For most people, contracts are like a flood beast, but for a small number, they are tools for wealth. If you want to trade contracts, first understand the following content.
1. Suppose the probability of liquidation is 0.1%. After 1,000 trades, the total probability of liquidation reaches 63%. After 2,000 trades, the probability of liquidation is 87%. The probability of liquidation is only a theoretical assumption. In actual operations, because price trends usually follow a normal distribution, as leverage increases, the probability of liquidation grows exponentially. This means that the probability of liquidation with 10x leverage is much greater than that with 5x leverage.
2. Suppose the trading cost for each trade is 0.1%, and the win rate is 50%. After 1,000 trades, the principal is likely to be zero.
3. Suppose you have 10,000 yuan. After the first trade, you make a 50% profit; after the second trade, you lose 50%. You are left with 7,500 yuan. If you lose 50% on the first trade and make 50% on the second, you are still left with 7,500 yuan. If you lose 90% in a trade, you will need to gain 900% profit to break even.
As for position sizing and stop loss lines, there is essentially no difference between the two; both reduce risk while also lowering returns.
4. In the spot market, 10% of retail investors can profit, while in the contract market, only 3% of retail investors can profit.
People who profit from contracts can be roughly categorized into three types:
First, it is to use small funds for short trades, relying on the winning rate to make money. Strict discipline is required, and when you make money, you must withdraw it.
Second, making money relies on the profit-loss ratio. Winning rate can be below 50%, but if you earn more than you lose, you can still make big profits.
Third, it's about rolling positions, like Tony turning 50,000 into millions, a student profiting 400 times from Dogecoin at lunch, and another student turning 1,000 into 10 million, all achieved through rolling positions.
I have played all three of these, starting with 8,000 and turning it into millions. Below, I will share how I did it:
If you want to treat cryptocurrency trading as a second source of income, want a piece of the pie in the cryptocurrency space, and are willing to spend time growing and learning, then you should not miss this article. Read it carefully; every point is the essence of the cryptocurrency world.
It can be said that whether in a bull market or bear market, these [trading iron rules that must be followed] can help you! Later, we will discuss the essential tool for Bitcoin trading — BOLL, which can determine whether it's a bull or bear market. If used well, achieving a 30-fold return in a month is quite simple!
Before each trade, everyone must ask themselves three questions:
First, think about the reasons behind each of your trades.
Second, do you often encounter situations where your profitable trades turn into losses?
Third, do you often hold positions until liquidation and not know what to do? These three questions are unavoidable for all traders; cryptocurrency enthusiasts have encountered them to varying degrees. Everyone goes through this, especially beginners, who are often very blind. The essence lies in their failure to establish mature trading thinking and a trading system.
What is a trading system? It is a self-methodology for trading, opening positions, closing positions, adding positions, reducing positions, taking profits, and stopping losses, essentially a set of rules you create. Having such a system offers the direct benefit of having a basis for all your trades, significantly reducing the likelihood of mistakes and the amount of losses. Additionally, you won't need to monitor the market in real-time; by strictly executing your system, you will have a clear understanding of your targets and losses, allowing you to remain calm regardless of how the market fluctuates.
So how do you build your own trading system? The most important thing is to have a good mindset. The cryptocurrency market is a 24-hour trading market, with unpredictable fluctuations and huge volatility. You need to have strong psychological qualities when trading. A person's trading habits, psychological endurance, strategy execution ability, and ability to overcome greed and fear all vary, determining that each person has a different trading system that suits them.
Based on my long-term summary, an excellent system must contain the following characteristics:
First, the frequency of opening positions should not be too high. There are too many people in the cryptocurrency space eager for wealth, feeling that if they don't open a position in a day, they will miss the big market movements. In fact, opening positions should depend on market conditions, not just time. Blindly opening positions when there is no market will only lead to losses. There are plenty of opportunities in the cryptocurrency space, but most are not ones you can seize. No one can capture every fluctuation. 'Waiting' is key; learning to wait and seize your own opportunities will naturally reduce the frequency of your stop-loss orders, and your profits will significantly improve.
Second, overcome greed. Greed is the most taboo thing in cryptocurrency trading, especially in contracts. The market fluctuates daily; if there is a rise, there must be a fall. I have seen too many people lose profits due to greed, failing to take profits and resulting in losses or even liquidation.
Third, strictly enforce take profit and stop loss. This is the most crucial operation in contract trading and is also the main reason why I have achieved a return rate of 11,570.96%. Before analyzing market conditions and opening trades, always consider where to take profit and where to stop loss, especially the stop loss position. Calculate whether the risk-reward ratio is worth taking the trade. When you feel confident, set these two positions, and regardless of how the market fluctuates, you will remain stable like a mountain. Strictly adhere to the stop loss position to preserve capital, and take profits in batches to lock in gains.
Fourth, manage your position control when opening trades. Why manage position control? A simple calculation can clarify this. If you make 20% profit on one trade and lose 20% on another, with a 50% accuracy rate, after 40 cycles, your assets will be cut in half. Considering transaction fees, you will have even less remaining. The result will definitely be zero assets. Therefore, you must manage position control well; fixed capital is a good choice, and withdrawing profits is a great habit, because what you withdraw is truly yours, while leaving it in the exchange is just floating profit.
Fifth, practice and review summaries. Once you have learned to control your mindset, position size, capital, and candlestick operation techniques, the most critical and indispensable step to building your own system is to practice and review. Practice brings knowledge, and reviewing can lead to improvement.
Reviewing means doing a review for every trade, every week. Notes and real trades can greatly help everyone in summarizing and enriching their reasons for opening trades, as well as perfecting their take profit and stop loss points.
