After ten years of struggling in the cryptocurrency market, I have personally experienced three bull-bear cycles, from an initial capital of 50,000 to now achieving financial freedom.
In this industry, I initially lost hundreds of thousands like gambling. But later, I started to seriously study, researched everywhere for information, learned related knowledge, and continuously improved my abilities. After several years of trial and error, I finally welcomed a turning point in 2024. I began my journey of resurgence. In just over two years, I went from 50,000 to now having eight figures!
Core principle - Three don'ts of cryptocurrency trading:
Avoid buying during price rises: When market sentiment is high, prices are often inflated. Conversely, buy during market corrections or declines, utilizing the fear in the market to acquire assets at low prices.
Diversify risk: Do not put all your funds into one coin. Diversifying investments can spread risk, so that even if one coin performs poorly, it will not have a fatal impact on the overall investment.
Control position size: Full position trading can limit your flexibility. Keeping a certain amount of cash reserves allows you to quickly adjust your strategy when the market trend does not align with expectations.
Then the complete trading process should be:
1. Market analysis; you can use any technical analysis.
2. Position management: After entering the market, you need to consider what might happen next. What to do if you make a profit? Should you increase your position or take profits and exit entirely, or continue to hold? What if the profit expands again? What if there are losses? Should you stop loss, hold the position, or exit part first? How much loss would lead to exiting entirely? Position management will consider both risk and return factors.
3. Strictly execute trades. When your plan is clear, you should start implementing it without being disrupted by market fluctuations.
4. Summarize the transaction. After completing a transaction, it is necessary to review the transactions from the previous period. The review samples should cover three market conditions: rising, falling, and volatile. Then, based on this, improve and optimize market analysis, position management, and the execution process of transactions.
We must first find the entry point based on our trading skills; this position must be a support line. When the market is above the support line, the trend is upward, and when it breaks below the support line, the trend is downward. More importantly, the support line is also the basis for defining potential risks. When the stop-loss is placed below the support line, the potential risk range is determined. If it reaches the initial stop-loss area below the support line, you should exit or at least flatten most of your positions and gradually reduce your holdings until all positions are closed.
Therefore, the potential profit margin is above the support line, and the upward trend in the market has not ended, so theoretically, the potential profit is unlimited. After entering the market, if the price rises, we can hold the original position for further increases, or reduce and add positions based on the original position. We will move the stop-loss according to market developments. When the market moves as we expect, we should move the stop-loss to a price close to the cost or below a certain range of support lines. Moving the stop-loss is continually reducing the risk in the market, which is equivalent to locking in floating profits.
When the price rises again to a new support or pressure level and then starts to fall back, the area below this support or pressure level is the area for reducing positions. At this time, we need to gradually liquidate all positions. To summarize: First, we need to find a support pressure line near the cost price. When the price rises far from the cost line, we gradually increase our positions, and the increase must be decreasing. When the price falls and gradually moves away from the cost line, we gradually reduce our positions, and the reduction must also be decreasing. Your position management technique must consider both risk and profit.
Next, let's talk about position management methods, which means operating in batches.
Batch operations refer to splitting the invested funds into parts for building, increasing, or reducing positions. Batch operations can be completed within a day or over a period of time.
Why should we take these actions? Because the cryptocurrency market is unpredictable, with both rises and falls being high-probability events. No one can accurately predict short-term price fluctuations, so it's essential to leave enough funds to cope with unpredictable fluctuations.
If you operate with full positions without sufficient confidence, once the market changes in the opposite direction, it will lead to huge losses. Therefore, you can reduce the risk of full investment through batch operations, which can dilute costs and is the basis for reducing costs and increasing profits.
Next, let's talk about how to operate in batches: there are equal batch operations and unequal batch operations.
First: Equal allocation, also known as rectangular trading method, refers to dividing funds into several equal parts, buying or selling in turn, with the same funding ratio for each transaction. Usually, 3 or 4 parts are used. For example, buy 30% first, if you start making a profit, buy another 30%; if not, refrain from introducing new funds. When the coin's price reaches a certain peak or the market changes, gradually reduce your position by selling.
