In the crypto circle, how hard is it to turn a few thousand into 1 million? I also entered the crypto circle with a small amount of money and am now close to financial freedom. Today, I am willing to share the valuable experiences from this journey selflessly with every like-minded friend. In the ocean of digital currency, the art of capital management is crucial. I tend to divide my capital into five equal parts, using only one part for trading each time. This way, even when facing storms, I can maintain the stability of the vessel. I set a strict rule for myself: once a loss reaches 10%, I immediately retreat, regardless of how turbulent the external conditions are. Even if I face small setbacks five times in a row, my losses will only be limited to half of my capital, and once I catch the waves of profit, the gains will far exceed this. Even if I occasionally get momentarily trapped by the market, I can remain calm and maintain a composed mindset.
Following the market trend is the most reliable beacon to success. During market downturns, do not blindly bottom-fish; that is merely a fantasy. When the market warms up and corrects, that is our golden opportunity to buy low, which is much safer than stubbornly holding at the bottom.
When selecting cryptocurrencies, we need to develop a discerning eye. Those cryptocurrencies that soar like shooting stars, whether mainstream or non-mainstream, should be approached with caution. Because they rise too dramatically, the force of their corrections is equally astonishing; any slight misstep could lead to getting stuck.
In the field of technical analysis, I particularly trust the MACD indicator. When the DIF line and DEA line intertwine below the 0 axis and successfully break through the 0 axis, that is a good time to buy. Conversely, if they intersect above the 0 axis and extend downward, that is a signal to reduce positions.
As for averaging down, that is a path full of thorns, and should not be easily ventured. Once you incur losses, do not blindly average down; otherwise, you will only sink deeper and may ultimately lose everything. Remember to decisively cut losses when you are losing, and only gradually increase your position when you are profitable.
Trading volume is also an essential factor that cannot be ignored. When the price breaks through at a low level and the trading volume significantly expands, it often indicates that a significant opportunity is coming.
And the most critical aspect is to follow the trend. By combining the daily line, 30-day line, 84-day line, 120-day line, etc., when a particular line begins to show an upward turning point, you can clearly perceive the market's direction and thus make correct decisions.
The journey of digital currency investment is full of risks and also contains infinite opportunities. Only by mastering the essence of capital management, the skills of trend analysis, and the discerning eye for selecting coins can one, like me, gradually rise from a small starting point to become a member of the middle class.
So how do retail investors make money?
Many people might say that short-term relies on technology, while long-term relies on logic. In essence, short-term relies on sentiment, while long-term relies on value. Value itself also has sentiment; for instance, Bitcoin can be hyped up to $70,000 and then drop back to $15,000—not because Bitcoin's value has changed, but because market sentiment has changed. Bitcoin is still Bitcoin.
Therefore, to understand the long-term investment value, one must also understand market sentiment. As for short-term trading, the so-called candlestick techniques also reflect market sentiment. How the major funds draw candlesticks entirely depends on the overall market sentiment, whether there is capital following the trend, and whether there is market heat. It can be said that what is seen and heard on the candlesticks is what the funds want you to see, rather than naturally formed trades. The ultimate reflection of sentiment is trading volume.
Thus, any rise or fall in cryptocurrencies is ultimately reflected in the trading volume. Volume must exist for price to exist; without volume, the trend can only decline. The first step for retail investors to resist emotions is to understand trading volume and only participate when there is volume. The principle is simple: volume represents capital at work; no volume means that capital has abandoned the cryptocurrency in the short term.
Why do short-term traders focus on hot spots? Because capital clustering can create a profit effect. Even long-term bull coins and value investments are accompanied by volume. During a period of low volume and consolidation, one must continue to observe. Retail investors need to resist emotions. Understanding trading volume alone does not solve the problem; one must have their own trading principles.
The second step for retail investors to resist emotions is to set clear buy and sell conditions. Many retail investors trade whimsically, buying and selling whenever they want.
The buy point is basically when cryptocurrencies rise significantly; if you don’t buy now, they will take off. The sell point is when cryptocurrencies drop significantly; if you don’t sell now, you will be deeply trapped. The emotional tendency of chasing prices and cutting losses is human nature and stems from the collapse of retail investor sentiment and emotions under the market's violent fluctuations. Retail investors must resist emotions and stop buying and selling whimsically. They must have clear buy and sell points, understanding under what circumstances to choose to buy and under what circumstances to choose to sell. One must have a clear principle, deciding before holding positions, and not acting on impulse.
The third step to resisting emotions is to learn to be patient and let go. In the retail investor's trading mindset, there is another aspect, which is the weakness of human nature: regret. You will regret why you didn’t sell back then, leading to a drop in price and losses. You will regret why you didn’t buy back then, leading to a surge in price and missing out. Retail investors need to learn to be patient; what they must endure is the floating loss.
As long as the investment logic doesn't change, one must accept floating losses; this is one of the situations that must occur on the investment road. No one can perfectly buy at the lowest point. Retail investors need to learn to let go; what they give up is missing out.
As long as cryptocurrencies do not align with your investment logic, even if the price keeps rising, you should not follow the trend to buy. You must learn to let go. Let go of those increases that do not belong to your understanding. Cold-blooded people find it easier to make money in cryptocurrency trading because the lack of emotion is the only way to survive in the market.
Looking back at when I first entered the trading market, I tried every means to find knowledge about technology online, hoping to learn everything as early as possible so that I could quickly start practical trading and make money.
