After much contemplation, I have made up my mind to start with a capital of 50,000 and focus on short-term trading in the cryptocurrency market. I am sharing my short-term trading insights, which allowed me to achieve 53,980,000 in just two short years, without reservation!
If you are currently in a state of loss and hope to develop stock trading (understood in this context as broadly financial trading, including cryptocurrency trading) as a second career in the future, please make sure to patiently read this article to the end. I believe you will gain something from it, and I strongly recommend saving it!
From this experience, I have deeply realized a truth: whenever one sincerely records every process and every insight from their own experiences, such writing will definitely be full of vitality. Regardless of whether the text itself is beautiful and ornate, I am grateful to the thousands of enthusiastic readers who have left me sincere messages and sent warm blessings. Therefore, I am willing to generously share my years of accumulated experience and insights in the cryptocurrency trading field.
I sincerely suggest that both newbies and veterans need to read the article I wrote today. After all, it will definitely be of great help to you. I went from huge losses to financial freedom, and now I have a 2,000-square-meter villa, a Land Rover and a small Rolls-Royce in Shanghai!
Ten years of experience tells you that if you don't understand "trading levels and cycles," don't enter the market! Otherwise, you will definitely lose money! (with illustrations)
Too many people have studied trading for many years but still fail to achieve ideal results. Many times, they fail because of the problem of "trading level and cycle".
There is a line in A Dream of Red Mansions: "Even though there are three thousand rivers, I only take a scoop to drink", which means: "There is a lot of water in rivers, lakes and reservoirs, but I only take a scoop to drink." It reminds future generations that they may encounter many beautiful things in their lives, but it is enough to grasp some of them with their heart, keep a clear head, and pursue what they really need in their hearts.
The same is true when we do transactions.
I've said this countless times in class: "The issue of transaction levels can be understood but not explained. Once you understand it yourself, it's actually very simple, but explaining it to others is not an easy task."
Until I stumbled upon these pictures:
Line chart of monthly average temperatures in Beijing in 2023 (Figure 1)
Line chart of extreme maximum temperatures in Beijing for each month in 2023 (Figure 2)
Line chart of the extreme minimum temperature in Beijing for each month in 2023 (Figure 3)
Beijing is a city with distinct four seasons. Taking 2023 as an example, the average temperature in Beijing in January is -2.5℃, which is a very normal temperature for winter. However, on a certain day in January 2023, the highest temperature in Beijing reached 14℃, and on another day, the lowest temperature reached -16.7℃.
Suppose there is a construction worker named Zhang San in Beijing. His working hours are 01:00-09:00 in the morning. Because he works outdoors, he has to keep warm when moving bricks in January. He has to wrap himself up in three layers of clothes like a dumpling. After all, -16.7℃ is no joke. But if his co-worker Li Si works from 09:00 to 17:00, then maybe just a cotton jacket will be enough.
So the question is, who is more resistant to cold, Zhang San or Li Si? Who is more stupid? Who has a more comfortable work life?
Is there no standard answer? No right or wrong, good or bad? So many times, many things aren't black and white, and we can't talk about right and wrong without considering the context. Without research, we have no right to speak.
If we consider a year in Beijing as a large cycle, and a month, week, and day as smaller cycles, the prevailing trends in the large cycle (a year) may be clear, such as spring typically following winter and autumn following summer. However, within smaller cycles (a month or a week), counter-seasonal phenomena may occur, such as sudden snowfall in summer and bright sunshine in winter.
This is like the market trends in different cycles. The dominant trend in the larger cycle is clear, but smaller cycles can reveal different trends. What we need to do is identify the cycle that works for us, clearly define each trade, and enter the market just as the sun rises and exit just as the storm approaches. Without greed, attachment, or fear, this is what it means to "drink from a single scoop of water, from a vast expanse of water."
Okay, now that the principle is explained, how do we put it into practice in trading?
Let’s first think about three questions:
“What is a trading cycle?”
“How do I choose a trading period?”
