Let's talk about something heartbreaking today. Have you also noticed that when playing contracts in the cryptocurrency world, 8 out of 10 people lose money? Before you rush to refute, first consider whether these scenarios are familiar to you:
Act I
: When I saw a certain coin suddenly soared, I got carried away by FOMO and bought in without hesitation. As a result, I bought at the highest point and the price was cut in half the next day.
Act 2: I set a stop loss but cancelled it out of impulse, thinking "hold on a little longer", but ended up losing more and more, and finally had to sell my stocks in tears.
Act 3: After making a 20% profit with great difficulty, I quickly ran away, but the coin later rose by 300%, which made me slap my thigh.
Don't ask me how I know this; it's all lessons I've learned with my own money. Today, I'm going to share with you how to avoid being a "leek."
1. The truth behind why 90% of people lose money
1. Cognitive bias: treating the cryptocurrency market as a casino and contracts as lottery tickets
2. Behavioral trap: Stop-loss is like a decoration, holding onto orders is like faith, running away when you make a little profit, and holding on when you lose.
Money management: Always go all-in and never withdraw profits
2. Three magic weapons to change your destiny
Magic weapon 1: Coin selection with sharp eyes
The top 100 by market capitalization is the bottom line (check CoinMarketCap at any time)
If you want to speculate on a new coin, focus on the first three months (it will probably go cold after that).
Focus on these: How often is the GitHub code updated? Is the daily transaction volume enough to reach $50 million? Is the financial backer strong?
Magic weapon 2: K-line martial arts secrets
Essential Course for Newbies: (Japanese Candlestick Charting Techniques) (Don’t laugh, it’s really useful) Volume Analysis (Volume is more important than price)
Advanced players:
Wave Theory TD Sequential
The third skill, and the most crucial one, is one I've learned through countless margin calls over the years: time and space management. This essentially refers to trading time and operating space. Manage your trading time and operating space well. If you don't do this well, then no matter how well you do the first two, you'll still suffer losses in the long run, and significant losses. How do you manage this specifically? First, you need a scientific and objective trading system, or plan. It absolutely must be scientific and objective to be effective. We often see posts on YouTube, Facebook, and TikTok about things like "10 units challenge 1 million units," "One gift, multiply your profits by several times," and "I've earned hundreds of times my money trading this way." Avoid such thoughts and watch or listen to related videos.
This kind of anxiety-mongering and fantasy-mongering stuff is a recipe for disaster. My assessment is that it's better to believe I'm the first emperor. Of course, I'm not saying it doesn't exist. In the cryptocurrency world, anything is possible, but we're all ordinary people. The probability of this happening to us is extremely slim. It all depends on fate. You're in this world to make money, not to gamble.
Suppose you have 30,000 yuan ready to invest in cryptocurrency contracts, then 20,000 yuan will be kept as off-market funds and will not be moved for the time being. 10,000 yuan will be used as on-market funds for direct trading, which means that the total contract funds are 10,000 yuan, which is equivalent to the current exchange rate of about 1428u. Then the Kelly formula is used here.
According to the Kelly formula, we can draw two conclusions
First, the maximum enabled position cannot exceed the total funds.
Second, the funds used in a single transaction should not exceed 1/10 of the total funds. In the contract, they stipulate that 1110 of the account funds should be used in a single transaction, and the maximum leverage should not exceed 10 times. There are roughly two types of contracts we open.
One is to do mainstream currency, such as Bitcoin, Ethereum,
Mainstream cryptocurrencies are relatively stable, with minimal fluctuations, making them relatively easier to manage. However, the probability of making a large profit with a small investment in the short term is relatively small. Meanwhile, altcoins experience rapid price fluctuations, making them difficult to manage. A surge of two or three times in a day can feel like a game, while a drop of two or three times, or even delisting, can also be a game. This is precisely why altcoins are so popular, offering the potential for quick wealth.
