A few years ago, I experienced a loss of more than 6 million in just 5 days. This is a warning to all newcomers in the cryptocurrency circle. For those who are inexperienced in trading, not playing is also the best way to prevent a liquidation. It is important to do what you can.
Starting from February this year, I used one account for 9 months and increased my account from 50,000 to more than 2,000,000
Today I will share my trading strategies and experiences with my fellow cryptocurrency friends.
There is a saying that if you stand on the shoulders of giants, you will struggle ten years less.
At the end of the article, I will also talk to you about the most important profit system.
Friends who are lucky enough to see this and want to improve their cryptocurrency trading skills must read more and study carefully. It is recommended to collect it!
In fact, contracts are not for ordinary players.
1. Fund management must be good. With a leverage of 0-100x, short-term losses are inevitable. The single risk should generally not exceed 2%-3%, and aggressive players can reach 5%-8%. If the risk exceeds 8%-10%, the drawdown in the unfavorable period will reach 70%, and the average person's mental breakdown point is around 50%. Fund management must be strictly enforced.
Many people like to trade 5x or 10x, and their trading level is above 4h. The stop loss of the trading level above 4h is generally 5%-15%, and the risk of a single transaction has reached 25%. Doing so is like seeking death. In order to ensure the risk level and high leverage at the same time, the level must be lowered to 1 hour, 15 minutes, or 5 minutes.
The smaller the level, the fewer players can handle it. Generally, 1h-4h is the limit for ordinary players, 5-15 minutes is what professional players can handle, and 1 minute is beyond the control of ordinary professional players.
2. Trading system + must pass. To hone the trading system, long-term trading experience must be accumulated. The sign of successful running-in is not to do anything outside the model, and the conditions are clearly defined. In this process, continuous iteration is required, and the baptism of the mainstream of the bull-bear shock market is required. Because it is leveraged trading, t+0, and frequent trading, 90% of the tuition fees need to be prepared. Many people come up with tens of thousands to play. You must understand one thing. No matter how much starting capital is, it is only enough to pay tuition once, and there are 8 more times to come. Therefore, you must do it with a small amount of capital, hundreds or thousands of dollars, and don’t add funds when you make a profit, and withdraw money when you make a profit. Continue to use small funds. At the beginning, the system and operation will not be particularly proficient, and many mistakes and unnecessary actions cannot be avoided. Many posts say how much they lost. In my opinion, such losses are meaningless. They just paid tuition once, and they didn’t even touch the door. The learning curve has not been raised, which is no different from gambling.
3. Execution must be good. Similar to last year's 519, if you bet on the wrong direction once, you will be doomed. No matter how much money you made before, it will be equal to 0 as long as you don't get through such a black swan. Not to mention strict stop loss, more liquidations are caused by bottom fishing against the trend, similar to the recent luna+ which was also bottom fishing against the trend. Don't bet on low-probability events, and don't expect to achieve success in one battle.
4. Time and experience accumulation. In a bull-bear market, you need to be familiar with the market characteristics of different products at different stages and adjust your strategy according to market conditions.
For small investors, the time they spend in this market is very limited, so it is certainly difficult to get involved in such a professional market. I have a few suggestions.
1. Trial and error with small capital.
2. Keep the leverage below 2/3 times, make good fund planning based on the big cycle, and consider rolling positions.
3. Do large cycles at the 1h, 4h or daily level.
4. If the conditions are insufficient, do not do short-term contract trading unless you are a professional, and do not do it as a professional unless you have no other choice.
5. Without completing the first 4 items, do not invest more than 20,000 yuan. Just use the pocket money you don’t feel bad about losing in the event of a loss.
In fact, in terms of difficulty, contracts are much more cruel than arbitrage and spot trading in terms of results. Don't look at the few people at the top of the pyramid. They are all trying to trick retail investors into entering the market. Everyone knows that the success of a general is the result of the sacrifice of thousands of soldiers.
I hope there will be less tragedy and more rationality. Keep a light position, follow the trend, and stop loss. The above suggestions hope to save your wallet and not fall into the quagmire of the casino and go down a road of no return. With 2,000 yuan in your pocket, why do you have to do contracts? You can only make 20,000 yuan if you make ten times a year. Setting up a stall for a month is not better than this. Many people end up getting stuck in a dead end and have to do it. The opportunity cost is much higher than other ways. Do it according to your ability.
I know that many people have low incomes and feel that not only can they not change their fate, but even working hard cannot improve their lives.
Thinking about saving some money, I can realize my life accumulation through investment or speculative trading, such as making the first 1 million.
There are also people whose families are better off and can afford to buy a house. At least their parents can give them a down payment and they live a good life. At this time, they also want to upgrade their class through speculative transactions, such as reaching the A8 level.
However, the reality is that no one can accept becoming rich slowly, and they feel that being rich when you are no longer young is meaningless. When you are seventy years old, no matter how rich you are, you can no longer eat, work, or play.
