The most risky approach should also be divided into three parts. That is to say, you should at least give yourself three chances.
For example, if the total account fund is 200,000, and the client allows a maximum loss of 20%, which is 40,000, then the most risky loss plan I suggest is: first loss of 10,000, second loss of 10,000, and third loss of 20,000. I believe this loss plan has some rationality, as having one successful trade out of three can allow you to profit or continue to survive in the market. Not being kicked out of the market is a success in itself and provides a chance to win.
2. Grasp the overall market trend. Trends are far more difficult to manage than fluctuations because trends involve chasing highs and cutting losses, requiring the determination to hold positions, while buying high and selling low aligns well with human nature. Trading becomes increasingly profitable the more it aligns with human nature; the difficulty of trading is precisely what leads to profits. In an upward trend, any violent pullback should be seen as an opportunity to go long. Remember what I said about probability? Therefore, if you are not on board or have exited, patiently wait for a 10-20% drop and be bold in going long.
3. Set profit-taking and stop-loss targets. Profit-taking and stop-loss are key to determining whether one can be profitable. In several transactions, we must ensure total profits exceed total losses. Achieving this is not difficult if the following points are met: ① Each stop loss ≤ 5% of total funds; ② Each profit > 5% of total funds; ③ Total trading win rate > 50%. Meeting these requirements (with a profit-loss ratio greater than 1 and a win rate greater than 50%) can lead to profitability. Of course, it can also be a high profit-loss ratio with low win rates or a low profit-loss ratio with high win rates. Anyway, as long as total profits are positive, total profits = initial capital x (average profit x win rate - average loss x loss rate).
4. Remember to avoid excessive frequent trading. Since BTC perpetual contracts are traded 24/7, many newcomers operate daily, trading nearly every day in a month with 22 trading days. As the saying goes: if you often walk by the river, how can you avoid getting your shoes wet? The more you operate, the more likely you will make mistakes. After making mistakes, your mindset will deteriorate, and once your mindset deteriorates, you may act impulsively, choosing 'revenge' trades: possibly against the trend or over-leveraged. This will lead to one mistake after another, easily causing significant losses on your account, which may take years to recover.
Key points to note when rolling positions:
1. Sufficient patience; the profits from rolling positions are huge. As long as you can successfully roll a few times, you can earn at least a million, so you cannot roll lightly; you need to find high-certainty opportunities.
2. High-certainty opportunities refer to a situation where there is a sharp decline followed by sideways movement, and then a breakout upwards. At this point, the probability of following the trend is very high, so correctly identifying the trend reversal point is crucial from the beginning.
3. Only roll long positions and do not short.
What is the right approach for ordinary people to trade profitably in the cryptocurrency market?
For everyone entering the cryptocurrency market for investment, whether they are seasoned investors or newcomers, the future trend of the cryptocurrency market is very promising.
Whether it is for fun or to achieve financial freedom through trading in the cryptocurrency market, how can we operate specifically to achieve results and fulfill our desires?
As more and more people globally participate in the blockchain field, it gradually begins to enter the public eye, and regulation becomes increasingly strict, leading the market to mature.
Compared to traditional industries, there are still many uncertainties, such as policy, funding, and information aspects. Risks and pitfalls are greater in this industry, which is mixed and chaotic; it is not an exaggeration to describe it as a smoke-filled environment, especially for those lacking discernment, indicating that risks and pitfalls far outweigh opportunities.
So how can we obtain profits while ensuring our own protection?
First, it is essential to protect oneself, enhance comprehensive knowledge of the blockchain industry and investment field, master professional skills, possess the trading techniques, mindset, and effective strategies to understand market movements. These are the fundamentals for us to survive and thrive in the cryptocurrency market and the means of survival in this jungle law-like domain.
One must never harbor a fluke mindset or a gambling/speculative attitude; you will definitely not be the exception. You are just one of many who are either not the worst or even worse.