At this time, moving averages are usually the first batch of technical indicators I learned. Most online tutorials teach how to use two moving averages: one fast and one slow. When the fast line crosses the slow line from below, you buy; when the fast line crosses the slow line from above, you sell. This type of golden cross trading strategy is like a treasure trove for beginners because, compared to other more complex indicators, the golden cross is at least feasible for newbies, allowing immediate action. The result is predictable: heavy losses, daily tension, and frustration wondering why they lost money, blaming the heavens, the earth, and the moving averages as useless garbage.
What I just said is 100% my real experience, mistakes I made when I first started trading, which I believe are also experiences of many newcomers today. Today, I hope to share with you through this article everything I have learned about moving average techniques over the years, summarizing the mistakes I made and the insights I gained. This way, you won't repeat my mistakes, and at least your path will be much smoother than mine. I summarized that most people misunderstand moving averages by making it too superficial, imagining it too simplistically, thinking that seeing a golden cross means buy, and a dead cross means sell. In fact, what we really need to do is think about how to use moving averages to maximize your profits and improve your trading performance.
Today, I will discuss two major themes with you.
-: Is there a universal parameter setting for moving averages?
Second: How to use moving averages to help us achieve a 3-fold return.
What is a moving average? Conceptually, it is easy to understand; it is the average price over a certain period presented in a line graph.
There are three common types of moving averages.
SMA (Simple Moving Average)
WMA (Weighted Moving Average)
EMA (Exponential Moving Average)
SMA is simply dividing all prices to get an average. It reacts slowly to recent prices and market trend changes. EMA and WMA are conceptually the same, just with different algorithms. They will tend to give more weight, so they adapt faster and are more sensitive to recent significant price changes.
-: Is there a universal parameter setting for moving averages?
Actually, the most common question about moving averages is whether there is a universal parameter for moving averages, and what the best parameter is. 20?
50? 100? Or 200?
What is your purpose for using moving averages? Do you want an objective indicator to judge long-term trends? Or do you want to find a better entry point? Or do you want to use moving averages to set a stop-loss point? All of these can be accomplished using moving averages, but the key is that there is no best parameter setting for moving averages; there is only the most suitable parameter setting! And this parameter should not be determined by you, me, or anyone else; it should be determined by the market itself. Depending on different market conditions, trends, and strengths, the most suitable parameters will vary.
We will judge which period’s moving average is most suitable for this market based on two words. Here I use 20, 50, and 200, the three most common moving average periods, as examples. Let’s look at examples of how the market adheres to the above three parameter settings.
We see in the image above that the current price is in a downtrend. Each time the price touches the 20EMA, it seems to face an invisible pressure to continue falling. This tells us that the market is currently following this 20-period EMA.
Let's switch to the 50 and 200-period moving averages.
Let's make a comparison.
Do you see the difference?
Respectively corroborated from the side.
The market is in a strong trend
Because the 20-period moving average is most suitable for a relatively fast trend.
And the callback amplitude of the trend is relatively small
The second example
I use the 50-period EMA.
Also, we see the market is following the 50-period moving average.
This situation indicates that the market is in an upward trend.
If we look at the 20 and 200 EMA.
It will be found that the 20EMA is not very suitable.
Because it constantly intersperses between prices.
The 200EMA is too far from the price.
The last example.
200EMA
200EMA is more suitable for a long-term and relatively weak trend.
Although the intervals at which the price touches are relatively far apart.
But from a broad perspective,
The market is following this 200-period moving average.
Overall
Continuing to move towards an upward trend.
Let's open the 20 and 50 EMA to take a look.
Seeing them both seem like foolishly interspersing up and down.
In a relatively slow or visually indistinguishable trend
200EMA is a good choice.
Unfamiliar with the above knowledge
Has this given everyone some inspiration?
How to use moving averages to double your profits
Second: How to use moving averages to help us achieve a 3-fold return.
Next, I will talk about the second one.
More questions that friends are concerned about
This is how we can use moving averages to improve our trading.
Here I will divide into two matters.
Third: Use moving averages as a filtering condition.
Second: Use moving averages to find a better entry point.
Achieve a better profit-loss ratio
As we mentioned earlier.
Different time periods of moving averages can reflect trends of varying strengths.
20, 50, and 200 EMA moving averages.
Representing short-term, medium-term, and long-term market trends, respectively.
Here I will take the long-term trend.
That is, the 200EMA as an example
If the price stays above the 200EMA, we can judge that the long-term trend is up. If the price is below the 200EMA.
We can judge that the long-term trend is down; of course, this is just a rough judgment method.
It is best to use Price Action.
But for beginners
Price Action trading is relatively complex, so I suggest everyone temporarily use a 200EMA as a filtering function before learning Price Action.
Filter out some trades that conflict with market trends.
What I mean is not to say that contrarian trading cannot be done.
If contrarian trading is done well, it can also be highly profitable.
But trading against the trend has a low win rate.
The relative requirements are relatively high.
A deeper understanding of the market is required.
Friends with little experience
I hope you first learn to trade with the trend.
Try to follow the overall direction of the market in every trade.
One tree cannot make a forest, and a lone sail cannot travel far! In the crypto circle, if you don't have a good circle and insider information, I suggest you follow me. I will guide you to profit without investment. Welcome to join the team!!! Crypto Dream Chaser