"Which trend should I follow?"
Let’s first talk about what is a trading cycle?
To facilitate observation and analysis of market performance over different time periods, we often divide market candlestick charts into different time levels, or cycles, based on "high open, low close." Common examples include the daily chart, the 4-hour chart, the 1-hour chart, the 15-minute chart, the 5-minute chart, and the 1-minute chart. Based on our discussion of the four seasons above, we know that different time levels will inevitably show different market performance.
For example, on the daily chart of Rock Sugar Orange, we currently see a clear bullish trend (Figure 1).
(Figure 1: Daily moving average bullish arrangement)
But when we open the 4-hour chart, we see another period of volatile market (Figure 2)
(Figure 2: 4-hour chart moving average entanglement)
When we open the 1-hour chart, we see another bearish trend (Figure 2)
(Figure 3: 1-hour chart, moving averages in a bearish pattern)
So if I were to ask you right away: Should I go long or short now? Is going long or short the right path? How would you answer?
Do you feel like cursing?
“How the hell should I know? If you don’t tell me which cycle you want to focus on, and you don’t tell me the background of the matter, how should I know whether to short or long?
So, the so-called trading cycle is the longest period of time you watch the market, your entry period, your analysis period, the period when you set your take-profit, the period when you set your stop-loss, and the reference period when you manage your orders...
To put it bluntly, the trading cycle is everything to you! Finding a trading cycle that suits you is very important!
So how do you choose a trading cycle that suits you?
It’s very simple. Just ask yourself this question: “How often do I check the market?”
If the nature of your work requires you to only look at the K-line once a day, then the "daily chart" is the trading cycle that suits you;
If you can view the K-line every hour, then the "1-hour chart" is the trading cycle that suits you;
If you can view the K-line every 5 minutes, then the "5-minute chart" is the trading cycle that suits you;
......
If you're a full-time trader who spends every day in front of a computer screen, I recommend choosing just one preferred timeframe as your trading cycle. For example, if you're a committed day trader who never holds positions overnight, then the 5-minute chart is a great fit. If you're willing to accept larger drawdowns and longer holding periods to maximize profits, then the 1-hour or 4-hour charts are a good fit.
Then comes the third question, “Which trend should I follow?”
We know that the market has inertia; once a trend forms, it won't easily reverse. Therefore, to increase our chances of winning a trade, we generally choose to follow a trend that's longer than our current trading cycle. This not only increases our chances of winning a trade, but also ensures we maximize our profits.
The phrase "choosing a trend that is larger than your trading cycle" is called a "trend cycle". The "trend cycle" and "trading cycle" generally follow the 4-fold principle:
For example, if the trading cycle is 5 minutes, then the trend cycle is 20 minutes;
If the trading cycle is 1 hour, then the trend cycle is 4 hours;
If the trading cycle is 4 hours, then the trend cycle is the daily chart (approximately equal);
If the trading cycle is the daily chart, then the trend cycle is the weekly chart (approximately equal to)
For example
For example, construction worker Zhang San has to move bricks for 4 or 5 hours before he can take a break to check the market, so his trading cycle is the 4H chart, and his trend cycle is the daily chart. Assuming the above case of sugar oranges, according to our principle of "must be two-find three-confirm" entry three-step method (see (Three-step intraday trading - building your first trading system)), Zhang San should first look at the trend cycle, which is the daily chart (Figure 3).
(Figure 3: Daily moving average bullish arrangement)
The daily chart tells Zhang San that there is currently a bullish trend, and this bullish trend has not yet reached its end (for how to determine whether the current trend has reached its end, see the 117th and 118th episodes of the free video series (From Trading Novice to Trading Expert)). The bullish trend that Zhang San sees on the daily chart is the trend he wants to follow.
The conclusion that the trend cycle gave him was: you can go long, you can go long with confidence and boldness, and that is enough.
