Let's talk about something heartbreaking today. Have you also noticed that 8 and a half out of 10 people are losing money playing contracts in the currency circle? Don't rush to refute, first see if you are familiar with these scenarios:
First act
: Seeing a certain coin suddenly skyrocket, FOMO emotions arise, and you rush in with a full position without saying a word, resulting in buying at the highest point and being directly cut in half the next day.
Second scene: Setting a stop loss and then canceling it with itchy hands, thinking in my heart "I'll resist it again", resulting in more and more losses, and finally cutting the meat with tears.
Third scene: I finally made 20%, so I ran away quickly, but the coin rose another 300% later, slapping my thighs.
Don't ask me how I know, these are all lessons I bought with real money. Today, I will talk to you about how to avoid being a chives.
1. The truth that 90% of people lose money
1. Cognitive bias: Treating the currency circle as a casino and contracts as lotteries
2. Behavioral traps: Stop loss is like a decoration, resisting orders is like a belief, running away when you make a little money, and resisting when you lose money
Fund management: Moving to full positions and never withdrawing profits
2. Three magic weapons for reversing fate
Magic weapon 1: The ability to pick coins with discerning eyes
The top 100 market capitalization is the bottom line (check CoinMarketCap at any time)
If you want to speculate on new coins, speculate on the first three months (most likely to cool down later)
Focus on these: ✅ Whether GitHub code is updated frequently ✅ Whether the daily trading volume is enough 50 million dollars ✅ Whether the gold owner behind is strong
Magic weapon 2: K-line martial arts secrets
Compulsory course for beginners: (Japanese candlestick chart technology) (Don't laugh, it's really useful) Volume analysis (volume is more important than price)
Advanced skills:
Wave Theory TD Sequence
The third ability, the most important, is also the bloody ability that I learned after countless liquidations over the years, space-time management. In fact, it refers to trading time and operating space. Manage your trading time and operating space well. If you don't do this well, then even if you do the first two points well, you will lose money in the long run and lose a lot. How to do management specifically? First of all, you must have a scientific and objective trading system, or a trading plan. It must be scientific and objective to be reasonable. We can often swipe videos on YouTube, Bilibili, and Douyin such as "10u challenge 1 million u", "how many times to flip in a week", "I made hundreds of times by trading like this". Generate less of this kind of thinking and watch and listen to less related videos.
If you believe in this kind of anxiety-selling and fantasy-spreading stuff, you will be cut like a leek. My evaluation is that it is better to believe that I am Feng Shihuang. Of course, I am not saying it does not exist. Everything is possible in the currency circle, but we are all ordinary people. The probability of this happening to ourselves is very slim. It depends on fate. You come to this circle to make money, not to gamble on luck.
Assuming you have 30,000 yuan ready to invest in the currency circle to do contracts, then 20,000 yuan is used as off-site funds and should not be moved for the time being. 10,000 yuan is used as on-site funds for direct trading, that is, the total contract funds at present are 10,000 yuan, which is approximately 1428u at the current exchange rate. Then the Kelly formula will be used here.
According to the Kelly formula, we can draw two conclusions
First, the maximum activation position cannot exceed the total funds.
Second, the single use of funds should not exceed 1/10 of the total funds. On the contract, it is 1110 of the account funds used for a single contract, and the maximum leverage multiple should not exceed ten times. We open contracts in about two ways.
One is to trade mainstream coins, such as Bitcoin and Ethereum,
The characteristic of mainstream coins is that they are slightly more stable, and the fluctuation range will not be too large, making them relatively easier to grasp, but in the short term, the probability of making big money with small money is relatively small. Altcoins rise and fall sharply, and the fluctuations are difficult to grasp. It's like playing to pull two or three times a day, and it's like playing to fall two or three times or even be removed from the shelves, but that's why altcoins are popular, because they can achieve short-term wealth.
Let's take altcoins as an example. Open a single order with 1/10 of the position, then the maximum leverage should not exceed 10X.
Now we will calculate according to the maximum magnification. The position after opening a contract is 1428u-10x10=1428u. The actual contract position you open is 1428u. The stop-loss position is usually set at 5% of your entry position. For example, if I choose to enter a long position when the price of a certain coin is 1u, then I need to set my stop-loss position at 0.95u. We will have a profit-loss ratio when doing contracts. We will only choose to open an order if the profit-loss ratio is at least greater than or equal to 1. That is to say, you must have at least 5% of the stop loss to match 5% of the increase in profit to be considered a suitable trade (here it rises to 1.05u)
Because the essence of the contract is to do the profit-loss ratio, using leverage multiples to move objective profits at a small cost. For example, I think this is a very good relative bottom and there is an opportunity to realize the expected increase. Then I will directly open it. In this way, if the funds are damaged by 5% in the stop loss, and there are two consecutive losses, that is, 10%, then at this time we need to adjust the strategy.
