Rules are lifebuoys, not decorations.
"Teacher, I can't control my positions. With an account of 1,000,000 U, I grew it to 1,600,000 in two months, but then a retracement directly dropped it to 850,000, and my mindset exploded."
This is a recent true experience of a fan of mine who trades spot. Such roller coaster plots are not uncommon in the cryptocurrency world; one could even say they are the norm. I replied to him: In the cryptocurrency world, living long is much more important than earning fast.
Today, I won’t talk about complex technical indicators or analyze the market's next steps; I will focus on solving one problem: as an ordinary spot trader, how to use the key of capital management to survive steadily in the market.
The following six rules are lessons I bought with real money; they are simple enough to remember in one sentence but powerful enough to change your trading trajectory.
1. Fixed risk: give each trade 'insurance'
Imagine, you divide your account funds into 100 equal parts, each part represents a 1% risk limit. No matter how optimistic you are about a trade, a single loss must not exceed 1% of the total funds.
An account of 1 million U, with each grid representing 10,000 U. Before placing an order, make sure to calculate where your stop loss is. If the potential loss exceeds 10,000 U, you only have two choices: either reduce your position or give up the trade.
The core of this rule is: being alive means unlimited possibilities. The most terrifying thing in the market is not missing opportunities, but when a truly big opportunity comes, you have no capital to participate.
2. Light position trial and error: use 'scent position' to test the market
Even if I am bullish on a coin, my first position will never exceed 50% of the planned position. I call this half-position 'scent position', its task is not to make money but to test the market direction.
If the price moves as expected, cautiously add the remaining position; if the trend moves against you and triggers a stop loss, since you only used half a position, your actual loss is only half of what was originally planned.
Retail investors die from going all-in, while experts thrive on averaging down. In the crypto world, there are no 100% certain trends; light position trial and error is the key strategy to avoid being deeply trapped by the market.
3. Adding positions with floating profits: treat profits as bullets, not as deposits
When the trade starts to profit and the floating profit exceeds 2% of the total account, I consider the profit part as 'the bullets the market lends me', rather than wealth that has already entered my pocket.
The basic principle of adding positions at this time is: the scale of added positions should not exceed the floating profit amount, while adjusting the overall stop loss to above the cost line. This way, even if the market reverses, the worst outcome is just to exit at breakeven, with the principal intact.
Many people are reluctant to take profits when they see floating profits swell, ultimately turning from profit to loss. The problem lies in their failure to treat floating profits as usable resources. Adding positions with floating profits is the wisdom of transforming paper wealth into strategic advantage.
4. Smooth heavy positions, reduce positions on retracement: respect the capital curve
When your account continuously sets new highs, it means you are in a favorable period; you can appropriately expand your position, but you must set a clear retracement reduction line.
My rule is: if the net value falls by 5% from the peak, cut the position in half; if it falls by 10%, only keep 30% of the base position. When the retracement stops and starts to rise again, gradually add back the position.
When the market rises, you are a pirate; when it retraces, you are a turtle. Be conservative in adverse times and aggressive in favorable times; this is the essence of long-term survival.
5. Big profit withdrawal: deposit 'luck' in the bank
The saddest story in the crypto world is: 'I once made a lot of money on paper.' The method to avoid this tragedy is simple: regularly withdraw profits.
My withdrawal rule is: when daily floating profit exceeds 20% or total net worth doubles, I must withdraw 30% of the profit that day and transfer it to a cold wallet or bank account.
What you withdraw is what you have earned; the rest belongs to the market. Withdrawing money is not losing faith in the market, but acknowledging the existence of luck and buying insurance for it.
6. Three questions before sleep: your trading health check
The rules are set, the key is execution. Every night before I sleep, I ask myself three questions:
Has today's single loss exceeded 1% of the total funds?
Are you using profits or principal to add positions?
After a big profit, did you withdraw money in time?
These three questions help me maintain trading discipline and allow me to sleep soundly without staying up all night watching the market. The crypto world is a 24/7 market, but your life shouldn't be.
Finally: rules are superficial, mindset is fundamental
These rules may seem simple, but the biggest enemy in execution is oneself. The market won't kill you, but an uncontrolled mindset will. The market is not an ATM; it’s more like a shredder; if you don’t follow the rules, no amount of money will be enough.
I've seen too many people chasing hundredfold coins, obsessed with all-in, and ultimately losing everything. I've also seen those low-key individuals who follow simple rules, surviving several cycles in the crypto world, steadily accumulating wealth.
Spot trading in the crypto world is not that complicated; the core is to implement these small details of capital management. Fixed risk, light position trial and error, adding positions with floating profits, smooth heavy positions, reducing positions on retracement, big profit withdrawal—these six rules cycle repeatedly, forming a complete framework for survival in spot trading.
I hope this 'mortal version' of the capital management manual can help you sleep more soundly and live longer.
Remember, in this market, the old demons are more respected than meteors. Follow Xiang Ge to learn more first-hand information and precise points in the crypto world; becoming your navigation in the crypto space, learning is your greatest wealth!#巨鲸动向 #加密市场观察 $ETH