Next, Zhang San's second step is to his trading cycle: the 4-hour chart. (Figure 4)
(Figure 4: 4-hour chart moving average entanglement)
The 4-hour chart currently indicates a range-bound trading situation. Based on Zhang San's conclusion from the first step, he can only go long. The current trading range is essentially a complex pullback within a larger cycle (the daily chart). Based on the principle of following the larger trend and reversing the smaller trend (all trades are essentially reversals of pullbacks), Zhang San can only look for long opportunities at support levels within his trading cycle. This helps him determine his entry point, stop-loss, take-profit, order management rules, and other specific trading strategies.
Therefore, Zhang San’s specific strategy is shown in the figure
Then in the following holding process, Zhang San may encounter the following common situations:
Situation 1: The market goes smoothly as expected, but during the market development, many opportunities that meet his trading system have appeared in smaller cycles (such as 1H chart, 5-minute chart). Should he make a few more trades?
A: No. As the saying goes, "From a vast expanse of water, I only take a sip." We can understand many trading opportunities, but we don't necessarily have to seize them all. Only by giving up can we gain. Otherwise, we'll often end up like a monkey trying to break a stick, gaining nothing. This will also disrupt our original trading plan, which once had a high chance of success, and lead to losses.
Case 2: The market goes smoothly as expected and strongly breaks through T1 and T2, resulting in the failure to realize the profits after T2, which is the so-called "selling at a loss".
Answer: This is perfectly normal. If your goal is to earn 1,000 yuan, and the market gives you 1,500 yuan instead, I often view the extra 500 yuan as a pleasant surprise, a special bonus from the market. I'm grateful for it, not complain. Often, changing your perspective can significantly boost your sense of happiness.
"From the vast expanse of water, I only drink from a single scoop." Only take what you can carry; don't expect to drink all the water in the river in one trade. Furthermore, as I just explained in the strategy, T2 isn't a fixed take-profit level, but rather a floating price that moves the take-profit.
How do we move our take-profit orders? We've covered this many times in our previous system lessons, so I won't repeat it here. More importantly, remember? Because we're following the upward trend on the daily chart, which hasn't reached its final stage, the market has already given us the expectation of seeing further ahead and profiting further.
Situation 3: The market does not go as Zhang San expected, so he stops loss and exits the market.
Answer: This is perfectly normal, and it's part of our daily trading routine. Simply accept it, forget about the trade, and reanalyze and prepare for the next one, perhaps switching to a different instrument or market, or even shutting down your computer and waiting for another day.
Many times, stop-losses aren't always the fault of traders or the strategy itself. Trading is essentially a gamble, a bet on future expectations. Technical analysis isn't science; it's based on probability in the context of big data. It's all art, and everything is vaguely correct.
Back to the beginning, why do many people, after years of studying trading, still stumble over the issue of "trading levels and cycles"? The core problem is like "a monkey trying to break a stick"—they want everything, but often end up with nothing.
If you want to make quick money in the market, earning money immediately by going long, then isn't that essentially just earning money by going long within a shorter trading cycle? Perhaps a 5-minute or 1-minute chart? So, what's the catch?
Is the 5-minute chart the right trading cycle for you?
Is the 20-minute chart, which is four times the 5-minute chart period, currently showing an uptrend? Is it currently trending? Has this trend reached its end?
Is the 5-minute chart currently showing a decline? Has the decline concluded?
You see, you know nothing. Simply put: your demands don't align with the current market. If you use these incompatible demands to invest in an unsuitable market, who else will fail? If you don't lose money, who will? If you don't feel like crying, who will?
Just study. Regardless of whether you can make money or not, at least you can lose less.
Finally, let me give you a fatal question?
What do you think is the correct trading idea?
A: I will do whichever cycle has "money"!
B: I only do it for 1-2 cycles. If I don’t make money in this cycle, I will take a break or change the product.
Think back to when I first entered the trading market
I tried my best to find knowledge about this on the Internet.
I hope to learn everything as soon as possible.
So you can start the actual combat as soon as possible
Start making money
At this time
Moving averages are usually the first technical indicators I learn.
