 2019 to May 19, 2021, contracts made me experience the roller coaster of life, reaching peaks of over 17 million RMB from tens of thousands, then crashing back to square one on May 19, and only then did I start to think quietly. In the crypto space, besides holding BTC and ETH, what else can help me survive better?
The reasons for losses in futures trading that I've summarized are mainly the following points:
1. Not knowing how to manage positions primarily manifests in: the multiplier for contracts and your own margin. You have no clarity, going for 100 times leverage, but do you know your risk? Do you know your liquidation price? 99% of liquidations occur when starting with seemingly small positions, but ultimately leading to large holdings and continuous adding, resulting in final liquidation.
2. Not distinguishing between luck and skill; a typical example is the year 2020 during the pandemic. A friend I met while working at Alibaba happened to enter the market in the first year of the pandemic, when the Federal Reserve reduced interest rates, resulting in consecutive low rates, causing BTC prices to soar. ETH also rose from a low of over $80 to $4880. This guy entered with over $70,000 and eventually left the market with $1.85 million in April 2021.
At first, they laughed at me for losing so much on May 19; only those who have experienced that kind of heartache understand. He was enjoying life with over 13 million RMB, pretty models, and luxury cars, while I started to doubt life and fate. But when I visited Nantong for a private meeting at the end of October 2024 and coincidentally looked him up in Suzhou, it turned out he was delivering takeout and in debt over a million. At that moment, I believed: learning can provide me with a safety net and help me better preserve my wealth.
3. Not admitting mistakes after being hit is the biggest taboo in trading contracts: when the trend is misjudged, it is crucial to cut losses in time, and the weakness of human nature is that 99% of people are reluctant to admit they were wrong, leading to one outcome: liquidation to punish you.
4. Not understanding trends: more than 80% of people faced liquidation in contracts, thinking it was due to their poor candlestick skills, but in reality, that's not the case; candlestick analysis here may account for only 20%. Essentially, if you really want to learn, you might finish in a week, but it will also lead you into a trap where you lose more, including theories like Dow Theory and Chan Theory, which I also spent over 100,000 to learn, but ended up using very little in practice.
5. Unwilling to settle down and learn, sinking deeper into the quagmire of losses. The biggest dream of a gambler is: 'next round, I will turn my fortunes around', but in reality, the next round only brings more losses. Only those who understand their pain and know what they want can calm down and learn. Learning should involve paid education because only then can you learn the real stuff and your mindset will change, allowing you to understand why others can achieve stable profits.
In the cryptocurrency space, significant losses generally occur under three circumstances:
First: stubbornly holding without a stop-loss led to a massive loss.
Second: frequent trading and losses from stop-losses will leave you with nothing; excessive stop-losses can make your mentality anxious.
Three: bearing losses against the trend, frequently cutting losses, not setting stop-losses, revenge trading emotionally, and trading following others.
In the cryptocurrency space, what truly makes you anxious sometimes is not your unrealized losses, but that your peers are making money while you are not in the game, and at this point, your anxiety may make you a bag holder.
My principle is:
After making a big profit, you must withdraw funds—secure your gains.
After a significant trading loss, you must take a break—anxious mindset.
After a big profit, you must withdraw funds, because after making a large profit, it is easy to become complacent, start messing around, open positions carelessly, and trade heavily, which can quickly lead you to lose the money you earned. After withdrawing profits, your principal decreases, making it less risky to mess around, and your drawdown becomes smaller. Conversely, after a big loss, you must take a break because people tend to rush to recover losses after a big hit, leading to impulsive and reckless trading, resulting in more losses. Taking a break after a big loss allows you to adjust your mindset, and you can quickly recover your previous losses once you feel better.
There is a saying in the field of technical analysis: trade what you see, not what you think. Objective trading is trading based on the market signals you see, as long as those signals align with your subjective judgment of the market direction; while subjective trading is based on what you think, if you believe the market will rise and you see a price that feels relatively low, you enter the trade, only to find that this price might just be halfway up the mountain, and even if you are trading lightly, you might not be able to withstand it.
Five lessons I learned from losses.
First: "Leverage is not a 'get rich quick' tool, but a 'risk amplifier'."
The biggest misconception for new retail investors entering the market is viewing leverage as a quick tool for wealth, frequently using 50x or even 100x leverage. However, market fluctuations exceed expectations; a 1% price fluctuation at 100x leverage can lead to liquidation.
Real money-making trades: leverage should be used cautiously, with large funds recommended to be controlled within 2-3 times, and absolutely no full-position trading. Just look at the HT liquidation incident in 2023 to understand why.
Second: emotional trading is the biggest enemy.
Adding positions to lower the average cost of losing positions is often the biggest misconception. Futures trading is different from spot trading, and having a mentality of 'rushing to recover losses' leads to either chasing highs and cutting losses or overtrading. Emotional trading causes you to completely lose your rationality, turning you into the market's 'ATM'.
You must believe: trade according to your plan, trade your plan! This statement has profound meaning.
Third: risk management is more important than profit.
The 'black swan' can exist in this market at any time; it happens every year, often when everyone is complacent. Therefore: do well with taking profits and stop losses, and retaining 10% of funds for yourself is always a good decision.
Fourth: technical analysis and fundamentals are both indispensable.
A paid student from 2022 once asked me, you don't need to share your data, just give it to us; there's no need to write it in the public account.
My answer to him was: the summary of data analysis and trend judgment is more about refining my own trading and grasping the market, continually learning, summarizing, and improving my understanding, so that I can better hold onto the money I earn.
Fifth: patience brings greater returns than frequent trading.
99% of retail investors suffer losses due to a core reason: trading should be like a sniper, patiently waiting for the best opportunities to emerge, while they are like hunters, searching for opportunities in the market every day. Such people who can make money are anomalies.
In the trading process, an important factor that we often overlook is the market environment. For example, after Trump took office, the entire cryptocurrency market entered a month-long bull run, and BTC's price also rose nearly 60%.
Trading should not only focus on the rise and fall of individual tokens, but rather pursue the overall market trend, and then trade heavily. Making big money cannot rely on BTC's volatility, but on the overall market movement; it cannot rely on interpreting the market, but on predicting the overall market and its trends.
The market is the best teacher; only experiences learned through your own losses can help you progress. If you have the ability to learn, buy a couple of foundational books, then learn and iterate through practical experience; at the same time, pay for valuable cryptocurrency knowledge to avoid pitfalls, and you will profit!
From 'gambler' to 'investor', from 'fear' to 'respect for the market', from 'holding contracts and unable to sleep' to consistently making stable profits, true winners do not rely on luck but rather on discipline and strategy.
Finally: many viewpoints in this article represent my personal understanding and judgment of the market, and do not constitute investment advice for you.