Therefore, young people are very anxious and eager to become rich overnight.
There are many people here who choose to enter the cryptocurrency circle, hoping to get rich through contract trading!
So, is this path feasible? Internet celebrity Liang Xi once earned tens of millions, but now he is heavily in debt and can no longer use online loans, credit cards, or Huabei.
1. The charm and risks of contract trading
In the cryptocurrency world, contract trading is like a mysterious and alluring vortex, attracting countless people to join in.
It seems to exude a unique "charm", and the possibility of high returns makes investors feel as if the dream of getting rich overnight is just around the corner!
2. Debate on the Nature of Transaction
1. Investment or Gambling
Cryptocurrency contract trading has always been a confusing topic. Is it an investment or a gamble? Compared with traditional investments, its rules are somewhat different.
Traditional investments often have clearer fundamentals and market rules to follow, while contract trading is full of more uncertainties.
In contract trading, investors use leverage to amplify gains or losses based on their predictions of cryptocurrency price trends.
When many people first started participating, they were confident that they could get a piece of the pie in this market with their wisdom and skills!
But in reality, they often fall into the vortex of gambling without realizing it, and place orders based solely on luck and intuition, but their awareness of risks is far from enough.
2. The tug of war between risk and return
The existence of leverage is like a double-edged sword. Although it can multiply profits when the market is favorable, it also greatly increases the risk of liquidation.
Once the market trend goes against investors' expectations, even a small fluctuation may cause investors to lose all their money.
The seemingly tempting high returns attract countless people to pursue them regardless of the risks. They often only see the huge profits in the successful cases, but ignore the huge risks hidden behind them. Driven by greed, they step into the abyss step by step.
3. The struggle of retail investors
1. The Lost Path of Highly Educated Youth
Look at those highly educated friends around us. They have good academic qualifications, jobs and knowledge. They stay away from pornography, gambling and drugs in their daily lives. They can be described as motivated young people.
But who could have imagined that they would also be trapped in the quagmire of contract trading and unable to extricate themselves.
They have been losing money, but they are never willing to give up. They keep trying various methods, summarizing experiences and lessons, and fantasizing that one day they will be able to master the so-called "trading strategy" and embark on the road to stable profits.
In front of others, he always acts like a financial expert, as if "by entering the financial industry, I am the top figure on the pyramid, and I walk around in the trillion-dollar market every day. The market is a ATM for me."
When they go home for the Chinese New Year, when relatives and friends ask, "Child, what do you do outside?" they will proudly answer, "I work in finance."
Many of them are actually not professional financial practitioners, and they don’t even know anything about financial knowledge. They are just attracted by the various hype and temptations in the cryptocurrency circle.
In order to make up for the regret of not being able to make a big splash in the stock market, they began to cram knowledge and study strategies, eager to make a splash in the cryptocurrency world.
But in the end, they chose the thorny road of contract trading and were beaten badly by the market.
(II) Blind Confidence of Retail Investors
In the cryptocurrency world, there are many retail investors like this. They generally have a blind self-confidence and overestimate their abilities.
When they see others making money in the cryptocurrency world, they think they can do it too and jump in without hesitation.
They think they have unique insights into the market and can accurately predict price trends, but they ignore the complexity and uncertainty of the market.
In contract trading, they often blindly place orders based on some superficial technical analysis and so-called "news", completely disregarding the risks.
They always think that they are smarter than others and can seize every opportunity in the market, but they don’t know that they have already fallen into a huge trap.
This blind self-confidence makes them unwilling to stop losses in time when facing losses. Instead, they continue to increase their positions in an attempt to recover the losses, but end up getting deeper and deeper into trouble.
4. Why is it so difficult to extricate yourself?
1. The temptation of high returns
The lure of high returns is undoubtedly one of the important reasons why many investors are attracted to contract trading. The leverage effect enables investors to obtain returns far exceeding the principal when the market is good.
For example, in a favorable market situation, investors may use leverage to magnify their original investment returns several times or even dozens of times.
The possibility of getting rich instantly is like a strong illusion that makes investors addicted. They keep chasing such high returns, and even though they know the risks are huge, they can hardly resist the temptation.
Moreover, the uncertainty of the cryptocurrency market also adds a mysterious color to this high return. The large fluctuations in prices make investors feel that there are opportunities everywhere, as if they can achieve financial freedom as long as they seize it once.
Therefore, driven by greed, they took the risk to participate in contract transactions again and again, and fell into a situation from which they could not extricate themselves.
2. Psychological factors
In addition to the temptation of high returns, psychological factors also play a key role in investors falling into the trap of contract trading. Greed and luck are the most common.
When investors see the profits in their accounts increasing, their greed will quickly expand. They want to earn more and are unwilling to take profits in time, always feeling that the market will continue to develop in a direction that is favorable to them.
However, when the market trend starts to turn unfavorable, their mentality of hoping for luck will make them think that this is only a temporary correction and that it will rebound soon, thus making them unwilling to stop losses.