Most of the online tutorials teach how to use two moving averages.
A fast one
A slow one
When the fast line crosses the slow line from bottom to top, you buy
When the fast line crosses the slow line from top to bottom, you sell
This type of golden cross and death cross trading strategy
For beginners
It's like a treasure
Because compared with other more complex technical indicators
The golden cross and dead cross thing is for Xiaobai
At least it's feasible
Can be cashed immediately
If you really believe it
Enter the market immediately
The result is predictable
It must have been a terrible loss.
Then I feel nervous every day
Very angry
Why do you lose money?
Blame the heaven and the earth
Complaining about the uselessness of moving averages is rubbish
The above is 100% my real experience
Mistakes I made when I first started trading
I believe this is also the experience of many newbies today.
Today I hope to share with you through this article
All the moving average techniques I have learned over the years
Summarize the mistakes made and the lessons learned
That way you won't make the same mistake I did.
At least your road will be much smoother than mine.
I summarized
Most people have a wrong understanding of moving averages
It's just too superficial
Oversimplifying this matter
Just buy when you see a golden cross and sell when you see a dead cross.
In fact, what we really want to do is
How to think about how to use the moving average
To maximize your profits
How to improve your trading performance
Today I will focus on two major topics
Discuss with everyone
1. Is there a universal parameter setting for the moving average?
2. How to use the moving average to help us triple our yield
I hope you will take 5 minutes
After reading this article
Finally, some inspiration
Let’s get started!
1: The secret of moving average
What is a Moving Average?
Conceptually easy to understand
As the name suggests, it is the average price over a period of time.
Presented graphically with a line
There are three common moving averages:
SMA（Simple Moving Average）
WMA（Weighted Moving Average）
EMA（Exponential Moving Average）
SMA is simply dividing all prices
Get an average
Responds slowly to recent price and market trend changes
The concepts of EMA and WMA are the same.
Just the algorithm is different
They tend to have more weight
So the speed of response will be faster
They are more sensitive to recent large price fluctuations
1: Is there a universal parameter setting for the moving average?
Actually, about the moving average
The most common question is whether there is a universal parameter for the moving average.
What are the best parameters?
20? 50? 100 or 200?
This question is like when you go to a coffee shop
Tell the store clerk:
Give me a cup of coffee, please!
The clerk asks you:
gentlemen
What kind of coffee would you like?
I said I don't understand these
Just give me the best coffee.
Usually here
Encountering an impatient clerk
I'll give you a cappuccino.
You pay
Then leave
Just like some online tutorials tell you
What do you use for 144EMA and 68EMA?
What about when 68 crosses EMA 144, you buy or sell
It's totally confusing.
on the contrary
Those responsible and patient store clerks will slowly guide you:
gentlemen
Would you like iced coffee or hot coffee?
Would you like coffee with milk or without milk?
The milk foam on the cappuccino is relatively soft.
Mochachinno has chocolate syrup, a little sweet
Espresso is rich in fat and has a sweet aftertaste that lingers on your teeth
If you like black coffee, you will be satisfied
same
As a responsible and patient trading coach
I will ask
What is your purpose in using moving averages?
Do you want an objective indicator to judge the long-term trend?
Or do you want to try to find a better entry point?
Or do you want to use the moving average as a stop-loss point?
The above things
In fact, all of this can be done using moving averages
But here comes the point
I can tell you responsibly here.
There is no best moving average parameter setting in this world
Only the most suitable parameter settings!
And this parameter should not be determined by you or me
Anyone decides
It is the market itself that decides this matter
According to different market conditions, different trends, strengths and weaknesses
The most suitable parameter settings will also be different
We will judge based on two words
Which period of moving average
Best for this market
These two words are
obey
Here
I use the three most common moving average periods of 20, 50, and 200 as examples
Let's look at examples of the three parameter settings above being followed by the market.
Let's switch to the 50 and 200 period moving averages.
Let's compare together
Do you see the difference?
