Attention all those facing total liquidation! Here’s some valuable information!
Using 3 truths + 3 practical rules, I'll help you understand the core logic:
1. Three major fatal cognitive biases
Leverage ≠ risk; position size is the root cause of liquidation
Example: 100x leverage using only 1% position size, risk ≈ 1% of full spot margin (e.g., with 100,000 capital, only 1,000 opens a position).
Wrong approach: Heavy investment in one bet (e.g., 10x leverage using 50% position size, 2% fluctuation leads to liquidation).
No stop-loss = stepping on a landmine
Data: 78% of liquidated traders continued to hold positions after losing over 5%.
Correct approach: Single loss ≤ 2% of capital (e.g., with 50,000 capital, the maximum single loss should be 1,000 to stop loss).
Rolling positions ≠ random adding, it should be a stepwise approach
Method: Start with 10% position for trial and error, add 10% of profits to the position (e.g., if the starting position earns 10%, use the profit to increase by 10% position size).
Counter-example: Doubling the position directly after profit leads to increased risk.
2. Three life-saving practical rules
Position formula: First calculate how much you can lose, then open a position
Formula: Total position ≤ (Capital × 2%) ÷ (Stop-loss margin × Leverage)
Example: With 50,000 capital, set a 2% stop-loss (stop at a 1,000 loss), 10x leverage, maximum position:
50000 × 2% ÷ (2% × 10) = 5000 (i.e., maximum use of 5000 to open a position).
Take profits in stages, don’t be greedy
Three-stage profit-taking method:
Sell 1/3 at 20% profit, sell another 1/3 at 50% profit, set a trailing stop for the remainder (e.g., sell all if it drops below the 5-day moving average).
Effect: Avoid rollercoaster rides and lock in profits.
Use small capital to buy insurance: Hedge against black swan events
Method: Use 1% of capital to buy put options, spend little to protect against crashes.
Example: During the crash in April 2024, those who bought options only lost 23%.
3. The essence of trading in one sentence
Use small risk to seek large probability returns:
Maximum loss of 2% of capital each time, earn as much as possible when you profit (win/loss ratio ≥ 3:1, for example, lose 200, at least earn 600).
Trade less: Only about 20 trades a year, 70% of the time stay in cash waiting for opportunities, don’t trade frequently and deplete capital.
Summary: Liquidation is not the market being ruthless, it’s you allowing emotions to control your actions.
Remember: First think 'how much can I lose', then think 'how much can I earn', replace impulse with discipline to survive and make big money. According to the current market situation, there will be significant opportunities soon, leave 166 up 🚗 leave 166 up 🚗 $BTC