Let’s take altcoins as an example. If you open a single order with 1/10 of the position, the maximum leverage should not exceed 10X.
We will now calculate based on the maximum multiple. The position after opening a contract is 1428u - 10x10 = 1428u, so your actual contract position is 1428u. The stop-loss position is usually set at 5% of your entry position. For example, if I choose to enter the market long when the price of a certain currency is 1u, my stop-loss position should be set at 0.95u. When trading contracts, there is a profit-loss ratio. The profit-loss ratio must be at least greater than or equal to 1 before we choose to open a contract. In other words, you need to have at least a 5% stop-loss to match the 5% increase in profit to consider it a suitable trade (here, it rises to 1.05u).
The essence of contracts is to calculate profit and loss ratios, using leverage to achieve substantial profits at a minimal cost. For example, if I think this is a very good relative bottom with a chance of achieving the expected increase, I'll enter the market immediately. However, if my stop-loss order results in a 5% loss, or two consecutive trades result in a 10% loss, then I'll need to adjust my strategy.
Please remember this rise and fall formula?
If your account drops 10%, you need to earn 11% to recoup your losses. If your account drops 20%, you need to earn 25%. If your account loses 70%, you need to earn 233% to recoup your losses.
After you have suffered continuous losses, your capital has shrunk, but the difficulty of making a profit has increased, which means that you have less money but have to do more difficult things than before.
Therefore, if you suffer two consecutive losses, which is 10%, you must adjust your strategy and reduce your position.
So after the 10% loss, the total funds are still 1285.2u. According to the plan of 1/10 position with a maximum leverage of 10 times, our contract position after opening the order is 1285.2. Similarly, even after ten consecutive losses, the account funds are still 842.21 and another loss of 584.796, which means that the total funds are still 59%, a loss of 41%. At this time, there are still nearly 60% of the book funds. If most people use a full position with high leverage, they may not know how many times they will have to liquidate their positions. But this is not what I want to say, because according to the formula, at this time, it needs to rise by 67% to recover the investment, which is actually relatively difficult at this time.
Then the best way is to use your remaining 213 off-market funds to make up for your position and replenish funds.
How much should you top up specifically? Don’t exceed 1428u, which is the maximum value you recharged last time.
Calculated in this way, the account has 1428u+842.21=2271.2u.
On this basis, only a 26% increase is needed to recover the losses. After recovering the losses, the positions added can be replenished. This is the first 1428u withdrawal, returning to the OTC market. This is how OTC funds are used.
If you continue to lose money, then continue with the original plan, then you will have the opportunity to lose money at least 30 times in a row.
I don't believe that you didn't do it right once out of the thirty times. If you really didn't do it right once, then just withdraw the money as soon as possible and go to work honestly. You are really not suitable for this circle.
Now we have finished talking about the operation of shrinking positions due to losses. Next, we will talk about the operation of expanding positions due to profits. Taking 1428u as an example, after we make a profit of 10%, the funds reach 1570.8u. At this time, we can choose to expand the position, that is, expand the original single contract position of 1428u to the contract position of 1576. And so on. Taking the minimum profit and loss ratio of 1:1 as an example, we can double our position by winning 14 times. If the profit and loss ratio is well controlled, 4 to 6 orders can double the total position. How about it? Doesn’t it sound very tempting? Yes, the advantage of this plan lies in this. It can attack when advancing and defend when retreating. It is a panacea strategy.
I will not disclose the specific amount, but in the past year, I have achieved a return rate of more than 400% with this strategy, which not only made up for the losses in the past few years, but also brought in a lot of profits.
Now that you have position management, the next step is time management. At this time, you need to use a very useful function that every exchange has: the contract cooling-off period.
What is the purpose of the cooling-off period?
First, it can help you calm down and prevent the next series of huge losses.