A trading system is not formed overnight but must be summarized through continuous practice of opening trades. No one is born knowing candlesticks or contracts; everyone learns and summarizes through constant exploration. Who hasn’t lost money and paid tuition? The important thing is that tuition should not be paid in vain; learning from setbacks and gaining wisdom from losses will naturally teach you what not to do and what to do in similar market conditions next time.
These are 16 hard-earned experiences I have summarized over more than a decade in the cryptocurrency space, worthy of repeated contemplation and learning. I share them with those who are destined to find them helpful.
1. Market declines usually serve as a test for high-precision cryptocurrencies. If your cryptocurrency's decline is smaller compared to a significant market downturn, it is likely that the major players are supporting the price, preventing it from dropping too much. This indicates that your coin possesses relative stability, allowing you to hold it, with potential future returns.
2. For beginners, if you are not familiar with how to buy and sell, there is a straightforward method. In short-term trading, you can observe the 5-day moving average. If the price breaks above the 5-day moving average, consider buying; conversely, if it breaks below, you can choose to sell. For medium-term trading, you can refer to the 20-day moving average. Similarly, breaking above the 20-day moving average can lead you to hold, while breaking below it can suggest selling. There are many different trading methods, and the best one is the one that suits you best. Regardless of the method, the key is execution. Stick to one method, as over 90% of people do not have problems; simple and conventional methods are often the most effective.
3. When a main upward trend forms, if there is no obvious trading volume support, you can decisively intervene and continue to hold during the sustained rise. When the price falls, if the trading volume significantly decreases and the trend has not been broken, you can continue to hold your coins. If the price falls with a large trading volume, it is recommended to reduce your position in a timely manner to avoid risks.
4. When a cryptocurrency's trend is established, the most crucial factor is to observe the trading volume, while other indicators can be temporarily set aside. If the trading volume rises or remains stable while prices continue to rise, consider holding. However, if the trading volume significantly increases while prices rise, it may signal a sell-off because a large number of participants might be looking to exit. The relationship between trading volume and price is vital; trading volume is like water, and price is like a boat.
5. In online trading, if after buying a certain coin there is no fluctuation within three days, consider selling it in a timely manner. If the price drops 5% after buying, and losses reach 5%, it is recommended to stop loss unconditionally to further avoid losses. Risk control and rebound are very crucial.
6. If a cryptocurrency has dropped 50% from its historical high and continues to decline for 8 days, it has entered an oversold channel. In this case, an oversold rebound may be imminent, and you might consider taking this opportunity.
7. In cryptocurrency trading, choose to trade leading coins, focus on strong altcoins, and avoid getting involved in chaotic markets, because during a bull market, leading altcoins have the largest price swings, and in a bear market, they tend to resist declines better. When prices drop, consider buying, and do not be afraid to chase up when there is significant growth. Strong assets will remain strong, and in short-term trading, the key is to buy high and sell higher.
8. Stay in tune with market trends, act according to the trend, and the purchase price does not necessarily have to be as low as possible; what matters more is appropriateness. The price's height does not determine whether you have an advantage, because the market can sometimes drop without limits. Avoiding worthless coins and following trends is the wise choice.
9. Do not let short-term profits cloud your judgment. The most important thing is to maintain consistent profits, and to achieve this goal, you need to review carefully. Is your trading success due to skill or luck? Establishing a stable trading system that suits you is the key to sustained profits.
10. Do not trade just for the sake of trading. If you do not have enough confidence to ensure that this trade will be profitable, do not force yourself to open a position. Maintaining a cash position is also a skill; selling fairly is experienced, while being able to maintain a cash position as much as possible is the mark of a master. In trading, what needs to be considered is not profit, but preserving capital; the key to successful trading is not the budget but the success rate.
11. In speculative markets, being flexible is an unwise strategy. Use a steadfast trading system to respond to market changes. Do not change your trading system easily, and do not be afraid to try different methods. Stick to an effective method, as in most cases, not making any changes is the best approach. Usually, you will find yourself making the most mistakes in times of greatest difficulty.
12. I believe that those who persistently want to trade do so because they 'love' this activity. Passion is important; to succeed in something, you must love it. However, do not become so absorbed that you cannot extricate yourself; always remember that family is our most important responsibility.
13. The external environment is not responsible, but we can control our inner self. Never attribute your failures to others; this is crucial. Regardless of how you fall into difficulties, we must be responsible for our own decisions. Only by taking responsibility can we honestly face our mistakes, avoid repeating them, and truly face errors; a trader who confronts mistakes is a brave warrior.
14. A few insider tips, as opinions do not have absolute right or wrong. Many times, what you see is just what you want to see or what you want to hear. When you are no longer interested in the opinions of the media or so-called experts, congratulations, you are not far from entry and success. This is because you may begin to cultivate your own independent viewpoint and beliefs.
15. You may think you are dealing with market conditions in the trading market, but in reality, you are dealing with yourself. What we see as surface-level success is just the result and performance; behind success often lie perseverance and patience. Greatness often conceals hardship, and time is the most valuable asset. 'Resilience surpasses intelligence; it is not the only important factor; mindset is equally important.
16. Trading is a form of rigorous training, a process of honing one's character and improving one's qualities. Study earnestly, deeply understand major cycles and high-probability theories, and cultivate insight.
That's all for today. You must maintain a good mindset when trading cryptocurrencies. Do not let your blood pressure spike during a big drop, and do not become complacent during a big rise; securing profits is crucial.
I have navigated the market for many years and am well aware of the opportunities and traps within it. If you are struggling with your investments and feel dissatisfied with your losses, leave a comment with 999! I will share my insights.
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