You say there is no capital in the cryptocurrency market? Who would believe that? Just in the futures market, the scale of liquidations at the billion level is right there. As a quasi-financial market, the cryptocurrency market has never lacked total capital but rather upward forces—especially the bullish consensus that cryptocurrency investors are longing for.
Why frequent liquidations? Small capital is gambling, and large capital is also gambling. Some say, 'Large capital seeks stability, while only small capital opens high leverage for quick accumulation.' This sounds like a joke—when faced with the temptation of rapidly increasing wealth, the size of capital is never a dividing line. Let’s make a hypothesis: if 1 million cryptocurrency investors all flood into the futures market, 20 billion in liquidation funds would amount to an average of 20,000 per person—this is still assuming that all participants are liquidated in an extreme scenario. Recent data shows that over 90% of liquidations are from those going long, in such a large-scale one-sided liquidation, who exactly is the 'opponent' for those shorting?
From this, it is not difficult to deduce: the list of liquidators may not all be so-called 'retail investors'.
A liquidation of billions at least indicates one thing: operators using 5x, 20x, or 100x leverage are always ready to be liquidated, regardless of the amount of capital.
The cryptocurrency market has fallen wave after wave; why are people still afraid to buy?
I seriously read many comments; some old friends have very clear understandings, but more people say things like:
① No bullets left.
② If it falls, will it fall further?
③ Afraid of losing but wanting to win, you have to chase highs and cut losses.
④ Waiting, the opportunity quietly slipped away.
⑤ No courage or determination.
Not daring to grab cheaper chips, probably due to these five mentalities.
In fact, these mentalities are quite normal and have always been my mindset. I suspect this is also why people in the cryptocurrency circle refer to themselves as leeks.
The first four reasons above are cognitive factors in contract investment, the fifth is the fear generated by a lack of understanding. With sufficient understanding, courage and determination will naturally follow.
Yesterday, I talked about two reasons why people are afraid to buy after a big drop in the cryptocurrency market: human instinct of fear and the understanding of contract speculation. In other words, aside from psychological reasons, the most important factor is the lack of a personal contract operating system.
Therefore, being able to achieve the investment realm of 'being greedy when others are fearful' is crucially about establishing your own practical contract system.
The famous investment philosopher Van Tharp once said: 'What you trade is not the market, but the concepts about the market.'
This concept is your investment operating system. However, how difficult is it to establish a practical contract system?
Before establishing an investment system, you need to have your own investment philosophy and a clearer understanding of yourself, such as interests, goals, knowledge, experience, skills, and ability boundaries.
Also, you need your own investment strategy: when to buy, when to sell, what to buy, how to buy, how to arrange funds, how to allocate investments, etc.
Finally, you also need a correction strategy. What to do if you make a mistake? This doesn’t mean you should jump off a building or cut your wrists.
Seeing this huge pile of problems guarantees that you're going to have a headache, OMG, investing is so hard to learn, there are so many rules and theories, even if you learn them, it doesn’t mean you can make money!
Outstanding investment masters say that to establish your own investment operating system, you must at least experience two bull-bear cycles: the first bull-bear cycle establishes the operating system, the second bull-bear cycle verifies and corrects your operating system.
The bull-bear cycle in the stock market lasts 6-10 years, while in the cryptocurrency market, the recognized bull-bear cycle is currently 4 years. Are you psychologically prepared to take at least 8 years to establish your operating system? At this rate, you might starve to death long before that.
Indeed, this still allows for consciously building your own investment operating system; some retail investors go their whole lives without establishing one.
In fact, I have built countless investment operating systems.
Cryptocurrency valuation frameworks, buying logic, selling rules, coin screening models, holding period systems… all sorts of things. The only difference is that what was previously used in the stock and forex markets is now moved to the cryptocurrency market.
Due to human weaknesses, constructing a complete investment system is easier said than done, especially since it may not guarantee effectiveness.
In the past six months, I've experienced 'achievements' of liquidating my position four times in cryptocurrency futures—this is nothing short of 'black humor' in my investment career.
After each liquidation, I, like countless retail investors, look for excuses to complain: 'Who told it to spike repeatedly, crash, and create gaps?'
Until one day I suddenly realized: let those complex operational systems go to hell! I only need one move to clear the fog and see the bright moon, ensuring profit without loss and eliminating the risk of liquidation.
This is my only ironclad rule for playing contracts, condensed into one sentence: extreme strict position management.
Contract liquidation boils down to two points: high leverage and full position.
Benchmark and position are the two sides of position management: if you want high leverage, your position must be extremely low; conversely, if your leverage is low, your position can be higher.
However, there’s no need to blame the market for reaching extremes, nor to complain that the market fluctuates too fiercely; the outside world has nothing to do with us. We only need to pay attention to our own capital situation and make absolutely safe arrangements.
Market conditions will always surge and plummet at some point; the safest strategy is to keep yourself in a safe box. You can occasionally open the box for fresh air, but don’t expose yourself to the firepower of bears or bulls.
Therefore, extremely strict position management is at the core of contract trading.
For example, if EOS is now at 3U, keep your contract's liquidation price at 1.5U, and naturally, you won't get liquidated.
Isn’t there a saying, 'As long as the green mountains remain, one need not worry about firewood'? If you don’t liquidate, you are strong.
There’s an old friend in the cryptocurrency circle who has long maintained a half-position strategy, and it’s still a dynamic half-position strategy. If that’s the case for spot trading, how much more so for contracts? That’s why this old friend is truly skilled; his operations represent the highest realm of investing.
Even someone like Buffett, who dominates the global investment scene, keeps 128 billion dollars in cash. Why shouldn’t we in futures do strict position management?
So, after dying four times on the battlefield of contracts, I finally understood that the only secret to playing contracts is position management.
Recently, I plan to ambush a potential coin that is about to surge, doubling is quite simple, and I’m also preparing to hold some potential coins until the end of the year, expecting a return of over 10 times is not a problem. If you want to follow along, leave a message, follow, and like.
Continuously monitor BTC, ETH, BNB.