Second, after calming down, use this time to re-examine the market and formulate a strategy. Here's a tip for everyone. First, you must choose one day off each week to calm down. Even those working 996 hours in China have days off. The 24/7 trading in the cryptocurrency world can easily wear you out, so a day off is essential. You must always take a day off. I choose Mondays, because the market currently has a high probability of seeing strong gains every Saturday and Sunday, and I'll be watching the market all night. So after all the hard work, I treat Mondays as a day off, a day off, a cooling-off period. Avoid visiting the exchange or reading any news. Except for days off, after closing a profitable position, you can choose to enter a 24-hour cooling-off period. This helps preserve your gains, rather than impulsively opening a second trade and then losing them all. Anyone who experiences gain and then loses will experience unspeakable pain and discomfort, and it's easy to get carried away and turn a profit into a loss.
The third scenario is when you've made two consecutive profits but haven't closed your position in time to take profits, only to end up losing money and exiting the market. All that hard work is in vain, with no profit at all. A 24-hour cooling-off period is essential. Similarly, watching your profits disappear bit by bit is incredibly frustrating. This is extremely dangerous.
Finally, after placing two consecutive stop-loss orders, you must open a 48-hour cooling-off period, or a two-day cooling-off period. There is no doubt about this. According to our plan above, continuous losses have already resulted in a loss of 10% of the principal. If you lose 10% a day, what are you waiting for if you don't take a break to adjust? At the same time, use this time to formulate a strategy after resuming your position. Many friends are worried about missing the market, but no matter how big the market is, there will only be one wave a day. You can make money during this cooling-off period and wait for the next wave to start after 24 hours. There is no problem at all.
The same goes for losses. Losses mean you're stuck in a market that's neither going up nor down, so a cooling-off period is necessary. Furthermore, most of the time in the cryptocurrency market is garbage time, with prices rising and falling as they do. Patience is key, and there are always opportunities.
Keep the frequency within a reasonable range, and control your emotional fluctuations and financial expenditure. This works out to between 1 and 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 engage in revenge trading. After I close a trade, whether it's a profit or a loss, I hold onto it unwaveringly. I close the chart and don't reopen it for 24 hours. This prevents me from engaging in revenge trading. We close trades for a reason, which means there's no reason to re-enter immediately. Revenge trading is a major cause of losses for emotional traders. This is especially crucial when trading Bitcoin with leverage. Cryptocurrency traders monitor Bitcoin market conditions for many hours each day, making it difficult to walk away and not re-enter after a loss.
2. Avoid trading cryptocurrencies on weekends. Weekends often see high price volatility and low trading volume in the cryptocurrency market. This makes it difficult to predict price trends. Crypto whales can easily manipulate prices amidst low liquidity, putting individual traders at a significant disadvantage. Furthermore, weekends are a time for stress relief and recreation, so it's best to take a break from the charts.
3. Trade only during specific hours. I only trade when I'm at my desk and fully focused. The cryptocurrency market operates year-round, so it's impossible to monitor it constantly. I set specific trading hours for myself, and only then do I check the market. This prevents me from being constantly connected to the market and my phone, allowing me to spend time with my family and do other meaningful things.
4. Never get emotionally attached to an asset. If you fall in love with an asset or investment, it can lead to poor decision-making. Emotionless trading means trading without subjective factors. People tend to become emotionally attached to specific altcoins, teams, or projects. This is great for investors, but potentially disastrous for traders.
5. Keep it simple and stupid. This is one of my staunch rules. When I was a beginner, I would check multiple indicators, news sources, and patterns to try to find the optimal trade. This often led to overanalysis. When I saw a trading opportunity on the chart, understanding stop-loss and position sizing was far more important than timing my entries and exits.
6. Only trade when you are calm. This is key. I won't trade when I'm angry, tired, or stressed. I must trade when I'm calm and focused, using my best judgment. Having a life outside of trading is key to maintaining the right mindset. Spending time with family and friends, reading, and playing sports are all key to my trading success.
