Let's talk about something heart-wrenching today. Have you also noticed that in the cryptocurrency market, 8.5 out of 10 people are losing money? Don't rush to refute this; first, see if these scenarios feel familiar:
Act I.
: Seeing a certain coin suddenly surge, FOMO emotions.
Jumping in without a second thought, resulting in buying at the highest point, and the next day it directly halves.
Act II: Set a stop-loss.
Then, out of impatience, you cancel and think "I'll hold on a bit longer," resulting in greater losses, and finally, you have to sell at a loss.
Act III: After finally making a 20% profit, I hurry to escape, only to find that the coin later surged by 300%, regretting it deeply.
Don't ask me how I know this; these are lessons I've learned with real money. Today, let's have an honest chat about how not to be a victim.
I. The truth that 90% of people lose money.
1. Cognitive biases: treating the cryptocurrency market as a casino, treating contracts like a lottery.
2. Behavioral traps: stop-loss is just for show, holding on to losing positions is a belief, take profits when you make a little, but hold on when you lose.
Capital management.
: Always going all in, never cashing out profits.
II. Three magical tools for changing fate.
Magical tool one: Eagle-eyed coin selection technique.
The market cap of the top 100 is the bottom line (CoinMarketCap)
Check at any time)
New coins should be traded within the first three months (after that, the likelihood of failure is high).
Focus on these: ✅ Is GitHub code updated frequently? ✅ Is the daily trading volume sufficient, at least 50 million USD? ✅ How strong is the back-end investor?
Magical tool two: K-line martial arts secret.
Beginner's required course: (Japanese candlestick techniques) (Don't laugh, it's really useful) Volume analysis (volume is more important than price).
Advanced skills:
Wave theory + TD sequence.
The third crucial ability, which I only learned after countless liquidations over the years, is time-space management. This refers to managing trading time and operational space. Manage your trading time and operational space well. If you don't do this well, no matter how well you do the first two points, you will still incur losses in the long term, and they will be significant losses. How to manage this specifically? First, you need a scientific and objective trading system, or a trading plan. It must be scientific and objective to be reasonable. We often see videos on YouTube, Douyin, or other platforms about "turning 10 USD into 1 million USD" or "how much I made trading this way," and we should reduce such thoughts and watch such videos.
This kind of anxiety-selling and fantasy-spreading is something you believe in; it's just a trap for you. My evaluation is that it’s not worth believing in me as an emperor. Of course, I’m not saying it doesn’t exist; anything is possible in the cryptocurrency world, but we are all ordinary people, and the probability of such things happening to us is very low. This circle is for making money, not for gambling.
Assuming you have 30,000 yuan ready to invest in the cryptocurrency market for contracts, then 20,000 yuan should be set aside as off-exchange funds and not touched for now. 10,000 yuan can be used as on-exchange funds for direct trading, which means the total contract funds are currently 10,000 yuan, roughly equivalent to about 1,428 USD at the current exchange rate. The Kelly formula will be used here.
According to the Kelly formula, we can draw two conclusions.
First, the maximum employed position cannot exceed the total funds.
Second, do not use more than 1/10 of the total funds for a single transaction. In contracts, this means using no more than 1/10 of the account funds for a single contract, and the maximum leverage should not exceed ten times. There are generally two types of contracts we open.
One is to trade mainstream coins, such as Bitcoin and Ethereum.
The characteristics of mainstream coins are that they are slightly more stable, with not too much volatility, making them relatively easier to grasp. However, in the short term, the probability of making big money with small investments is relatively low. In contrast, altcoins have wild fluctuations, making them difficult to manage. Gaining two to three times in a day feels the same as playing, and losing two to three times or even getting delisted feels the same as playing. But it is precisely because of this that altcoins are popular because they can lead to short-term wealth.
Let's take altcoins as an example; if the single opening position is 1/10 of the total position, then the maximum leverage should not exceed 10X.
Now we calculate based on the maximum multiplier. The position after opening the contract is 1,428 USD - 10x10 = 1,428 USD, and the actual position opened is 1,428 USD. The stop-loss position is usually set at 5% of your entry position. For example, if I choose to enter when the price of a certain coin is 1 USD, then I should set my stop-loss position at 0.95 USD. We always have a profit-loss ratio for contracts, and the profit-loss ratio must be at least greater than or equal to 1 to choose to open a position. This means you should at least have a 5% stop-loss to match a 5% profit increase for it to be a suitable trade (in this case, rising to 1.05 USD).
