Every time the market warms up, many newcomers flood into the crypto space. Beautiful souls are all too common, but interesting souls want cars and houses. 'Blockchain may be the only lifeboat for young people.' In reality, it's not just young people; the crypto space has given countless ordinary people a chance to turn their lives around.
Today, I want to share some ways to make money in the crypto space based on my personal experiences over the years. If you are a newcomer still wandering aimlessly, please continue to read.
1. Spot trading
Spot trading means buying and holding coins, which is relatively simple; as long as you can hold it, you’re good. You can refer to this guide on getting started with digital currencies or open the exchange app to learn on your own. Most people who first enter this market start with spot trading. What are the advantages of spot trading? Mainly stable growth and diverse choices. Grabbing a quality project's token can appreciate with the project's development. In the past few years, there have been 61 projects among the top 600 cryptocurrencies that have achieved over 100 times returns, making the opportunities, possibilities, and probabilities of making money in the crypto space very high.
In fact, spot trading is about buying low and selling high, which is the same logic as stocks. Spot trading is a one-sided market, highly dependent on price increases. You either make money in a one-sided uptrend or profit from buying low and selling high in waves. If you buy poorly, you will also be trapped, so the most important thing is whether you can hold on.
2. Contract trading
In terms of contract trading, it is essentially futures trading, where the trading target is not the actual currency but rather the rise and fall of the currency price, allowing for both buying long and short. Trading is relatively more flexible compared to spot trading. However, due to its high speculative nature, it can easily lead to gambling tendencies, so there are certain requirements for traders' trading fundamentals and mindset.
In fact, contracts can transcend bull and bear markets, as the bilateral profit attribute inherent in contract trading offers profit opportunities for traders regardless of price movements.
In an upward trend, go long on strong coins; conversely, in a downward trend, go short on the weakest coins.
Most people in the cryptocurrency space are short-term traders, making it difficult to hold out for ideal closing prices. Many are also not proficient in position control and cannot rely on volatility to average down. Given this situation, for most traders, a good entry price outweighs everything.
Once there is a profit, take some off the table to secure your gains, while setting a cost price stop loss for the remaining portion. This is something I have always emphasized in my community.
Tips for making money with perpetual contracts
1. Avoid going all in
Capital should be reasonably allocated, paying attention to the liquidation price and margin utilization rate. Generally speaking, a 30% position already carries significant risk, as it occupies 30% of the total margin in the contract account.
2. Grasp the overall market trend
Trends are much harder to navigate than consolidations, as trends involve buying high and selling low, requiring discipline in holding positions, while high selling and low buying align more with human nature.
Trading becomes less profitable the more it aligns with human nature; precisely because it's difficult, it can be lucrative.
In an upward trend, after any violent pullback, choose to go long. Remember what I said about probability? So, if you’re not already on the bus or have gotten off, wait patiently. If there’s a drop of 10-20%, be bold and go long.
3. Set specific profit and loss targets
Setting profit and loss limits can be said to be the key to whether one can make a profit. In multiple trades, we need to ensure that total profits exceed total losses. Achieving this is not difficult; just follow these few points:
① Each stop loss ≤ 5% of total funds;
② Each profit > 5% of total funds;
③ Total trading win rate > 50%
Meeting the above requirements (profit-loss ratio greater than 1 and win rate greater than 50%) can lead to profitability. Of course, you can also have a high profit-loss ratio with a low win rate or a low profit-loss ratio with a high win rate. Anyway, as long as total profits are positive, it’s good. Total profit = initial capital × (average profit × win rate - average loss × loss rate).
4. Remember not to trade too frequently
Since BTC perpetual contracts trade 24/7, many newcomers trade almost daily, with about 22 trading days in a month. As the saying goes: If you often walk by the river, how can you avoid getting your shoes wet? The more you operate, the more likely you will make mistakes. After a mistake, the mindset can deteriorate, leading to impulsive decisions and 'revenge' trading: possibly against the trend or with heavy positions. This can lead to a series of mistakes, easily resulting in significant losses that may take years to recover.
What types of contracts are there?
Perpetual contracts: Perpetual contracts have no expiration date, allowing users to hold them indefinitely and perform their own closing operations.
Delivery contracts: Delivery contracts have specific delivery dates, including this week, next week, this quarter, and next quarter. When the specific delivery date arrives, regardless of profit or loss, the system will automatically settle.
USDT margin contracts: This refers to using stablecoin USDT as collateral. As long as there is USDT in the account, multiple cryptocurrencies can be traded through contracts, with profits and losses settled in USDT.
Coin-based margin contracts: These use the underlying cryptocurrency as collateral. Before trading, you need to hold the corresponding cryptocurrency, and profits and losses will also be settled in that cryptocurrency.
No matter how diligent a fisherman is, he won’t go out to sea in stormy weather, but will carefully protect his boat. This season will pass, and a sunny day will surely come!