Confirmed on the side
The market is in a strong trend
Because the 20-period moving average is best used for a relatively fast
And the callback amplitude is relatively small
Example 2
I use the 50-period EMA
Also see that the market is respecting the 50-period moving average
This situation represents that the market is in an upward trend
If we use 20 and 200EMA to look at it
You will find that it is not very suitable for 20EMA
Because it keeps going back and forth between prices
200EMA is too far away from the price
Final Example
200EMA
The 200EMA is more suitable for a long-term and weaker trend.
Although the intervals between each price contact are relatively far
But from a broad perspective
The market is following this 200-period moving average
Overall
Continue to move in an upward trend
Let’s open the 20 and 50 EMA and take a look.
Seeing them both moving up and down like fools
In a trend that is slow or difficult to discern with the naked eye
The 200EMA is a good choice
Don't know the above knowledge
Did it give you some inspiration?
2. How to use moving averages to double your returns
Next I will talk about the second one
More friends are concerned about
How we can use moving averages to improve our trading
I'll break it down into two things here.
First: use the moving average as a filtering condition
Second: Use the moving average to find a better entry time
Achieve a better profit-loss ratio
We just said
Moving averages of different periods can reflect trends of different strengths.
20, 50, and 200 EMA moving averages
Represents short-term, medium-term, and long-term market trends respectively
Here I will take the long-term trend
That is, the 200EMA example
If the price stays above the 200EMA
We can judge that the long-term trend is rising
If the price is below the 200EMA
We can judge that the long-term trend is down.
Of course, this is just a rough way of judging.
The best way is of course to use PriceAction (price action trading method)
But for beginners
PriceAction (price action trading method) is relatively complex
So I suggest that before you learn PriceAction (price action trading method)
You can temporarily use a 200EMA as a filter function
Filter out some transactions that conflict with market trends
(Of course, don’t forget to pay attention)
I don't mean that you can't do contrarian trading.
If you do counter-trend trading well, you can also make a lot of money.
But the winning rate of trading against the trend is low
Relatively high requirements
A deeper understanding of the market is required
Friends with little experience
I hope you learn to trade with the trend first.
Try to follow the general direction of the market in each transaction.
Let's look at this example
Price is above the 200EMA
Let's say I see a sell signal.
Go short
Logically, my take profit should be placed at 200EMA
on the contrary
Suppose I make a trend-following trade and go long
My profit margin is much greater.
You can always go to the next key position of the market (that is, the main support and resistance level)
Generally speaking
Before the market reaches a pressure point
Trading with the trend is the best option
Just like the current BTC market
From $1800 to $20000
From $20,000 to $30,000
From $30,000 to $40,000
......
No one knows where the top is
Then let’s not guess.
Thing 2
How to use the moving average to find a better entry time and achieve a better profit and loss ratio
How to ride a big trend
Here I will compare two moving parallel line trading techniques.
Golden Cross and Dead Cross
and
Interaction between price and moving averages
I personally think that the more logical trading method is to look at the interaction between price and moving average
The same chart
Two different trading methods
The same stop loss point
The same take-profit point
Because the timing of entry is different
The results are two different things.
On the left is the signal of the 20EMA crossing down through the 50EMA
The profit-loss ratio of entry is 3.65
On the right is the entry based on the interaction between price and 20EMA
The profit-loss ratio is 8.32
ah!
Did you see it?
Although this situation is something I have deliberately chosen as an example
But similar situations will continue to appear in the market
Let’s look at the example of the death cross on the left.
20EMA crosses below 50EMA
Use the previous high as the stop loss point here
Suppose we are great
You can catch the whole trend
For every $1 we risk, we get $3.65 in return.
Let’s look at another example of price interacting with EMA.
All other conditions remain unchanged
Because we see that the price has made a false breakout at the 20EMA
A bearish engulfing candlestick pattern appears at the end of the next candlestick.
We entered the market two Yin-Yang lines earlier than the death cross.
React faster
So the rewards are more
Do you understand?