Because the essence of contracts is to focus on the profit-loss ratio, using leverage to make small investments yield objective profits. For example, if I feel that it is a very good relative bottom with an opportunity to achieve the expected gains, I will directly open a position. If I incur a 5% loss in the stop-loss, and after two consecutive losses, which is 10%, then at this point, we need to adjust the strategy.
Please remember this rise and fall formula?
If the account funds drop by 10%, that means your account has lost 10%, and you need to earn 11% to break even. If it drops by 20%, you need to earn 25%. If the account loses 70%, then it would need to rise by 233% to break even.
After consecutive losses, your principal is reduced, but the difficulty of breaking even increases. This means you have less money to do something that is harder than before.
Therefore, after two consecutive losses, which is 10%, it is necessary to adjust the strategy. Reduce the position size.
After a 10% loss, the total funds are left at 1,285.2 USD. According to the plan of maximum leverage of 10 times with 1/10 position size, the contract position opened is 1,285.2 USD. Continuing this way, even after ten consecutive losses, the account funds are still left at 842.21. With a further loss of 584.796, the total funds are down to 59%, losing 41%. At this point, there is still nearly 60% of the account balance. For most people's full-position high-leverage play, they might not even know how many times it would take to be liquidated. But what I want to say is that according to the formula, at this point, you need a 67% rise to break even. The difficulty at this moment is relatively high.
Then the best way is to use the remaining 213 USD in off-exchange funds to perform a supplementary capital action.
How much to supplement? Don't exceed 1,428 USD, which is the maximum value you deposited last time.
So, calculating this way, the account has 1,428 USD + 842.21 = 2,271.2 USD.
On this basis, you only need to rise by 26% to recover losses. Once the losses are recovered, you can reinvest the added positions. That is, the first withdrawal of 1,428 USD returns to off-exchange funds. This is the use of off-exchange capital.
If you continue to lose, then continue with the original plan. This way, you at least have the opportunity to lose continuously for 30 times. I don’t believe that you can’t get at least one right out of those thirty times. If you really can’t get it right even once, then it’s best to withdraw your money early and go back to a regular job; indeed, you might not be suitable for this circle.
Now that the part about reducing positions after losses is finished, let’s talk about expanding positions for profits. Taking 1,428 USD as an example, after making a 10% profit, the funds rise to 1,570.8 USD. At this point, you can choose to expand your position, meaning increasing the original single contract position of 1,428 USD to a contract position of 1,576 USD. Continuing like this, with a minimum profit-loss ratio of 1:1, we can double the position after winning 14 times. If the profit-loss ratio is controlled excellently, 4 to 6 trades can achieve a total position doubling. How does that sound? Doesn't it sound very tempting? Yes, the advantage of this scheme is that it allows for both aggressive offense and cautious defense, making it a versatile strategy.
I won't disclose the specific amount, but over the past year, I have achieved a return of over 400% with this strategy, not only covering the losses of the past few years but also generating a decent profit. With position management in place, the next step is time management. At this point, a particularly useful feature available at every trading platform is the contract cooling-off period.
What is the purpose of the cooling-off period?
First, it can calm your emotions and prevent subsequent continuous heavy losses.
Second, after calming down, use this time to reassess the market and formulate strategies. Here's a reference: First, you must choose one day each week as a rest day to cool down. Even working 996 domestically allows for rest days. The cryptocurrency market operates 24 hours, which can easily lead to fatigue, so a rest day is essential. You must set aside a fixed day for yourself. I choose to rest on Mondays because there is a high probability of a nice upward movement in the market every weekend. I stay up late watching the market, so after the hard work, I take Monday as a rest day, initiate the cooling-off period, and avoid looking at exchanges or any related news. Apart from rest days, after taking profits from every trade, you can choose to initiate a 24-hour cooling-off period to preserve your victories instead of impulsively opening a second position and losing everything back. Anyone facing the experience of gaining and then losing will have a hard-to-express pain and discomfort, making it easy to lose control, turning profits into losses.
