If you are a beginner in the cryptocurrency space, don’t start with overly complex indicators. The simpler and more practical, the better; often, simplicity is the best!
Having traded cryptocurrencies for over a decade, I have used 99% of the indicators available on the market, but only this set of indicators (candlestick patterns) has a success rate of 100%. I have also tested it over nearly 10 years, and it is suitable for beginners!
Newcomers to the cryptocurrency market often make common mistakes. Purely practical advice, take your time to read!
Contract Leverage
1: Some beginners still do not understand what leverage is in contracts. They think that 100x risk must be higher than 1x, but they are actually the same. Take the exchange I use as an example: whether you open one contract at 1x or 100x, the floating profit and loss are the same. The level of risk depends on your judgment of the trend, the entry point, and importantly, the management of your position.
2: So how should we choose the leverage multiple? Personally, I tend to prefer 100x leverage. For the exchange I use, the number of contracts you can open at 100x is much higher than at 1x, meaning the margin requirement is much smaller. If the trend is correct, and my entry point is not good, I can average down by adding positions, turning losses into gains. Adding positions is for better profits, not to increase risk.
2. Adding Positions and Position Management
As mentioned above, adding positions is for better profits, not to increase your risk. Many beginners may not know how to add positions effectively. I usually choose to add positions at resistance and support levels. Instead of adding at a single position, I might double or triple my position size, achieving quick profits to lower my risk. Regarding position management, I usually enter with 25% of my total capital or even less, regardless of the trend size. I never enter with 50% or 100% of my capital. Why? As you all know, the more you enter, the greater the risk, as you're closer to liquidation prices, and it’s hard to avoid bad entry points or sudden spikes. This way, I can better control risk.
3. Take Profit and Stop Loss + Anti-Position
Making money is not just about being experienced; knowing when to take losses is what truly makes you experienced. This is something everyone understands, but very few can actually do it. Beginners in this market must cultivate the good habit of using stop losses and take profits. Don’t be too greedy with profits; otherwise, what was originally a profitable trade could turn into a loss. For example, if I see a bullish trend, I will go long near the support level. After making a profit, I will consider taking some profits while letting part of it continue to roll. If I find the trend is not right and it hits the resistance level and fails to break through, I will exit completely. In my view, stop losses are even more important than taking profits. If the trend is wrong, whether chasing after peaks or bottoms, you must reverse your position; it’s crucial to stop losses when necessary. Never resist the market; otherwise, if the market moves in one direction, your losses will only accumulate until liquidation. The stop-loss level should ideally be set near the support or resistance levels, depending on market conditions and your risk tolerance to determine which cycle's support or resistance levels are appropriate. In the cryptocurrency market, nothing is impossible. Once you enter this space, you should know this. So remember, be cautious. Money earned by luck will slowly be lost through a lack of skill.
4. Support and Resistance Levels
I have mentioned support and resistance levels multiple times. Many friends may not understand this. A support level is where the price has fallen multiple times without going lower, starting a rebound. A resistance level is where the price has risen multiple times to a point where it cannot go higher, leading to a decline. How should we view support and resistance levels? Each cycle has different support and resistance levels. By connecting the highest and lowest points, you can see them. The larger the cycle, the higher the reference value.
5. Frequent Operations
Many new traders find themselves frequently trading, opening long and short positions in quick succession, often resulting in losses on both sides. They may end up losing everything after transaction fees. This bad habit must be corrected. Remember, trading is never short on opportunities; there are chances every day and every moment. There’s no need to rush. Not every opportunity can be seized, and not every opportunity can be acted upon. It’s not about how many trades you make, but about how precise they are. Control your trades well, and you won’t easily let your hard-earned money slip away.
Buying the Dip Rule: When a strong cryptocurrency declines for nine consecutive days at a high level, this is likely an excellent buying signal. At this point, do not hesitate and act decisively. Such consecutive declines often reveal real investment opportunities, known as 'golden pits'. In the cryptocurrency market, significant pullbacks are sometimes the best opportunities to acquire low-priced assets. Seizing such opportunities lays the foundation for future wealth growth.
Take Profit Rule: If the cryptocurrency you hold has risen for two consecutive days, you must consider reducing your position to lock in profits. The cryptocurrency market is unpredictable, and there is no myth of perpetual rises without declines. Timely taking your profits is the most practical approach. Avoid missing the optimal take profit opportunity due to greed, which could lead to a reversal of profits.