7. Keep a Journal. Journaling can be boring and tedious. It's also important because it helps us avoid making the same mistake twice. I have to remind myself to slow down, stop looking at the charts, and take the time to record as much information as possible about my trades.
8. Daily Simulated Trading I still do simulated trading regularly. I simulate trading Bitcoin and some BTC every day to avoid risks and test new ideas and indicators.
9. Don’t blindly chase the dip. Trying to perfectly pick the bottom is unwise; wait for a safer trend change confirmation signal. Trading within a trend is much less risky than trying to buy low and sell high.
10. Don't Overtrade. I've found that the fewer times I trade, the more money I make. Even when the market is full of opportunities, I try to keep the number of open trades under three. Managing risk with multiple trades is much more difficult because if every trade goes against you at the same time, you could incur a significant loss.
While the road to originality is arduous, I share insights tailored for retail investors daily. I have a decade of experience in the digital currency market. Integrating knowledge and action may seem simple, but it's actually not easy. Today's sharing hopes to illuminate the path forward for cryptocurrency investors and alleviate their pain.
If you're also a technology explorer with a passion for cryptocurrency trading, join our official account (Crypto Circle Sunny Day). Here, you can see real market trends, learn and connect, and gain insight into the market's pulse. No matter how the market fluctuates, planning ahead will ensure you're prepared.
When you first enter the market, do you always feel that profits are out of reach and losses keep coming?
When a novice enters the cryptocurrency market, does he feel that profits are always out of reach of him, while losses keep coming?
Every veteran has experienced setbacks and has grown through losses. The key is to learn from those losses and avoid repeating them. Today, I'll share my own profound reflections on losses, discuss the most common causes of losses for beginners, and offer practical solutions.
Directly pointing to the three major "vital points" of novice losses:
1. Lack of trading system and discipline: Unable to control hands, buying and selling randomly, too many "temptations" outside the system. 2. Inadequate stop-loss execution: Knowing to stop-loss, but always relying on luck, eventually small losses turn into big losses. 3. Emotional trading: Reluctant to accept losses, retaliatory trading, resulting in more losses.
I believe many novice friends have deeply experienced these three points. Next, I will give you a more in-depth analysis of these three points, combined with my many years of practical experience, and provide a specific "pitfall avoidance" guide.
Trading system discipline: Don’t make unreliable trades
Many newcomers to the cryptocurrency world are like headless chickens, rushing in blindly upon hearing rumors of a surge in a certain price. They also follow the trend after seeing others making huge profits by buying "Dogcoins." Some even trade based on intuition and luck. This "haphazard" trading style may yield a small profit in the short term, but in the long run, it is bound to result in more losses than gains.
Block out external noise and focus on opportunities within the system:
The cryptocurrency world is flooded with information, with various social networks and influencers flooding the market. New traders can easily be distracted by "insider tips" and "get-rich-quick" stories, which can shake their trading systems. Learn to block out this noise and reduce unnecessary distractions. Focus on researching and finding opportunities that meet your trading system's requirements, and patiently wait for your "prey."
Stop-loss execution: "safety gas gauge" is indispensable
In a highly volatile market like the cryptocurrency world, the importance of stop-loss orders cannot be overstated. A stop-loss order is like a car's airbag; you might not need it on a regular basis, but in the event of a crash (or market volatility), it could save you and prevent significant losses.
Many novices still find it difficult to decisively stop losses in actual trading, mainly due to the following psychological barriers:
Reluctance to accept losses: Human nature naturally abhors losses. Stop-loss trading means admitting a misjudgment and accepting losses, which is psychologically difficult to accept.
Luck mentality: You always think that the price will rise again and that if you wait a little longer, you might be able to get out of the position. This luck mentality will cause you to repeatedly delay stop-loss orders, eventually causing small losses to become large losses, or even a margin call.
Solution: Overcome psychological barriers and execute stop-loss orders mechanically!