Please remember this rise and fall formula?
If the account funds fall by 10%, that is, your account loses 10%, you need to earn 11% to recover the cost. If it falls by 20%, you need to earn 25%. If the account loses 70%, you need to rise by 233% to recover the cost.
After you lose money continuously, your principal shrinks, but the difficulty of recovering your principal is increasing, which means that you are taking less money but doing something more difficult than before.
Therefore, two consecutive losses, that is, 10%, must adjust the strategy. Go to reduce the position.
Then after losing 10%, the total funds at this time are still 1285.2u. According to the plan of 1/10 position with a maximum leverage of 10 times, the contract position after we open an order at this time is 1285.2. And so on, even after losing ten times in a row, the account funds are still 842.21 and have lost 584.796, that is, the total funds are still 59%, and the loss is 41%. At this time, there is still nearly 60% of the book funds, which is probably not enough to liquidate all the positions many times for most people's full position high leverage play. But what I want to say is not this, because according to the formula, it needs to rise by 67% to recover the cost at this time, and the difficulty is relatively greater.
Then the best way is to use your remaining 213 off-site funds to add a position to replenish funds.
How much to add? Don't exceed 1428u, which is the maximum amount you recharged last time.
Calculated in this way, the account has 1428u+842.21=2271.2u.
On this basis, you only need to rise by 26% to recover the loss. After recovering the loss, withdraw the added position, that is, the 1428u of the first time, and return to the off-site.
If you continue to lose money, then continue to follow the original plan, then you will have at least 30 chances to lose money continuously.
I don't believe you won't get it right once in these thirty times. If you really don't get it right once, then take the money away as soon as possible and go to work honestly. You are really not suitable for this circle.
So, the operation of shrinking positions after losing money is finished. Next, we will talk about the operation of expanding positions after making profits. Taking 1428u as an example, after we make a profit of 10%, the funds come to 1570.8u. At this time, you can choose to expand the position, that is, expand the original single contract position of 1428u to a contract position of 1576. And so on, taking a minimum profit-loss ratio of 1:1 as an example, we can double the position after 14 victories. If the profit-loss ratio is controlled very well, 4~6 orders can double the total position. How about it? Does it sound very attractive? Yes, this is the advantage of this solution. It can be attacked and defended. It belongs to a versatile strategy.
I will not disclose the specific amount, but in the past year, I have completed the return rate to more than 400% with this strategy, which not only filled the losses of the past few years, but also has a considerable income.
Now that we have position management, the next step is time management. At this time, we need to use a particularly useful function that every exchange has: contract cooling-off period.
What is the use of the cooling-off period?
First, it can calm your emotions and prevent continuous huge losses in the future.
Second, after calming down, use this time to re-observe the market and formulate a strategy. Here is a reference for everyone. First of all, you must choose one day a week as a day off to calm down. Even domestic 996 workers have a day off to be oxen and horses. The currency circle trades 24 hours a day, which can easily make people tired, so a day off is essential. You must give yourself a fixed day off. I will choose to rest on Monday, because the market will most likely have a good increase every Saturday and Sunday. I will stay up all night to watch the market, so after the hard work, I will treat this day as a day off, give myself a day off, and start a cooling-off period. I will not look at the exchange, nor any related news. In addition to the day off, after profiting and closing each order, you can choose to start a 24-hour cooling-off period. This is to preserve your victory results, instead of impulsively opening a second order and then spitting it all back out. Anyone who faces the experience of getting and then losing will have unspeakable pain and discomfort, and it is easy to get overwhelmed and turn profits into losses.
The third situation is that after two consecutive profits, there was no time to close the position and take profit, and finally it fell back and broke even. After tossing for a long time, it was all a floating shadow, and I didn't earn a penny. At this time, you must open a 24-hour cooling-off period. The same is true here. It is difficult to feel the profit disappearing little by little. This is very dangerous.
Finally, after two consecutive stop-loss orders, you must open a 48-hour cooling-off period, which is two days. There is no other way. According to our plan above, you have lost 10% of your principal in a row. If you lose 10% in one day, what are you waiting for if you don't rest and adjust? At the same time, use this time to formulate a strategy for recovering the position. Many friends are worried about missing the market, but even the biggest market is only one wave a day. If you earn this wave and enter the cooling-off period, there is no problem in starting the next wave after 24 hours.
The same is true for losses. If you lose money, it means you are stuck in a position where the market is neither up nor down. A cooling-off period is necessary. And most of the time in the currency circle is garbage time. How it rises is how it falls. If you wait patiently, there will be opportunities.
Control the frequency within a reasonable range, and control both emotional fluctuations and economic consumption. Calculated in this way, it is between 1~4 orders per week. If you stick to it, you will get closer and closer to success.