All conditions remaining unchanged
As long as you have a better entry time
There will be a better profit and loss ratio
You only have to win once at the critical moment
It can offset several of your failed trades.
Only in this way, day by day
You can make money
Make a lot of money
In and out short-term trading
Few can make money
And still very tired
so
For beginners
I offer this advice from the bottom of my heart.
There are hundreds of technical indicators on the market.
You really don't need to learn it all.
Biting off more than you can chew
You just choose one
Dig deeper
Learn it well
It's enough for you
I have seen too many experts who can achieve 100% profit just by relying on K-line.
Countless
Next
Let’s look at another example of price interacting with a moving average.
This is a 200EMA
In this period of about one month
We see that the price only had two chances to touch the moving average
This means we only have two trading opportunities.
The first time we see a false breakout at the 200EMA
Bearish Engulfing Pattern
And we see that the shadows are telling us
The price has tried to move upwards but was rejected.
The second time we see the price make two consecutive false breakouts near the EMA
Add a double top pattern
We are also entering the short position
Same as the first time
The results are all good
The two just now are through the interaction between price and moving average
Get an example of a good profit-loss ratio
You should know that the moving average is actually a dynamic support and resistance level.
Whenever the price pulls back to this key position
We only then look out for opportunities to enter
Trading in this position
Usually have a good profit-loss ratio
This is the moving average trading method I personally recommend.
But when we open 20EMA and 50EMA to compare
Three trading opportunities occurred during this period
At a very rough glance, there were two times when it was profitable.
One is a loss
Sounds pretty good
But let’s look a little deeper.
You will find that the profit and loss ratio of the two trading methods cannot be compared.
The final amount of money earned was more than double
Do you understand?
Okay, let me summarize what I learned today.
Point 1: There is no one-size-fits-all parameter setting in the market
There is only one most suitable moving average parameter setting
This parameter setting is determined by the market situation.
Point 2: Moving average can be used as a filtering function
Give you an absolutely objective reference factor
Let you know which side the market trend is on?
Make sure you can trade with the broader trend
Point 3: We learned about the interaction between price and moving averages
The results obtained
It is better than using trading signals such as golden cross and dead cross
Our focus should be on the interaction between price and moving average
It is not very rigid to just look at when the two moving averages cross up or down.
Because price is the root of all things
If we get hold of this
There is definitely a better time to enter.
To get a better profit-loss ratio
In the long run, your chances of success are definitely much greater!
The three realms of the cryptocurrency market:
Coins in hand, coins in heart
Coins in hand, no coins in mind
No money in hand, no money in heart
The final state is to leave the financial market
There are thousands of virtual currencies in the world and hundreds of them in the market. It is impossible to study them all.
First, you must be clear about your financial situation and use part of the funds for long-term investment, because long-term investment is the easiest way to make money.
Second, don’t trade frequently. The more you trade, the more mistakes you will make.
You can win N 100% in your life, but you can only lose one 100%
Therefore, your profit and loss ratio is a disproportionate concept in life. I hope everyone pays attention to it.
Third, learn to wait, because waiting will help you better understand who you are and what you want to do.
The most difficult part of cryptocurrency trading is not choosing the coin, nor buying or selling it, but waiting;
The most difficult thing in life is not hard work or struggle, but choice.
A decline cleanses one’s impetuousness, while a rise tests one’s self-cultivation.
Cryptocurrency trading can make us grow continuously, but growth is painful. This pain does not come from the growth itself, but from the fact that we have to face so many changes and unforgettable experiences during the growth process.
For self-disciplined people in the cryptocurrency circle, pain is also joy; where there is hope, hell is also heaven.
In the cryptocurrency world, retail investors always give up on those that haven’t risen yet and chase after those that have already risen; in life, people always cherish what they don’t have and forget what they have.
The reason why you lose money in cryptocurrency trading is not because you think it is simple, but because you want it to be complicated;
I am Axin. If you don’t know what to do in a bull market, click on my avatar and follow me. I will share the bull market spot planning and contract password for free.