The so-called myths of getting rich quickly in the cryptocurrency circle have also become their motivation to persevere. When they see others making tens of thousands to tens of millions, they firmly believe that they can also become the next lucky person, and they are still unwilling to give up even if they suffer losses again and again.
This psychological obsession makes them sink deeper and deeper into the quagmire of contract trading, unable to extricate themselves.
5. Contract trading has no chance of winning
If you think about it carefully, contract trading has no chance of success for most people. First of all, market uncertainty is an insurmountable obstacle.
The digital currency market is affected by many factors, and price trends are difficult to predict. Even if you master some technical analysis methods, you cannot accurately judge the future trend of the market.
There are still a lot of human manipulation factors in the market. In order to gain profits, some bankers and big investors will manipulate market prices through various means, putting ordinary investors in trouble.
After more than 10 years of cryptocurrency trading, I have summarized my experience and will share some practical tips on how to prevent margin calls when trading contracts!
1. When the market is in a state of shock, the long and short positions are in full swing. At this time, you should actively avoid risks. Risks come from exchanges pulling the plug and huge instantaneous fluctuations.
Or you can participate with a small amount of light position. Keep the risk small.
2. Shanzhai Wuliang Pin. At the end of a wave of rising market, near the peak area of BTC, Shanzhai bulls are prone to concentrated selling*, triggering Wuliang Pin. This situation also needs to be avoided.
The principle I set for myself is to only trade BTC or mainstream products with large trading volumes. Products with insufficient trading volumes are extremely risky in this situation.
3. Maximum drawdown under the closed loop of trading logic. I set it to 50% for myself. Always avoid liquidation. In summary, when the risk is high, do a small amount, and when the risk is low, do a large amount. But to be honest, it is difficult to grasp this degree.
4. Asset allocation*. Always use less than 10% of your liquidity to play. Withdraw when the profit reaches x times. In the early stage, you can't figure out whether it is earned by luck or strength. At this time, locking in profits is the best strategy for you, and then rolling with small funds, repeating the cycle. The top few of Contract Emperor started with hundreds or thousands of dollars. If you don't have a mine at home, it's best not to compare the principal with others.
Finally, I spent half a year exploring the contract myself. The top few on the list all experienced many liquidations in the early days. For newbies with insufficient trading experience, not playing is also the best way to prevent liquidations. It is important to do what you can.
So how do we open contract transactions correctly?
After more than 10 years of cryptocurrency trading and the pain of five contract liquidations in the past few years, I finally realized the only secret to playing contracts!
1. Liquidation in the cryptocurrency contract market is common
In the last month, we have witnessed a liquidation of up to $20 billion in the cryptocurrency contract market. This data makes us ponder: Is the cryptocurrency market really short of funds?
In the cryptocurrency world, it is not difficult to find that funds are never a problem. What is truly scarce is the upward force that can gather all forces. This force is what every market participant desires and is the key to driving the market forward.
So why did such a large-scale liquidation occur? Is it just small funds that are desperate and trying to make a fortune with a small investment? This is not the case. Whether it is small funds or large funds, the pursuit of overnight wealth is a common goal. When we see the figures of those liquidations, we should not simply blame them on the impulse of small funds.
Suppose that if 1 million retail investors all enter the contract market, then the 20 billion liquidation funds will average out to 20,000 per person. But this is just an extreme assumption, which is based on the assumption that all retail investors participate in the contract and all contracts are liquidated. But the reality is not the case. Recently, the proportion of liquidation of long positions has reached more than 90%, which has caused us to think about the real situation of the market.
From this perspective, it is not just retail investors who are liquidated. The liquidation of tens of billions of dollars is more like a warning: whether using 5x, 20x or 100x leverage, there are huge risks. This risk can come at any time regardless of the size of the funds.
2. Establish a robust contract practice system to cope with market fluctuations
Why are so many people still hesitant and hesitant to buy recently? After in-depth analysis, I found that different friends have their own unique insights, but more voices reveal the following mentality:
One is that they have run out of ammunition and lack of funds makes it impossible for them to re-enter the market.
The second is the concern that "the decline will never end", and the fear that the market will continue to fall after buying.
The third is the mentality of "fear of gain and loss", which is to be afraid of losses but also to pursue victory, thus falling into a vicious circle of chasing rising and selling falling.
The fourth is to "wait and see" and miss the opportunity in hesitation.
The fifth is "lack of courage and determination", feeling fear of the unknown in the market and being unable to act decisively.
These mentalities are common in the cryptocurrency world. They are like an invisible barrier that fills the entire market with panic. After an in-depth analysis, I found that the first four reasons mostly stem from the cognitive level of contract investment. Only when you have a deep understanding and sufficient knowledge of the market can you overcome these obstacles and have enough courage and determination to deal with market fluctuations.