Finally, let's talk about the 10 things you need to stick to in trading
1. Never trade revengefully. After I complete a trade, whether it is profitable or a loss, I will firmly abide by it. I close the market chart and do not open it again for 24 hours. This prevents me from making revenge trades. We close the trade for a reason, which means there is no reason to re-enter immediately. Revenge trading is the main reason for losses among emotional traders. This is especially critical when trading Bitcoin with leverage. Cryptocurrency traders look at Bitcoin quotes for many hours a day, making it difficult to leave and not re-enter after a loss.
2. Avoid trading cryptocurrencies on weekends. The cryptocurrency market usually has high price volatility and low trading volume on weekends. This makes it difficult to predict price movements. Crypto whales can easily manipulate prices with low liquidity. This puts individual traders at a distinct disadvantage. In addition, weekends are a time to de-stress and have fun, and you should stay away from the market charts and take a good rest.
3. Only trade during specific time periods. I can only trade when I am sitting at my desk with full concentration. The cryptocurrency market is open all year round, so we can't keep a close eye on it all the time. I set trading hours for myself, and only then do I check the market. This avoids my constant urge to stay in touch with the market and my phone, allowing me to be with my family and do other meaningful things.
4. Never get emotional about assets. If you fall in love with the assets or investments you are trading, it can lead you to make poor decisions. Emotionless trading means that trading is not affected by subjective factors. People tend to be emotionally fond of certain altcoins, teams, or projects. This is good for investors, but it is a potential disaster for traders.
5. Keep it simple and stupid. This is one of my firm rules. When I was a beginner, I would check multiple indicators, news sources, and patterns to try to find the best trading method. This usually leads to over-analysis. When I see a trading opportunity on the chart, knowing the stop loss and position size is far more important than the timing of entry and exit.
6. Only trade when you are in a peaceful state of mind. This is key. I don't trade when I'm feeling angry, tired, or stressed. I have to be single-minded and use my best judgment when I'm calm. Life outside of 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 diary. Diaries are boring and tedious. It is also important because it can help 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 do simulated trading regularly. I simulate trading Bitcoin and some altcoins every day. This avoids risks and tests new ideas and indicators.
9. Don't blindly chase the fall. Trying to perfectly bottom out is unwise. You should wait for a safer signal to confirm the trend change. Trading in the trend is much less risky than trying to buy low and sell high.
10. Don't overtrade. I have found that the fewer times I trade, the more money I make. Even if there are many opportunities in the market, I try to keep the number of open trades to less than 3. Managing multiple trade risks is much more difficult because if each trade goes against you at the same time, you may suffer significant losses.
Although the road to originality is difficult, my Sunny Day's daily sharing is all real insights tailored for retail investors. I have ten years of market experience in mastering digital currencies. Knowing and acting in one, it seems simple, but it is not easy. Today's sharing is intended to light the way forward for currency people and reduce the pain of exploration.
If you are also a technology explorer and have a special interest in technical operations in the currency circle, you are welcome to join the public account (Sunny Day in the Crypto Circle). Here, you can see real market dynamics, learn and communicate, and understand the pulse of the market. No matter how the market changes, you can respond calmly by planning in advance.
When you first enter the market, do you always feel that you have no chance of making a profit, and losses follow one after another?
After entering the currency circle, new Xiaobai will feel that the discovery of profit seems to always be out of reach, but the loss is coming one after another,
Any predecessor was once a leek, and also grew up from losses. The key is to learn from the losses and avoid repeating the same mistakes. Today, I will talk to you about the most common causes of losses for novice users, and provide practical solutions based on my own profound "summary of loss reflections".
Directly pointing to the three major "deadly points" of novice losses:
Trading system + lack of discipline: Unable to control hands, buying and selling randomly, too many "temptations" outside the system. 2. Insufficient stop-loss execution: Knowing that you need to stop-loss, but always holding a lucky mentality, eventually small losses turn into big losses. 3. Emotional trading: Unwilling to accept losses after losing money, revenge trading, resulting in more and more losses.
These three points, I believe many novice friends have a deep understanding. Next, I will give you a more in-depth analysis of these three points based on my many years of practical experience, and give you specific "avoiding pitfalls" guides.
Trading system discipline: Don't do "unreliable" trading
Many novices are like headless flies when they first enter the currency circle. They hear news that a certain coin is about to explode, so they rush in; they see others buying "dog coins" and making a lot of money, and they are also envious and follow suit; they even trade based on feeling and luck. This kind of "do whatever you want" trading method may make a small profit in the short term, but in the long run, it is destined to lose more than you earn.
