Essential Course in Cryptocurrency;
8 Key Principles of Position Management to Avoid Being a 'Fully Invested Retail Investor'
In the cryptocurrency market, 99% of liquidations are not due to market conditions, but rather issues with position management. If you want to survive in this volatile environment, you must first learn this set of principles.
① Golden Ratio Method
Divide your capital into 5 parts, using only 1/5 for each position. A single stop-loss should only incur a 2% loss; even if you experience 5 consecutive stop-losses, your total loss will not exceed 10%. Meanwhile, aim for a profit target of 50%+, resulting in a risk-reward ratio of 5:1. Small losses with big gains will allow you to go further.
② Follow the Trend
The trend is the only truth in the cryptocurrency market. A rebound in a downtrend is a trap, while a correction in an uptrend is an opportunity. Adding positions during a bull market correction has a 67% higher success rate than blindly trying to catch the bottom.
③ Avoid the Trap of Sudden Surge
Cryptocurrencies that surge more than 50% in the short term are generally part of a pump-and-dump scheme. Historical data shows that coins that skyrocket 300% in 72 hours have a 95% chance of giving back all gains within two weeks. Once the hype fades, prices can plummet.
④ MACD Zero Axis Rule
A golden cross below the zero axis indicates a buy signal; a death cross above the zero axis serves as a warning to reduce positions. This method helped me capture an 18% swing in BTC in April 2024.
⑤ Profit Scaling, Refuse to Average Down
Averaging down means adding leverage to losses. The correct approach is to add to your position with profits when you achieve a 20% gain, which amplifies returns without harming your principal.
⑥ Volume-Price Code
Trading volume is the thermometer of the market. A breakout on high volume at a low price is a signal to start; high volume stagnation at a high price is a warning to exit. 'High volume, high price; low volume, low price' is the survival code for seasoned investors.
⑦ Moving Average Matrix
3-Day Moving Average → Ultra-short opportunity
30-Day Moving Average → Mid-term wave
84-Day Moving Average → Main upward trend
120-Day Moving Average → Long-term trend
Moving averages are the most stable navigation tools.
⑧ Review Alchemy
Ask yourself three questions at the end of each trading day:
Logic: Has the fundamental situation of the coin changed?
Technical: Does the weekly K-line pattern still meet expectations?
Emotion: Was today's trading rational or driven by emotions?
The cryptocurrency market is not a place to flip fortunes with a couple of lucky trades, but rather a game of slow accumulation based on positions and discipline.
Remember this: The market can be deceiving, but your positions cannot.