1. Set a stop-loss and clearly record it in your trading plan:
Stop-loss orders aren't improvised; they're pre-set in your trading plan. Before opening a position, clearly define your stop-loss according to your trading system and risk tolerance, and record it in your trading plan.
2. Execute stop-loss orders mechanically, like a robot, without any emotional reaction:
Once the price hits your stop-loss level, execute it without hesitation, just like a robot. Don't make excuses, don't harbor any illusions, and don't intervene manually. Remember, stop-loss orders are designed to protect your principal, avoid further losses, and leave room for future profit opportunities.
3. Use tools to assist in stop-loss:
You can use the stop-loss function of the trading platform to set a stop-loss order in advance. Or set an alarm on your phone to remind yourself when the stop-loss order is near the key stop-loss level.
4. Stop-loss review to positively reinforce stop-loss behavior:
After each stop loss, don’t be discouraged. Review the situation and analyze whether the stop loss is reasonable? Is the stop loss executed in place? Summarize the experience and lessons.
Emotional Management: Taming the Wild Horses of Emotion
The cryptocurrency market is trading 24 hours a day, with drastic price fluctuations, which can easily lead to emotional ups and downs. Especially when there are consecutive losses, 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 the loss, when the emotions are high, they still find it difficult to control themselves, and the losses continue to increase.
1. Don’t get hung up on hot coins. When the profits of altcoins reach a certain level, you need to switch. If you want to profit from them all the time, you will end up with nothing. The reason is simple: altcoins cannot rise forever. If you have over-hyped them, you need to switch. Otherwise, they will fall back to the starting point, and all your efforts will be in vain. For example, FIL LUNA
2. If the price of a currency moves sideways at a high level and then hits a new high, seize the opportunity to sell. If the price of a currency moves sideways at a low level and then hits a new low, there is a high probability that a good opportunity has appeared. When the price of a currency moves sideways at a high level and then hits a new high, be wary of the main force's inducement to buy more. Do not hesitate to reduce your position or exit the market. If the price of a currency moves sideways at a low level and then hits a new low, and then quickly recovers, it is likely that the main force is making a final move, and you should be firm and unwavering at this time.
3. When the market environment is bad, the price will rise against the trend, and a small rise against the trend will lead to 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 lead to a big fall.
4. Only increase your investment when you make money, and don't spread the losses evenly. This may break the cognition of many old friends. Our positions should be increased when the currency price breaks through the previous high, rather than adding to the position when it keeps falling. The more you add, the more you lose, and finally you can't move. You must cut losses and let profits run.
5. As long as you identify the bottom price, it will generally rise by two steps forward and one step back. Don't doubt it at this time. Generally, there will be a big surprise later. Especially when the trend is rising, it will be pulled up and washed out at the same time. Don't get off the train lightly.
6. First-rate players look at sectors first, second-rate players only look at single coins, third-rate players look at indicators, and the worst-rate players only gamble. This means that when we want to buy a certain coin, we must first look at the sector. Only by investing in hot sectors will popularity and winning rate be high. Then we can look at the tokens. Those who only look at indicators are novices, and those who look at everything are gamblers.
7. Indicators are based on volume and price, so volume and price are the root of indicators. If you don't look at volume and price, you will be worried about speculating in cryptocurrencies. The batches are calculated based on the price and trading volume, so the real technical analysis needs to look at volume and price. The rise in price requires a lot of capital to drive it.
8. Look at support for an upward trend and resistance for a downward trend. When the price of the currency is rising, the success rate of operations based on the support line is very high, and there is an opportunity to buy low when the price falls back. In a downward trend, the chance of success of operations based on the resistance line is very high, and you can open a short position or an opportunity to exit the market.
If you like it, you might as well pay attention to [Crypto Xiaoxun], a one-sided opinion. Listen to both sides and you will be enlightened, listen to only one side and you will be confused. Focus on the core technology of the cryptocurrency circle! Follow me and time will give you the most real answer!