Second: Unequal distribution, refers to investing funds in different proportions, such as 1:3:5, 1:2:3:4, 3:2:3, etc. The shapes generated by these ratios include rhombus, rectangle, hourglass, etc., with the pyramid trading method being the most commonly used.
Third: Compare using the same amount of capital and position with different methods.
Pyramid: Buy 5 layers at 1000, 3 layers at 1100, 1 layer at 1200, average price 1055.
Inverted pyramid: Buy 1 layer at 1000, 3 layers at 1100, 5 layers at 1200, average price 1144.
Equal-part rectangle: Buy 3 layers at 1000, 3 layers at 1100, 3 layers at 1200, average price 1100.
When the price rises to 1200, profits are: pyramid 145, inverted pyramid 56, rectangle 100.
When the price drops to 1000, losses are: pyramid +55, inverted pyramid -144, rectangle -100.
By comparing, it can be seen that the pyramid cost is the least, and when the price rises, the profit is greater. When the price drops, the risk is stronger. The inverted pyramid is just the opposite; if the price drops to 1000, the inverted pyramid loses 144. In practical use, it's more reasonable to use the regular pyramid method when buying and the inverted pyramid method when selling.
After a significant drop in coin prices, if we see a bottom but are uncertain if it has reached the bottom, buying at this time may lead to being trapped if the price continues to fall. If we do not buy, we may miss out on the upward reversal. In such cases, we can use the pyramid position building method.
For example:
When a certain coin drops to the 10 U position, buy 20% of the position; if the price drops to 8 U, enter 30%. At this time, the average cost is 8.6 U.
If the market continues to fall to 5 U, then enter 40%; the average would be 6.5 U.
If the price rebounds to 6.5 U, it means breakeven. If it rebounds to 10 U, it means a profit of 3.5 U. However, if you buy heavily at 10 U and the price returns to 10 U, you just break even.
During the price rise, the lower the price, the larger the position should be; as the price gradually rises, the position should gradually decrease. This method of buying belongs to right-side position building. This kind of cost is relatively safe; as long as the market does not drop below the holding cost, there is no need to panic.
This method requires a heavier initial position, so it has higher requirements for first-time entrants, who need to have a grasp of market fluctuations. It is suitable for technical players.
The inverted pyramid selling method is the opposite of the regular pyramid; the upper portion is wider, and it narrows downwards, resembling a funnel. As the price of coins increases, the number of coins held should gradually decrease, meaning that the amount sold increases as the price rises. This is the method for reducing positions or liquidating.
The core of position management includes the above points. Once you understand them, I believe that in the future, whether for spot building or contract building, you will have a clear mindset.
If you can see this, then I believe you are definitely a loyal fan of the community!
Now let's proceed with practical teaching! (The following text will be explained in plain language, as I fear you may not understand otherwise!)
Spot position management
Example: If you have 100,000 U, you should divide it into ten parts! Prepare to buy ten coins! Allocate 10,000 U to each coin! Each entry should involve the same amount of money!
Example: For XX coin, build a position at XX price with 50% position, and supplement the position with another 50% at XX price. The meaning of 50% position is to allocate 10,000 U per coin, with 5,000 U reserved for building and 5,000 U for supplementation.
A major taboo in spot trading is to heavily invest in coins you are optimistic about while lightly investing in those you are not.
This coin is good; I will buy a little more, say 30,000 U.
This coin is just okay; I plan to buy in with 10,000 U.
If you do not adhere to this position management, a problem will occur: if you heavily invest 30,000 U in a coin and it loses 10%, that is 3,000 U. However, if you lightly invest 10,000 U in a coin that gains 10%, that is only 1,000 U, and you still incur a loss!
The above is the plain-spoken operation of spot trading; if you don't understand, watch it a few more times.
Contract position management
Position allocation for ETH is calculated by the number of positions!
The position of 1000u should not exceed 5 positions.
The position of 3000u should not exceed 10 positions.
The principal of 5000u should not exceed 20 positions.
The position of 10000u should not exceed 30 positions.
The position of 30000u should not exceed 50 positions.
The position of 50000u should not exceed 100 positions.
The position allocation for BTC is calculated by the number of positions!
