It's better to sit back and watch the tiger fight than to snatch food from the tiger's mouth.
I've been trading cryptocurrencies for five years, and I still clearly remember my naivety when I first entered the market. With an initial capital of 100,000, I followed so-called 'teachers' to trade, and in just six months, my account surprisingly grew to 600,000. At that time, I felt like the chosen one, until later when I traded independently, my account shrank by 50% in less than three months, and I suddenly realized: I had just coincidentally caught the bull market, and I didn't actually have the ability.
The market always educates every person who disrespects it in the most direct way. Now, I have already formed my own trading system, and although the methods seem 'clumsy,' they have allowed me to survive in a highly volatile market and achieve stable profits.
1. Recognize the essence of the market: who is manipulating the price?
A question that all cryptocurrency traders ponder day and night: What factors influence cryptocurrency prices? This question can be extended to: Who is actually manipulating cryptocurrency prices? Why are they manipulating them?
After observing for these years, I understand that long-term prices are determined by value, while short-term prices are determined by market makers. If you participate in short-term trading, you are essentially trying to snatch food from the market maker's mouth—this is the truth behind 'snatching food from the tiger's mouth'.
'Good news raises prices, good news cashes out and drops prices' has become a consensus in the market. This phrase hides the core logic of trading: a real price increase often happens when the news is known to the market, not when the news is realized. This is the power of market expectations.
Market makers do not raise prices for no reason; every increase is aimed at attracting retail investors to take over. When you don't know why you are chasing a coin, the market maker has already prepared the reason for you—this coin has good news and prospects, and it has been rising before you bought it. So you jumped in, and now you are trapped.
2. The biggest enemy in trading is not the market, it is yourself.
I have seen too many reasons for traders' failures, which can be summed up in three fatal habits:
Chasing prices up and down is the biggest pitfall. Seeing a coin rise rapidly can make you greedy, fearing to miss out on a hundredfold opportunity, but once you enter, you get trapped; when the price drops and panic ensues, you may be scared into cutting losses, perfectly missing the rhythm.
Heavy betting is a major cause of liquidation. People often feel that if they see the right direction, they can become rich overnight by putting all their funds on one coin. However, if the market fluctuates slightly, they may face forced liquidation, leaving no opportunity for recovery.
Trading with a full position is the easiest behavior to get carried away. Once the market fluctuates, emotions can easily get out of control, leading to continuous over-investment in hopes of recovering losses. As a result, even if you correctly predict the general trend, you may not have the funds to continue trading.
True trading wisdom is not about accurate predictions, but about managing risks. A single impulse to chase rising prices can increase the risk of being trapped; a strict stop-loss can provide more assurance to preserve the principal.
3. My 'foolish' trading rules.
Those who survive long and earn steadily in the cryptocurrency circle are often the 'stubborn' ones who stick to the 'foolish method'. Here are some simple rules that have been tested over time:
1. The trend is your friend; do not go against the trend.
If you are unsure of which way the trend is, do not trade. In a bull market, the trend is clearly upward; in a bear market, the trend is clearly downward. Do not confidently try to time the market's top or bottom, and do not go against the trend.
My personal judgment criteria are very simple: look at the 60-day moving average. If the price is above the 60-day moving average, I consider entering or increasing my position; if the price is below the 60-day moving average, I decisively exit. This seemingly simple method has helped me avoid multiple significant corrections.
2. Capital management is the bottom line for survival.
Divide the principal into 10 parts, using no more than one-tenth of the principal in a single trade. If you have 10,000 U to trade, then each stop-loss should not exceed 1,000 U.
My own rule is even more conservative: a single trade should not exceed 5% of the total capital. This way, even if there are consecutive losses, the principal will not be harmed, and there will still be opportunities for recovery.
3. Always set a stop-loss when opening a position; do not let profits turn into losses.
Setting a stop-loss when opening a position is the best way to protect the principal. Plan the stop-loss position before opening a position, rather than impulsively entering and then thinking about when to set a stop-loss.
Once there is a certain level of unrealized profit, set a protective stop-loss near the opening price. If a previously profitable position turns into a loss, the psychological impact is significant. I generally set a break-even stop-loss when there is more than 3% unrealized profit.
4. Avoid frequent trading; wait for certain opportunities.
Overtrading violates the principles of capital management. If you divide your capital into 10 parts and lose one-tenth each time, frequent trading can lead to losing your entire capital if you make ten trades in a day, all wrong.
I now average no more than 10 trades per month, only waiting for high-certainty opportunities. The cryptocurrency circle is never short of opportunities, but your principal is limited.
5. Pyramid-style scaling, not averaging down costs.
Buying more as prices fall is the biggest mistake a trader can make. Gann saw countless big players on Wall Street go bankrupt due to bottom-fishing.
The correct approach is pyramid-style scaling: increase positions slightly when the market moves in the desired direction, and do not increase beyond that. In an upward trend, increase positions after the price breaks through a consolidation range.
4. Be wary of various traps in the cryptocurrency circle.
The cryptocurrency circle is full of temptations and traps. IMO, IFO, dual currency wealth management, and interest-bearing deposits... various new concepts are emerging, but the essence is often just new ways to fleece investors.
Beware of any projects that promise high returns. If a project promises returns exceeding 30%, you should be highly cautious. Normal investments struggle to provide such high returns consistently.
Stay away from investment models that require 'referrals'. If an investment requires you to develop downlines to earn profits, it is likely involved in pyramid schemes. Real investments should earn profits from the growth of asset values themselves, not from recruiting people.
Do not easily trust projects backed by 'celebrities'. Even the Trump family has issued their own 'Trump Coin', but that does not mean these coins have actual value. Celebrities issuing coins often do so to quickly monetize their own IP.
5. Leverage: a 'weapon' that beginners should use with caution.
For beginners in contracts, my only advice regarding leverage is to engrave 'low' in your mind!
Beginners should start with 1-5x leverage; do not underestimate it! 5x leverage means that a 20% reverse price fluctuation will trigger a liquidation, which is already a significant risk. Leverage exceeding 20 times is no different from gambling.
High leverage must be paired with lower positions. If using 10x leverage, the position should be halved compared to using 5x. Ensure that even in losses, you do not suffer significant damage.
Always set a stop-loss when opening a position! This is your only 'safety rope'. Do not move the stop-loss to hold onto a position; harboring illusions during losses often leads to catastrophic consequences.
Conclusion: Success in trading cryptocurrencies is not about being smart but about maintaining discipline.
After years in the cryptocurrency circle, I have come to realize that successful traders are not those who predict the most accurately, but those who manage risk the best.
The market always follows an ancient, unchanging rule: big fish eat small fish, and small fish eat shrimp. This is the law of nature.
If you cannot overcome the weaknesses of human nature, it is better to choose dollar-cost averaging in mainstream currencies like Bitcoin and avoid the whirlpool of short-term trading. After all, the returns from holding Bitcoin for the long term often exceed those of most short-term traders.
The simplest way to trade cryptocurrencies is actually to recognize the essence of the market, control one's desires, and execute established strategies—the 'foolish method'. These methods seem simple but require great patience and discipline to persist. This is also the real reason why most people cannot make money in the market.
The cryptocurrency circle lacks stars but not longevity. Surviving is more important than anything else. Follow Xiang Ge to learn more firsthand information and accurate points in the cryptocurrency circle, becoming your navigator in the crypto world—learning is your greatest wealth!