There are two main reasons for the market downturn after the cryptocurrency market crash: one is the natural fear instinct of human beings, and the other is the lack of understanding of contract speculation. In addition to these psychological factors, I think the more critical thing is to establish a set of your own contract practice system.
3. From self-awareness to strategy improvement, achieving long-term stability
The famous investment philosopher Van Tharp once said: "You are not trading the market alone, but your understanding and belief in the market." What this means is your investment operating system - a unique set of market interpretation and action guidelines. But how easy is it to build such a practical system?
Before building the latest strategy system, you need to clarify your investment philosophy and have a deep understanding of yourself. This includes your interests, goals, knowledge accumulation, skills mastery, and the boundaries of your abilities. Only by truly understanding yourself can you find a path that suits you. In addition, you need to be clear about when to enter the market, when to leave the market, which targets to choose, and how to configure positions. Not only that, you also need to be prepared to deal with mistakes. When the market trend does not meet your expectations, how should you deal with it? This is not to let you choose extreme methods, but to let you learn lessons from failure and constantly improve your system.
You may find this road difficult. But playing with coins is not an easy task that can be accomplished overnight. It requires continuous learning, practice, reflection and adjustment. To establish and verify a perfect investment operating system, you often need to go through two bull and bear cycles. In the stock market, this may take 6 to 10 years; in the cryptocurrency circle, although it is generally recognized that the bull and bear cycle is shorter, about 4 years, it also means that you need at least 8 years to continuously improve and verify your system.
This may sound daunting, but you have to know that this is a marathon, not a sprint. However, I must admit that not everyone realizes the importance of establishing an investment operating system. Some retail investors may blindly follow the trend and chase the rise and fall throughout their lives, and never really establish their own strategy system.
4. How to avoid liquidation in contract operations?
In fact, I have tried to build multiple operating systems. I have carefully designed the valuation model of currencies, the criteria for buying and selling, the strategy for selecting currencies, and the planning of holding time. Whether it is the stock market or the foreign exchange market, I have invested my efforts in operation. Now I bring these experiences to the cryptocurrency circle, hoping to find my own path to success here.
In the past few years, I have encountered five liquidations in contract operations. This is undoubtedly a heavy blow to me, and also a miraculous experience in my career in the cryptocurrency circle. After each liquidation, I tried to find various reasons and reasons to explain it, and even complained about the volatility of the market like many leeks.
But one day, it suddenly dawned on me. I began to realize that an overly complex operating system might not be what I really needed. I began to think about whether there was a way to get rid of the trouble of liquidation and make me more relaxed on the road of the cryptocurrency circle.
So, I found my answer - strict position management. Although this trick is simple, it contains profound investment wisdom. It allows me to stay calm in the face of market fluctuations and avoid getting into trouble due to excessive leverage or heavy positions. I believe that as long as I can strictly implement this strategy, I will be able to go further and more steadily on the road of investment.
5. Extreme position management: the ultimate line of defense against cryptocurrency contract liquidation!
The root cause of contract liquidation is often due to two factors: excessive leverage and full position operation. These two are like a double-edged sword in position management, and we need to carefully weigh them. Leverage and position complement each other. When you choose high leverage, you must adjust your position to a very low level accordingly, and vice versa.
We don't need to comment on the extreme volatility of the market, and we don't need to be too emotional about the ups and downs of the market. How the outside world changes has nothing to do with our inner decisions. All we have to do is to protect the safety of our positions. The market will always stir up waves at some point, but the safest strategy is to put yourself in a solid fortress. You can occasionally stick your head out and feel the pulse of the market, but you must never expose yourself to the forefront of risks.
Therefore, extremely demanding position management has become the core of contract trading. It is not only a strategy, but also an attitude, a kind of awe and respect for investment. For example, the current price of EOS is 3U. If we can control our contract liquidation price at 1.5U, then no matter how the market fluctuates, we will be safe. This is the charm of position management, which makes us more calm and at ease in investment.
There is an old saying: "If you keep the green mountains, you will never run out of firewood." This is the essence of position management. Only by ensuring the safety of your own funds can you be invincible in the future market. In the currency circle, I always adhere to half-positionism, or even dynamic half-positionism. Whether it is spot trading or contract trading, I can handle it with ease. After experiencing the baptism of the contract market many times, I deeply realized that the only secret to playing contracts is position management.
Even the stock god Buffett maintains a large amount of cash reserves. Why can't we learn strict position management from them?
I have been trading in cryptocurrencies for more than 10 years, and here is what I have summarized through my hard work (the brainless rolling method): 300 times in 3 months, earning 30 million. If you also want to get a piece of the cryptocurrency market, read this article carefully, you will benefit for life!
01 Timing of rolling position
02 Technical Analysis
03 Position Management
04 Adjusting positions
05 Risk Management
Since the dust settled on the Fed's interest rate cut policy, the cryptocurrency market has welcomed a group of new investors who are eager for wealth and hope to find their own place in this field. However, the cryptocurrency market is not full of gold, it is more like a cruel natural selection, and only those who truly adapt to the laws of the market can gain a foothold. Although the market is open to everyone, only a few investors can really get rich returns in this field.