Shield external noise and focus on opportunities within the system:
The currency circle is full of information, and various communities and KOLs are full of information. Novices can easily be interfered with by various "insider news" and "get rich myths", which will shake their trading system. You must learn to shield these noises and reduce unnecessary interference. Focus your energy on researching and finding opportunities that meet the requirements of your trading system, and wait patiently for your "prey".
Stop-loss execution: The "safety airbag" is indispensable
In the highly volatile market of the currency circle, the importance of stop loss cannot be overemphasized. Stop loss is like the airbag of a car. It may not be used in normal times, but once a collision occurs (violent market fluctuations), it can save your life and avoid major losses.
Many novices still find it difficult to stop losses decisively in actual trading. There are mainly the following psychological obstacles:
Reluctant to lose: Human nature naturally hates losses. Stop loss means admitting misjudgment and accepting losses, which is difficult to accept psychologically.
Lucky mentality: Always feel that the price will rise back, and waiting a little longer may get you out of the trap. This lucky mentality will make you delay stop loss again and again, eventually leading to small losses turning into big losses, and even liquidation.
Solution: Overcome psychological obstacles and execute stop loss mechanically!
1. Preset the stop-loss level and clearly record it in the trading plan:
Stop loss is not a spur-of-the-moment decision, but is pre-set in the trading plan. Before opening a position, you must clearly set the stop-loss level according to your trading system and risk tolerance, and record it in the trading plan.
2. Execute stop loss mechanically like a robot, never emotionally:
Once the price hits the stop-loss level, execute the stop loss without hesitation like a robot. Don't look for any reasons, don't have any illusions, and don't intervene manually. Remember, stop loss is to protect the principal, avoid greater losses, and leave room for future profit opportunities.
3. Use tools to assist stop loss:
You can use the stop-loss function of the trading platform to set a stop-loss order in advance. Or set a mobile phone alarm to remind yourself near the key stop-loss level.
4. Stop-loss review, positively reinforce stop-loss behavior:
After each stop loss, don't be discouraged, do a review, analyze whether the stop loss is reasonable? Whether the stop loss execution is in place? Summarize the experience and lessons learned.
Emotional management: Taming the "wild horse of emotions"
The currency circle trades 24 hours a day, and the price fluctuates violently, which can easily cause emotional ups and downs. Especially when you lose money continuously, it is easier to fall into the quagmire of emotions and make irrational trading decisions. Many people know that revenge trading is wrong, but after losing money, it is still difficult to control themselves when they are emotionally overwhelmed, resulting in more and more losses.
1. Hot coins cannot be loved, and you must change when the profit of the cottage coin reaches a certain point. It is inevitable that you want to eat from the beginning to the end. The reason is very simple. The cottage cannot always rise. If you speculate too much, you must change, otherwise you will return to the origin, and you will be busy for nothing, such as FIL LUNA in those years.
2. High-level sideways consolidation and then a surge, seize the opportunity to prepare to sell: Low-level sideways consolidation and then a new low, a high probability of a good opportunity. When the coin price reaches a new high after sideways consolidation at a high level, be wary of the main force inducing more buying, and don't hesitate to reduce positions or leave the market when you should: When the coin price reaches a new low after sideways consolidation at a low level, and then quickly recovers, it is likely the last wash by the main force, and you should remain steadfast.
3. When the market environment is not good, the price will rise against the trend, and a small rise against the trend will be a big rise. When the market environment is good, the price will fall slightly against the trend, and a small fall against the trend will be a big fall.
4. Only add positions when you make money, and don't spread the losses. This may break the understanding of many old irons. We should increase our positions when the coin price breaks through the previous high, instead of adding positions when it keeps falling. This will only make the more you add, the more you lose, and you will be unable to move in the end. You must cut off the losses and let the profits run.
5. As long as you recognize the bottom price, it will generally rise two steps forward and one step back. Don't doubt it at this time. Generally, there will be big surprises behind it, especially when the trend is rising, it will be pulled up and washed at the same time. Don't get off the bus easily.
6. First-class players look at the sector first, second-class players only look at single coins, third-class players look at indicators, and last-class players only gamble. This means that when we want to buy a certain coin, we must first look at the sector. Only by doing hot sectors can the popularity be high and the success rate be high. Secondly, look at the token. Only novices look at indicators and enter, and those who look at everything are gamblers.
7. Indicators change with volume and price, so volume and price are the source of indicators. If you don't look at volume and price and trust indicators, you'll frown when trading coins. Indicators are calculated based on coin price and trading volume, so real technical analysis requires looking at volume and price. Price increases require a large amount of capital to push.
8. Look at support in an upward trend and resistance in a downward trend. When the coin price is in an upward trend, the success rate of operating based on the support line is very high, and there is an opportunity to buy low on dips. In a downward trend, the success rate of operating on the resistance line is very high, and you can open short or leave the market.
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