Secondly, one must believe in patterns and the cyclic nature of bull markets and transitions, diligently learn their skills in bullish markets, practice with small funds, and even if remaining in cash, one can still outperform over 90% of investors during the entire bullish cycle. In bear market conditions, quietly wait for opportunities to enter at relatively low points, and when the bull market arrives, patiently await the bloom. Timing is crucial for our profits and is an essential element that helps us achieve significant results.
The third common misconception is that many people mistakenly believe that having too little capital means they want to gamble big. Without the ability, they infinitely amplify their greed, engaging in contracts and leveraging, and cannot endure the cycle's trend dividends. Even if they do not see profits for a day, they feel they cannot bear it. Such people, no matter how successful, will merely be advanced financial workers and will never enter the ranks of competent investors or achieve lives of time freedom, financial freedom, and energy freedom.
Because their thinking determines their upper limits, this is a cognitive bias that cannot be changed solely by trading skills, systems, and strategies.
To make money in the cryptocurrency market, one must first experience losses, summarize and reflect to find the core reasons for the losses, change and break through them through systematic learning, then turn losses into profits, start earning small amounts, and finally gradually accumulate wealth. This process is the cultivation of our own wealth-bearing capacity. Only when our wealth-bearing capacity improves can we better hold onto wealth.
Investment is something to be done for the rest of one’s life, not just for a single market wave. What we need to do is achieve long-term stable profits.
Therefore, before making decisions, we must ask ourselves: is this judgment based on our own abilities?
If the answer is not sufficiently certain, it is better not to act than to make a mistake; making mistakes in the cryptocurrency market leads to darkness in your life. If you do not want to live this way in the future, clearly see the boundaries of your abilities.
Clearly positioning oneself is simple; as long as we are authentic, we can achieve it.
Of course, self-deception and avoiding harm are much simpler, for that is human nature.
However, the cruelty of financial markets and the cryptocurrency sector does not care about these so-called self-respect, face, emotions, whether you have money, or how well you are doing; it only looks at strength.
If you realize you do not have the strength, either do not participate or improve your strength; there are no shortcuts.
Cryptocurrency market insights: the secrets of MACD and moving averages.
Technical indicators are just a tool.
Do not deify it, nor should it be seen as having no use.
Quoting a famous saying from university to start this article! Knowing when to stop can lead to calmness; calmness can lead to peace; peace can lead to contemplation; contemplation can lead to gains.
The same technical indicators can be a tool for profit in the hands of some people, while in the hands of others, they become a weapon of self-destruction. The reason for different outcomes lies with the user and cannot be blamed on the technical indicators.
No technical analysis system can work effectively from start to finish. Why? The reason is simple; any analytical system has its timeliness and locality. An effective analysis system today may become ineffective after some time. A system that works well in one market may not be applicable in another.
There is no technical analysis tool in the world that can achieve significant profits in the trading market solely by simple application without thinking and understanding. The trading market is a battleground of wisdom between people, and the winners are always those who diligently think and are good at dialectical analysis.
Next, I will explain the MACD indicator, intending to spark ideas and provide traders with an analytical perspective and approach.
(-) The principle of MACD.
The MACD indicator is a trend-like indicator based on the construction principle of moving averages, which smooths the closing prices. The MACD indicator uses the convergence and divergence between the short-term (commonly 12 days) moving average and the long-term (commonly 26 days) moving average to make judgments about buying and selling opportunities.
The advantage of MACD is that it avoids the frequent buy and sell signals issued by moving averages, increasing the requirements and restrictions for issuing signals. In practice, it is more stable than moving averages. Its disadvantage, like moving averages, is that in a sideways or range-bound market, the indicator can easily produce false signals and issue incorrect indications.
(2) Application of MACD
1. Basic application concepts
(1) MACD represents the deviation between the short-term exponential moving average and the long-term exponential moving average. (2) When the market trend strengthens, the short-term moving average rises faster than the long-term moving average, and MACD will run upwards. (3) When the upward trend of the market weakens, the short-term moving average will gradually flatten. If the market continues to decline, the short-term moving average will cross below the long-term moving average, and the MACD line will drop below the 0 line. (4) Changes in the direction of MACD reflect that the original market trend will gradually weaken, but whether a trend reversal will definitely occur should be considered in conjunction with other indicators.