For those investors who are ready to step into the cryptocurrency world, they must be aware that the cryptocurrency world is not a place where you can easily realize the dream of getting rich overnight. Instead, it requires investors to conduct long-term market research, experience accumulation and continuous learning. Many people enter the market with the fantasy of getting rich quickly, hoping to get huge returns quickly with small investments. Although such success stories do exist, they often need to be achieved through a carefully planned "rolling position" strategy, which is not easy and cannot be achieved through frequent operations.
The "rolling position" strategy is feasible in theory. It requires investors to invest with appropriate positions when major opportunities appear in the market, rather than frequently making small transactions. The successful implementation of this strategy often depends on accurate judgment of market trends and grasp of timing. Although it is possible to accumulate wealth from zero to tens of millions by seizing such opportunities a few times in a lifetime, this requires investors to have extremely high market insight and decision-making ability.
In the pursuit of profit, investors should not only focus on the ultimate profit target, but should pay more attention to how to achieve these targets. This means starting from one's own actual situation, investing time and energy to deeply understand the market, rather than blindly pursuing those unrealistic huge profits. The essence of trading is to identify and seize opportunities, rather than blindly pursuing light or heavy positions.
In daily trading practice, investors can use small amounts of money to operate, thereby accumulating experience and skills. When the real big opportunity comes, they will go all out to seize the opportunity. When investors gradually grow from a small amount of principal to millions of yuan, they will unknowingly master the strategy and logic of making big money. At this time, their mentality will become more mature and stable, and future operations will be more like the replication and optimization of past successful experiences.
For investors who want to learn the rolling strategy or want to understand how to grow from a small amount of capital to a millionaire, the following content will provide valuable guidance and advice. This will be a journey full of challenges and opportunities, requiring investors to invest a lot of time and energy in in-depth research and practice.
Rolling time
The art of rolling a position is not something that can be mastered on a whim. It requires the right time, right place, and right people to increase your chances of success. Here are four golden opportunities for rolling a position:
(I) Breakthrough after a long period of sideways trading: When the market is in a sideways state for a long time and the volatility drops to a new low, once the market chooses a breakthrough direction, you can consider using rolling positions.
(II) Buying at the bottom of a bull market: In the bull market, the market experienced a strong rise and then suddenly fell. At this time, you can consider using a rolling strategy to capture the opportunity to buy at the bottom.
(III) Weekly level breakthrough: When the market breaks through the key resistance or support level on the weekly chart, it is like breaking through a solid line of defense. At this time, rolling positions can seize this breakthrough opportunity.
(iv) Market sentiment and news events: When market sentiment is as changeable as the weather, or when there are major news events and policy changes that may shake the market, rolling positions can be a powerful weapon in your hands.
Only in these specific circumstances will the chances of winning in rolling positions be significantly improved. Other times, it’s better to be cautious or simply pass on less-than-clear opportunities. But if market conditions seem suitable for rolling positions, don't forget to strictly control risks and set stop-loss points to prevent unexpected events. After all, wise investors are always those who know how to find a balance between risks and opportunities.
Technical Analysis
After confirming that the market is suitable for rolling positions, the next step is technical analysis. First look at the trend, using tools such as moving averages, MACD, and RSI to determine whether the market is going up or down. If possible, it is best to use several indicators together, which is more reliable.
Find out the key support and resistance points of the market, determine whether the breakthrough is reliable, and use divergence signals to seize the opportunity of reversal. For example, if the price hits a new high but MACD does not keep up, this may be a top divergence, which means that the price may fall. At this time, you can consider reducing your position or shorting. Conversely, if the price hits a new low but MACD does not hit a new low, this may be a bottom divergence, which means that the price may rise. At this time, you can consider adding positions or going long.
Position Management
The key to reasonable position management lies in three steps: determining the initial position, setting the rules for increasing positions, and formulating a strategy for reducing positions. It is easier to understand by giving an example.
Initial position: If you have 1 million yuan, the initial investment amount should not exceed 10%, which is 100,000 yuan.
Rules for increasing positions: When you decide to increase your investment, you must wait until the price breaks through the key resistance level. The amount of each additional investment should not exceed 50% of the original investment, that is, a maximum of 50,000 yuan.
Scaling strategy: When the price reaches your expected profit target, you can start selling gradually. Remember, let go when it is time to let go, don't hesitate. The amount sold each time should not exceed 30% of the current holdings, so that you can gradually lock in your profits.
In fact, as ordinary investors, we can be bolder when we encounter great opportunities, and be more conservative when there are few opportunities. If we are lucky, we may make millions; if we are unlucky, we can only accept reality. However, I still want to remind everyone that once you make money, you should first withdraw the invested capital, and then use the profit to continue investing. You can not make money, but you cannot lose money.