The position of 1000u should not exceed 0.5 positions.
The position of 3000u should not exceed 1 position.
The position of 5000u should not exceed 2 positions.
The position of 10000u should not exceed 3 positions.
The position of 30000u should not exceed 5 positions.
The position of 50000u should not exceed 10 positions.
Contracts are actually the same as spot trading; the initial principal per order is the same, and the number of contracts per order is the same. Take profits when needed and cut losses when needed; treat yourself as a trading machine! In the end, the K-god will conquer you with strength!
In two years, with less than 50, I achieved a win rate of 418134%, making over 20 million. Just relying on this trick (easily understanding K-lines), I easily turned it into 100 times, with a win rate as high as 100%, and it has been consistently effective until now (suitable for everyone, easy to understand, especially suitable for practical use).
For those trading cryptocurrencies but not understanding K-lines, this article will help you easily understand K-lines and determine support and pressure levels.
Many people enter the cryptocurrency market, confusedly trading and hoping to make a quick profit, but they do not understand K-line charts. In fact, one of the biggest taboos in the cryptocurrency market is not understanding K-line charts; now let's talk about K-line charts in the cryptocurrency market.
K-line: Also known as Yin-Yang line or candlestick. For specific meaning, see the image below:
K-lines can be divided into three types based on their shapes: bullish lines, bearish lines, and same-price lines.
Bullish lines can be categorized into large bullish, medium bullish, and small bullish lines. Bearish lines can be categorized into large bearish, medium bearish, and small bearish lines. The same-price line refers to a K-line where the closing price equals the opening price, a special form where both are at the same price level, such as cross lines or T-lines.
K-lines can be divided by time into daily, weekly, monthly, and yearly K-lines, as well as subdividing daily trading time into several equal parts, such as 5-minute, 15-minute, 30-minute, and 60-minute K-lines.
These K-lines all have different functions. For example, the daily K-line reflects the short-term price trend. Weekly, monthly, and yearly K-lines reflect medium- to long-term trends, while 5-minute, 15-minute, 30-minute, and 60-minute K-lines reflect ultra-short-term trends.
Their drawing methods are largely similar. For example, for the weekly K-line, just find the opening price on Monday, the closing price on Friday, the highest price and the lowest price during the week, and you can draw it.
Monthly K-line: Used to observe long-term trends, allowing you to see the upward or downward trends of the market over larger time periods.
(Note: The 5-month moving average on the monthly K-line is equivalent to the 100-day moving average on the daily K-line, and is close to the 120-day moving average on the half-year line.)
Example: When the 5-month and 10-month moving averages on the monthly K-line diverge or form a dead cross, it often indicates that a significant downtrend has begun. At this time, if you haven't stopped loss yet, you must decisively cut your position and exit!
On the contrary, it means a significant uptrend has begun. If you have not built a position at this time, you should buy in.
Weekly K-line: Used to observe medium-term trends; it is the most practical K-line chart that must be viewed daily.
(Note: The 5-week moving average on the weekly K-line is equivalent to the 25-day moving average on the daily K-line, and the 10-week moving average is equivalent to the 50-day moving average on the daily K-line.)
Example: When the 5-week and 10-week moving averages curve upward and form a golden cross, it has already entered a strong state and will lead to a better market.
On the contrary, it means entering a weak state, which often leads to a significant drop. Therefore, it's important to stop loss and exit in a timely manner; do not harbor a fluke mentality.
Daily K-line: Used to observe short-term trends; it is the most viewed and practical K-line chart daily.
Using short, medium, and long-term moving averages makes it easy to determine the strength and weakness of the market or individual stocks. Using daily MACD combined with moving averages and changes in trading volume can help identify better entry points. During strong trends, it is also easy to determine exit points on daily K-lines.
Minute K-line: Used to observe ultra-short-term trends.
There are K-line charts for 60, 30, and 15 minutes, which can help you see the details of downward or upward changes that cannot be observed on weekly or daily K-lines. These are essential for short-term trading.
The 10-hour moving average of the 60-minute K-line is equivalent to the 3-day moving average of the daily line, and the 20-hour moving average is equivalent to the 5-day moving average of the daily line.