Signal for a Price Surge: When a cryptocurrency experiences a 7% increase, this is just the beginning of the trend. Normally, the next day, the cryptocurrency will continue to rise due to inertia. Therefore, investors should closely monitor the market and not rush to exit. Patiently wait for the price to rise further to gain larger profits.
Trend Code: For cryptocurrencies with long-term growth potential, the end of a pullback is the best entry point. In cryptocurrency investing, it is essential to refuse to blindly chase after rising prices and sell off during declines. Patiently wait for the market to pull back to the right level, and enter in accordance with the trend; just like waiting for the wind to come, you can easily ride the wave of wealth growth.
Trend Change Warning: If the price of a cryptocurrency remains flat for three days, further observation is needed. If it continues to stay flat for six days without a breakthrough, investors should decisively switch positions. Do not cling to a losing position; prolonged flatness often indicates an imminent trend change. Timely adjustment of investment direction can effectively mitigate risks.
Stop Loss Rule: If after buying a cryptocurrency, you fail to recover your costs the next day, you should immediately liquidate your position. In cryptocurrency investing, stop losses must be decisive. Once you realize your investment direction is wrong, you must cut your losses quickly. Hesitation often leads to greater losses; strictly following the stop loss strategy is essential to preserve your capital in the market.
Law of Continuous Growth: When a cryptocurrency rises for three consecutive days, it often indicates that there may be a five-day upward trend to follow. On the fifth day, investors should take profits. In the cryptocurrency market, knowing when to sell is the key to successful investing. Accurately grasping the timing for selling can maximize profits.
Volume-Price Bible: When a cryptocurrency breaks out with increased volume at a low level, this is a clear entry signal. The increase in volume indicates active capital involvement in the market, and prices are expected to continue rising. Conversely, if there is increased volume at a high level but stagnation occurs, this is a strong exit warning. At this point, investors should decisively exit to avoid falling into a price decline trap.
Moving Average Strategy: In technical analysis, the 3-day moving average can be used to determine short-term trends, the 30-day moving average helps observe medium-term trends, the 80-day moving average is often related to major upward trends, and the 120-day moving average can serve as a reference for long-term investments. Investors should choose cryptocurrencies where the moving averages are trending upwards, following the trend to achieve stable profits while avoiding fatigue and risks from frequent trading.
Reverse Strategy: Even with a small amount of capital, you can achieve considerable returns in the cryptocurrency market. The key is to reject the interference of FOMO (Fear of Missing Out) and strictly adhere to trading discipline. Persistently learn and practice daily to improve your investment knowledge and skills by 1%. Through the power of compound interest, create a miracle of wealth growth.
General Patterns in Cryptocurrency
Previously, the market was a confrontation between the East and the West. There would be market movements both during the day and at night. The main movements usually occur during Western trading hours, specifically between 21:30 Beijing time and 7:30. Major increases typically happen in the early morning. Therefore, a qualified trader should sleep at 20:00 and wake up at 4:00 to monitor trades.
1. When there is a significant drop during the day in the domestic market, you must buy the dip. Foreign traders will push the price up at 21:30.
2. If the market rises significantly during the day, do not chase high prices; it will likely drop back at night.
3. The key signal for buying and selling is the spike. The deeper the spike, the stronger the buy and sell signals.
4. Major meetings or favorable news will often lead to price increases, followed by declines once the news is out.
5. If various communities recommend buying a cryptocurrency and they speak highly of it, you may likely get scammed. When a cryptocurrency is extremely hot, you can often short it immediately.
6. When a friend in the group recommends something, and you feel disinterested, it’s likely to take off. When in doubt, it might be worth trying a little.
7. When you hold a large position, you will definitely face liquidation. Why? You are on the liquidation list that the exchange focuses on.
8. Once your stop loss on a short position is triggered, it will definitely drop. If it doesn't trick you out or get you liquidated, how can it drop? For example, TRB.
9. When you are about to break even, just a little more, and then the rebound suddenly stops, how can you close your position and run away?
10. When you take profits, it pulls up. If you don’t exit, how can the market rise? The weight of your position is too heavy.
11. When you are excited, a sudden crash may come; your excitement could also be a trap set by the market makers.
12. When you are broke, every project seems to be rising, making you FOMO, rushing to enter the market. So you understand that the market is manipulated with a probability of over 80%. Besides controlling your position, you must also wait for the right moment to act and never enter the market until the market makers have made their moves!
I have been in the market for many years, deeply understanding the opportunities and traps. If your investments are not going well and you feel regret over your losses, leave a 999 in the comments! I will share my insights.