Adjusting positions
After finishing the position management, we come to the most critical step - how to achieve rolling positions by adjusting positions.
1. Timing: Enter the market when the conditions for rolling positions are met.
2. Open a position: Follow the signals from technical analysis and find the right time to enter the market.
3. Add positions: If the market goes in your direction, then gradually add positions.
4. Reduce your position: When you have made the expected profit or something is wrong with the market, sell it slowly.
5. Close a position: When your target price is reached, or the market is clearly changing, sell everything.
How to operate specifically, let me share my experience of rolling warehouse:
1. Add more when you make money: If your investment goes up, you can consider adding more, but the premise is that the cost has come down and the risk is small. You don’t have to add every time you make money, but you have to add at the right time, such as at the breakthrough point in the trend, and then reduce it immediately after the breakthrough, or add it during the callback.
(II) Base position + T: Divide your assets into two parts, keep one part as the base position, and buy and sell the other part when the market price fluctuates. This can reduce costs and increase returns. There are several ways to divide it:
1. Half-position rolling: half of the funds are held for a long time, and the other half is bought and sold when the price fluctuates.
2. 30% bottom position: 30% of the funds are held for the long term, and the remaining 70% are bought and sold when the price fluctuates.
3. 70% bottom position: 70% of the funds are held for the long term, and the remaining 30% are bought and sold when the price fluctuates.
The purpose of doing this is to maintain a certain position while taking advantage of short-term market fluctuations to adjust costs and optimize the position.
Risk Management
Risk management, in simple terms, involves two things: total position control and capital allocation. To ensure that your total investment does not exceed the risk you can bear, you must allocate funds wisely and not put all your eggs in one basket. At the same time, you must always pay attention to market dynamics and changes in technical indicators, flexibly adjust strategies according to market conditions, and stop losses or adjust investment amounts in a timely manner when necessary.
Many people may feel excited and scared when they hear about rolling positions. They are eager to try but are also worried about the risks. In fact, the rolling position strategy itself is not very risky. The key lies in the use of leverage. If used reasonably, the risk can be completely controlled.
For example, I have 10,000 yuan in principal. When the price of a certain coin is 1,000 yuan, I open a position. I use 10 times leverage, but only use 10% of the total funds (that is, 1,000 yuan) as margin. In this way, I actually only use 1 times leverage. If I set a 2% stop loss line, once the market is unfavorable, I will only lose 2% of the 1,000 yuan, that is, 200 yuan. Even if the worst happens and the liquidation condition is triggered, you will only lose the 1,000 yuan, not all the funds. Those who have liquidated their positions often use too high leverage or have too heavy positions, and the slightest market fluctuation may trigger a liquidation. But according to this method, even if the market is unfavorable, your losses are limited. Therefore, whether you use 20 times leverage or 30 times, or even 3 times or 0.5 times, the key lies in whether you can use leverage reasonably and control your positions.
The above is the basic operation process of rolling position. Friends who are interested can read more and study it carefully. Of course, everyone may have different opinions. I am just sharing my experience and not trying to convince anyone.
How to make small funds bigger?
Compound interest effect.
If you have a coin and its value doubles every day, after a month, its value will be much higher. Double it on the first day, double it again on the second day, and so on, and the final number will be astonishingly large. This is the magic of compound interest. Even if you don't have much money at the beginning, as long as you keep doubling it, you will eventually accumulate to an astonishing number.
For those who don't have much money but want to enter the market, aim for big goals. Many people think that small funds should be traded frequently in the short term to increase value quickly, but in fact, the medium and long term may be more suitable. Instead of making a little money every day, it is better to focus on how many times the growth can be achieved in each transaction. What we want is multiple growth, an exponential leap.
In terms of position management, you should first diversify your risks and not put all your funds on one transaction. You can divide your funds into three or four parts and only invest one of them at a time. For example, if you have 40,000 yuan, divide it into four parts and only use 10,000 yuan for each transaction.
Use leverage appropriately. The leverage for mainstream currencies should not exceed 10 times, and for small currencies should not exceed 4 times.
Make adjustments dynamically. If you lose money, replenish the same amount of funds from outside; if you make money, withdraw some appropriately. In any case, don't let yourself fall into losses.
When your funds grow to a certain level, you can consider gradually increasing the amount of each transaction, but don't add too much at once; do it step by step.
Through reasonable position management and a sound trading strategy, small funds can gradually achieve substantial appreciation. The key is to wait patiently for the right time and focus on the big goal of each transaction rather than the small profits every day.
I also know that margin calls can happen to anyone. But I still had spot profits to make up for the losses. I don’t believe that you didn’t make any money from the spot. My futures only account for 2% of the total funds. No matter how much I lose, I won’t lose it all. The amount of loss is always within my control.
I hope that we can all make our funds grow like a snowball.
There are several points you must know about contracts in the cryptocurrency world:
What is leverage trading?