The third scenario is after two consecutive profits, where you didn't manage to close your position to take profits, and in the end, it falls back to break even and exit. After all the hassle, it's just floating shadows, not a penny earned, and at this time, a 24-hour cooling-off period must be initiated. Similar to watching profits disappear bit by bit, this feeling is very uncomfortable. This is very dangerous.
Finally, after two consecutive stop-loss trades, you must initiate a 48-hour cooling-off period, which is a two-day cooling-off period. There’s no debate about this. Following our plan above, consecutive losses have already reduced the principal by 10%. If you lose 10% in one day and don’t take a break to adjust, what are you waiting for? Use this time to formulate a strategy for reinvestment after the cooling-off period. Many friends worry about missing out on market conditions, but no matter how big the market movements are, there’s only one wave a day. If you seize this wave during the cooling-off period, then waiting 24 hours for the next wave is completely fine. The same goes for losses; a loss indicates that you have stuck in a market that isn't moving. The cooling-off period is necessary. Moreover, most time in the cryptocurrency market is wasted time; the price rises and falls, and patience will always yield opportunities.
Control the frequency within a reasonable range; manage emotional fluctuations and economic consumption. This way, it averages between 1 to 4 trades per week. Stick to it, and you'll get closer to success.
Finally, let's talk about the 10 trading principles that need to be adhered to.
1. Never engage in revenge trading. After completing a trade, whether winning or losing, I resolutely stick to my decision. I close the market charts and do not open them again within 24 hours. This prevents me from engaging in revenge trading. We have reasons for closing trades, and there is no reason to immediately re-enter. Revenge trading is a major cause of losses for emotional traders. This is especially critical when using leverage to trade Bitcoin. Cryptocurrency traders look at Bitcoin prices for many hours each day, making it difficult to leave and not re-enter after a loss.
2. Avoid trading cryptocurrencies on weekends. Cryptocurrency prices usually fluctuate greatly and have low trading volumes on weekends. This makes it difficult to predict price trends. Crypto whales can easily manipulate prices in low liquidity situations, putting individual traders at a significant disadvantage. Additionally, weekends are times for relaxation and entertainment, and one should stay away from market charts and rest well.
3. Trading only during specific time frames. I can only trade when I am completely focused and sitting at my desk. The cryptocurrency market operates 24/7, so we can't keep our eyes glued to it all the time. I set specific trading hours for myself, and I only check the market during these times. This way, I avoid the impulse to constantly keep in touch with the market and my phone, allowing me to spend time with my family and do other meaningful things.
4. Never develop feelings for your assets. If you fall in love with the asset or investment you want to trade, it can lead to poor decision-making. Emotionless trading means trading won't be influenced by subjective factors. People tend to emotionally prefer certain altcoins, teams, or projects. This is great for investors but a potential disaster for traders.
5. Keep it simple and foolish. This is one of my firm rules. When I was still a beginner, I would check multiple indicators, news sources, and patterns to try to find the optimal trading method. This often leads to over-analysis. When I see an opportunity to trade on the chart, understanding stop-loss and position size is far more important than timing the entry and exit.
6. Only trade when your mindset is calm. This is crucial. When I feel angry, tired, or stressed, I do not trade. I must be calm and focused to use my best judgment when trading. Life outside trading is key to maintaining the right mindset; spending time with family and friends, reading, and participating in sports are all key to my trading success.
7. Keep a journal. Journaling may be boring and tedious. However, it is important because it helps us avoid making the same mistakes twice. I must remind myself to slow down, stop looking at charts, and take the time to record as much information about my trades as possible.
8. Simulate trading every day. I still regularly engage in simulated trading. I simulate trading Bitcoin and some altcoins every day, which helps avoid risks and test new ideas and indicators.
9. Don't blindly chase the dip. Trying to perfectly time the bottom is unwise; you should wait for a safer trend change confirmation signal. Trading in the trend is much less risky than trying to buy at the lows and sell at the highs.
10. Don't overtrade. I find that the fewer trades I make, the more I earn. Even if there are many opportunities in the market, I try to keep the number of open trades to less than 3. Managing multiple trading risks is much more challenging because if each trade goes against you, you could suffer significant losses.
I have ten years of market experience in digital currency. Integration of knowledge and action may seem simple, but it is not easy. Today, I share to illuminate the path for cryptocurrency enthusiasts and reduce the pain of exploration.
#币圈暴富 #BTC走势分析 #比特币减半
