Friends who want to play short-term in the cryptocurrency market should pay attention to three principles:
1. Gold Standard Principle
The first is that you should adhere to the gold standard principle; short-term trading is definitely not about holding onto coins. The profit based on the gold standard is the first criterion for considering whether to sell. If you make more than 10% in the short term, you can consider starting to secure your capital. If you earn 20% in the short term, then when your profit pulls back to 10%, you should sell to recover your capital. If you earn 30% in the short term, then a 15% pullback means you should sell unconditionally. This principle is entirely based on profit margins, without considering any technical or news factors. What is the second principle?
2. Capital Preservation Principle
The second principle is the capital preservation principle. No matter which cryptocurrency you buy, when it gradually loses and drops to 15%, you should cut your losses and leave the market to ensure safety. Personally, I believe that 15% is a reasonable recovery suggestion. Of course, you can adjust it according to your own situation, such as setting it to 20%, 10%, or 5%, but remember, in short-term operations, setting a stop-loss is essential. Otherwise, you will lose all your principal in cryptocurrency. Investing is a very high-risk endeavor, especially in short-term trading. In a market with unlimited ups and downs, you are very likely to lose all your principal. So, always invest with an amount you can afford to lose in short-term operations.
3. Incremental Position Building
The third principle is incremental position building, the principle of never being fully invested. What does incremental position building mean? Many people will buy all their chips at once, while the correct approach should be to sell progressively as the price rises and buy progressively as the price falls. This way, you can select your chips at lower positions while ensuring that you only take back your profits and principal during the upward trend. Throughout this process, you should never be fully invested; you should always leave 10% to 20% of your position to prepare for what? To prepare for a black swan event. During extreme spikes, you can buy at a lower price to lower your cost. But remember, you will never buy at the lowest point and will never sell at the highest point.