Before introducing isolated margin and cross margin, let's briefly introduce leveraged trading. Leveraged trading refers to investors using funds borrowed from trading platforms or brokers to buy and sell assets beyond their own ability to bear. They use their own assets in the account as collateral to borrow and invest more funds in the hope of earning more returns.
Suppose you have $5,000 and believe the price of Bitcoin will rise. You can buy $5,000 of Bitcoin directly or trade with borrowed funds using your own position. Suppose the price of Bitcoin rises by 20%. If you invested $5,000 without using leverage, the value of your current investment would rise to $6,000 ($5,000 principal + $1,000 profit). In other words, the profit is 20% of the principal.
However, if you use a 5:1 leverage when investing $5,000, you will borrow four times your own funds, which means you will have an investment capital of $25,000 ($5,000 is your own funds and $20,000 is the loan). Assuming the price of Bitcoin increases by 20%, the value of your $25,000 investment capital will now rise to $30,000 ($25,000 investment capital + $5,000 profit). When you repay the $20,000 loan, you will have $10,000 left. In other words, the profit is 100% of your own funds ($5,000).
Remember that leveraged trading is extremely risky. Let's look at the opposite scenario, where the price of Bitcoin drops by 20%. At this point, if you had not used leverage, the value of your $5,000 investment would drop to $4,000 ($5,000 investment - $1,000 loss), a 20% loss. But if you used 5:1 leverage, the value of your $25,000 investment would drop to $20,000 ($25,000 investment - $5,000 loss). Once you repay your $20,000 loan, you will be left with nothing, a 100% loss.
The simplified examples above do not include transaction fees or possible interest on borrowed funds, which can reduce your returns in real trading scenarios. It is important to remember that because markets can move quickly, potential losses could even exceed your investment principal.
What is Isolated Margin?
Isolated margin and cross margin are two different types of margin that are offered by many cryptocurrency trading platforms. Both models have their own benefits and risks. Below we will take a closer look at what these two models are and how they work.
In isolated margin mode, the margin amount for a specific position is limited. This means that users can decide how much funds to allocate as collateral for a specific position, while the remaining funds are not affected by the transaction.
Assume that your total account balance is 10 BTC. You believe that the price of Ethereum (ETH) will rise, so you decide to open a leveraged long position on ETH. You allocate 2 BTC as isolated margin for this particular trade, with a leverage ratio of 5:1. This means that you are actually trading 10 BTC worth of ETH (2 BTC of your own funds + 8 BTC leveraged position).
If the price of ETH rises and you decide to close your position, all the profits you make will be credited to the initial margin of 2 BTC allocated to the trade. But if the price of ETH drops sharply, the maximum amount you can lose is the isolated margin of 2 BTC. Even if your position is forced to be closed, the remaining 8 BTC in your account will not be affected. This is why this mode is named "isolated" margin.
What is Cross Margin?
Cross margin uses all available funds in your account as collateral for all trades. If one position is losing money, but another is profitable, that profit can be used to cover the loss, allowing you to hold your position longer.
Let's use an example to explain how this works. Let's assume that your total account balance is 10 BTC. You decide to open a leveraged long position in ETH and a leveraged short position in another cryptocurrency, Z, in Cross Margin mode. You are actually trading 4 BTC worth of ETH and 6 BTC worth of Z, both with a leverage ratio of 2:1. Your total account balance of 10 BTC will be used as collateral for both positions.
Assume that the price of ETH falls, causing potential losses, but at the same time the price of Z also falls, resulting in a profit on your short position. In this way, the profit from the Z transaction can be used to offset the loss from the ETH transaction, and both positions can remain open.
However, if the price of ETH falls and the price of Z rises, both of your positions could face losses. If the loss exceeds your total account balance, both positions could be forced to close and you could lose your entire 10 BTC account balance. This is very different from isolated margin, where your maximum loss is no more than the 2 BTC allocated to the corresponding trade.
Keep in mind that the above simplified examples do not include transaction fees and other costs. In addition, real trading scenarios are usually much more complicated.
The main difference between isolated margin and cross margin
From the above examples, we can clearly see the similarities and differences between isolated margin trading and cross margin trading. We can summarize their main differences in the following way:
Collateral and liquidation mechanism
In isolated margin mode, only a portion of funds is reserved for a specific trade, and only that portion of funds is at risk of loss. This means that if you use 2 BTC to trade in isolated margin mode, only these 2 BTC are at risk of forced liquidation.
However, in the cross margin model, all the funds in your account are used as collateral for the trade. If a position is losing, the system can use your entire account balance to prevent the position from being forced to close. However, if multiple trades are losing heavily, you may lose your entire balance.
Risk Management
Isolated margin allows for more granular risk management. You can allocate a specific amount you are willing to lose to each trade without affecting the remaining account balance. In contrast, cross margin combines the risk of all open positions. This model can be useful when managing multiple positions that may offset each other, but combining the risk of all positions may also mean that potential losses may be higher.
flexibility
In isolated margin trading, if you want to increase your margin, you must manually add more funds to the isolated margin position. In contrast, cross margin automatically utilizes all available balances in your account, preventing any positions from being forced to close, eliminating the need to frequently pay maintenance margin.