Therefore, for short-term operations, it is better to refer to 60 and 30-minute K-line charts.
How to use the golden ratio to determine approximate support and pressure positions.
The top ten truths you must understand to make money in the cryptocurrency market!
Let me reveal the top ten truths of the cryptocurrency market.
People often say: 'One day in the cryptocurrency world equals ten years in the human world. After ten years of working, everything is empty; one year in cryptocurrency can make you a millionaire!'
But is that really the case?
Indeed, the opportunities for getting rich in the cryptocurrency market are more than in traditional industries, but the hidden risks are equally enormous! Many people blindly follow the crowd, thinking they can make quick money just because they see friends making profits. However, the low barriers to entry lead more people to harbor fantasies of 'getting rich overnight', neglecting the importance of risk and cognition.
As a seasoned player who has worked hard in the cryptocurrency space for many years, I have summarized (the top ten truths of the cryptocurrency market), hoping it will help everyone see reality, avoid detours, and participate rationally.
Truth 1: You may think that a certain altcoin is likely to rise 100 times, but the reality is that 99.99% of altcoins will eventually go to zero.
Insight: Do thorough research when investing; choose projects that have value and ecological support; do not chase high prices blindly.
Truth 2: When a project is widely advertised as a 'money-making opportunity', it is likely that the time has come for the big players to offload and harvest.
Insight: Learn to think backward, do not be influenced by market emotions, take profits in a timely manner, and avoid becoming a bag holder.
Truth 3: When retail investors are generally panicking and feel the market is about to collapse, it often signals the beginning of a bull market.
Insight: Market panic is a tactic used by big players to accumulate at lower prices; learn to identify bottom opportunities.
Truth 4: When you become increasingly confident in the rising trend of a coin and prepare to go all in, it is often when the big players are closing their positions and exiting.
Insight: Stay rational, do not blindly invest heavily, and learn to buy in batches and take profits.
Truth 5: You may think the winning rate for contracts is 50%, but in reality, only less than 10% can make money.
Insight: Contract play requires high position management, mindset management, and execution ability; do not be greedy or blindly leverage.
Truth 6: Most people see the big players as enemies, but real experts learn to dance with the big players, following their steps.
Insight: Being on the right team is more important than individual effort; going with the flow will yield greater profits.
Truth 7: Many people think making money in cryptocurrency is easy, but less than 10% can actually make money.
Insight: The cryptocurrency market also follows the 80/20 rule, or even the 90/10 rule. Respect the market, integrate knowledge and action, and you can remain undefeated.
Truth 8: Do not underestimate KOLs (Key Opinion Leaders); their professional knowledge and market analysis can help you avoid pitfalls.
Insight: In the era of paid knowledge, be clear about whether you are getting value equivalent to what you pay. Ability always precedes making money.
Truth 9: The rise in coin prices, besides ecological landing and value support, is more importantly driven by market 'consensus' and 'greed'.
Insight: The relationship between supply and demand determines price, and market beliefs and emotions have a huge impact on coin prices.
Truth 10: To get rich in the cryptocurrency market, you need to possess the following points simultaneously:
Luck - Find truly promising targets;
Cognition - Be able to hold onto coins without being scared off by market fluctuations;
Take profits - Understand the importance of securing profits and taking them when they are good;
Long-termism - Stick to long-term investments, do not chase short-term profits;
Cash flow - Continuously earn income and invest steadily in the market.
Insight: Making money in the cryptocurrency market is not easy. Besides seizing opportunities, you also need luck, patience, and the right execution.
Summary
The above top ten truths may be a bit painful, but they are valuable experiences I have summarized over many years of navigating the cryptocurrency market! I hope they help everyone recognize the market and reduce their 'tuition fees'.
Remember:
Capital first, risk second, profit third!
Respect the market, maintain a good mindset, learning ability, and execution ability; self-discipline is the key to success!
Accept gains calmly and losses lightly; strive for what is certain and follow the natural course!
Giving roses to others leaves a fragrance in your hands; thank you for your likes, follows, and shares! Wishing everyone financial freedom by 2025!