(5) During price movements, short-term moving averages will converge or diverge from long-term moving averages. Therefore, MACD actually reflects the degree of convergence or divergence of moving averages.
2. Application Rules (1) After the most recent sell signal is issued, if the MACD line crosses the 0 line from top to bottom, the subsequent buy signal will be more credible. When a buy signal is issued, the MACD line may not be below the 0 line, but during the most recent price decline, the MACD line should be below the 0 line. (2) After the most recent buy signal is issued, if the MACD line crosses the 0 line from bottom to top, the subsequent sell signal will be more credible. When a sell signal is issued, the MACD line may not be above the 0 line, but during the most recent price increase, the MACD line should be above the 0 line.
When (3) the market is in a bull market, especially at the beginning of the rise and during the main upward phase, before the MACD issues a buying signal, it may not have dropped below the 0 line, but due to the market's strong performance, buying can be considered. Similar situations also apply in bear markets, but in general, the 0 line rule should be fully considered when making investment decisions.
3. Gerald Appel's golden rule
(1) At least two MACD indicators should be used in combination: short-term MACD for selecting buying opportunities and long-term MACD for selecting selling opportunities.
(2) When the market is in a significant upward trend, one should actively buy and be cautious about selling. At this time, you can use short-term MACD such as 6-19 days to determine the buying opportunity, and long-term MACD such as 19-39 days to determine the selling opportunity.
(3) When market conditions are relatively stable or slightly rising, one should actively buy and sell. Use the 12-26 day MACD to determine buying opportunities and the 19-39 day MACD to determine selling opportunities. (4) When the market is in a significant decline, one should actively buy and sell frequently. At this time, a more sensitive 12-26 day MACD should be used as the standard for selecting buying and selling opportunities. Note: unless the price reaches or falls below the stop-loss level, the prerequisite for choosing to sell is that the MACD line has previously crossed above the 0 line during its upward movement.
3) Combined analysis of moving averages and MACD.
1. In practice, if the cryptocurrency price reaches a new low (or fluctuates horizontally), and the MACD does not reach a new low but gradually rises, this bottom divergence pattern indicates that the market may enter a phase favorable for going long afterward.
2. Bottom divergence between MACD and cryptocurrency prices is sometimes not a straightforward signal. When it shows complexity, it can often lead traders who rigidly and mechanically apply technical indicators to great difficulties.
3. Bottom divergence can appear multiple times during the decline of a cryptocurrency. If traders rashly enter the market to go long simply upon seeing bottom divergence, they will inevitably incur losses as the price continues to decline. This shows that the analysis and application of technical indicators is not an isolated or simply applicable process; it requires traders to repeatedly validate from the perspective of technical environmental analysis.
4. The moving average and MACD indicators not only have complementarity but also resonate at key points. The compatibility details of moving averages and technical indicators are quite complex and difficult to exhaustively describe. Traders can gradually explore according to commonly used analytical ideas in practical operations.
5. Strong cross above the 0 axis means that the DIF breaks upwards above the 0 axis. If the subsequent MACD upward histogram can continue to enlarge and the price is supported above the moving average system, then the upward momentum will continue to strengthen, and traders can choose an opportunity to go long.
This article mainly explains technical theories closely related to moving averages. Without these foundational theories as a basis, moving average techniques would be like castles in the air, ethereal and elusive, making them hard to grasp. Start steadily from the basics and continuously expand and deepen your theoretical foundation, and you will find that the price fluctuation trajectory becomes increasingly clear and distinguishable.
One tree cannot make a forest; a single sail cannot sail far! In the cryptocurrency market, if you do not have a good network or insider information, then I suggest you follow me; I can help you profit and welcome you to join!