Use Cases
Isolated margin is suitable for traders who want to manage risk on a trade-by-trade basis, especially when the trader is highly confident in a particular trade and wants to manage the risk separately. Cross margin is more suitable for traders who hold multiple positions that may hedge each other, or those who want to utilize their entire account balance without having to pay maintenance margin frequently.
Advantages and Disadvantages of Isolated Margin
The advantages and disadvantages of isolated margin are as follows:
Advantages of Isolated Margin
Manageable risk: You decide how much money to allocate and lose on a specific position. Only that amount of money is at risk of loss, and the remaining funds in your account are not affected by the potential loss of that specific trade.
Clearer P&L: When you know the exact amount of money allocated to a single position, it is easier to calculate the P&L of that position.
Predictability: By segregating funds, traders can predict the maximum loss they could face in a worst-case scenario, which helps in better risk management.
Disadvantages of Isolated Margin
Requires close monitoring: Since only a portion of your funds are used as collateral for your position, you may need to monitor your trades more closely to avoid forced liquidations.
Limited leverage: If a trade starts losing money and is close to being liquidated, you cannot automatically use your remaining account funds to stop it. You must manually add more funds to your isolated margin.
Higher management costs: Juggling multiple isolated margins for different trades can be complex, especially for beginners or traders managing a large number of positions.
In summary, while isolated margin provides a controlled environment for managing leveraged trading risks, the model requires more active management and may limit profit potential if used improperly.
Advantages and Disadvantages of Isolated Margin
The advantages and disadvantages of cross margin are as follows:
Advantages of Cross Margin
More flexible margin allocation: Cross margin automatically uses all available balance in the account to avoid forced liquidation of any open positions. Compared with isolated margin, this model provides higher liquidity.
Offsetting positions: Gains and losses between positions can offset each other, which may be beneficial for hedging strategies.
Reduced Liquidation Risk: Cross Margin reduces the risk of any single position being liquidated prematurely by pooling all balances, as there is a larger pool of funds to meet margin requirements.
Easily manage multiple trades: This simplifies the process of managing multiple trades simultaneously, as you don’t have to adjust margin for each trade individually.
Disadvantages of Cross Margin
Higher risk of overall liquidation: If all positions incur losses and the total loss exceeds the total account balance, there is a risk of losing the entire account balance.
Less control over individual trades: In the cross margin model, since the margin is shared by all trades, it is difficult to set a specific risk-reward ratio for a single trade.
Potential for over-leverage: Since the cross margin model allows the use of the entire balance, traders may be tempted to open larger positions than in the isolated margin model, which may result in larger losses.
Lack of clarity on risk exposure: It is difficult for traders to clearly gauge their overall risk exposure, especially when there are multiple open positions with varying degrees of profit and loss.
An example of using both isolated margin and cross margin
Combining isolated and cross margin strategies is a subtle way to maximize returns and minimize risk in cryptocurrency trading. Let’s use an example to illustrate how it works.
Let's assume that you think the price of ETH will rise due to an upcoming upgrade to Ethereum, but you also want to hedge against potential risk from overall market volatility. You suspect that while ETH may rise, BTC may fall.
In this case, you can consider using isolated margin mode for a portion of the portfolio (for example, 30%), and use that portion of funds to open a leveraged long position in ETH. This way, you can limit your potential losses to 30% in case ETH does not perform as expected. But if the price of ETH rises, you will get a substantial gain from this portion of the portfolio.
For the remaining 70% of the portfolio, you use the cross margin model to open a short position in BTC and a long position in another altcoin, Z. You believe that this trade will perform well regardless of BTC's trend.
In this way, you are using the potential gains of one position to offset the potential losses of another position. If BTC drops as you predicted, the resulting gains can be used to offset the losses of Z, and vice versa.
Once you have these positions set up, you will want to monitor both strategies on an ongoing basis. If ETH starts to drop, you may want to consider reducing your isolated margin position to limit your losses. Similarly, if Z in the cross margin strategy starts to significantly underperform, you may also want to consider adjusting your position.
By combining isolated and cross margin, you can actively try to profit from market predictions while also hedging your risk. However, while combining these two strategies can help with risk management, it does not guarantee a profit or avoid losses.
Conclusion
Leveraged trading has the potential to increase returns, but it also comes with equal or even higher levels of risk. Users should choose between isolated margin and cross margin based on their own trading strategy, risk tolerance, and ideal position management level.
Volatility is often a top priority in cryptocurrency trading, so it is important to understand the intricacies of both margin types. Traders can easily navigate the volatility of the cryptocurrency market by combining smart decision-making with diligent risk management practices. Again, be sure to conduct comprehensive research and consult with a professional if possible before diving into leveraged trading.
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