Understanding the market is not as important as managing your position; this is the true essence of survival in the cryptocurrency world.
I have seen too many people who analyze things eloquently, talking endlessly about candlesticks, yet their account balances keep shrinking. It's not that they don't understand the market, but they perish because of one word — 'position.'
Those who go all in on altcoins and get liquidated to zero are them, those who miss opportunities in a bull market with light positions are them, and those who are stuck in a bear market with full positions and unable to move are still them.
The truth is so cruel: in the cryptocurrency world, understanding the right direction is just the beginning; managing your position is the real skill. Today, I will share three iron rules of position management that have helped me survive in the cryptocurrency world, based on my own experiences.
01 Position is the invisible judge that determines life and death
You must have experienced: clearly seeing a significant upward trend, but due to heavy investment in an altcoin, a slight pullback scares you into cutting losses quickly. Or when a bull market comes, you sell too early and watch others celebrate.
The biggest feature of the cryptocurrency market is high volatility, with prices fluctuating by 20%-50% within a day. In such a market, position management is not only for making money but also for survival.
Position is essentially the proportion of risk you are willing to take. Many people simply understand position as 'how much I bought,' but overlook the risk exposure it represents.
For example, when you heavily invest in a certain altcoin, you not only bear the technical risks of that coin and the risk of the team running away, but also the systemic risks of the entire cryptocurrency market.
The first hard rule I set for myself is: any single cryptocurrency's position should not exceed 10% of the total capital. This means that even if it goes to zero, I only lose one-tenth of the total capital, leaving room for recovery.
02 Three rules of position management in the cryptocurrency world to save your life
Capital first, profit later
In my trading system, the maximum loss for each trade must be controlled within 2%-4% of the total capital. For example, with a capital of 100,000, if a single loss exceeds 4,000 yuan, you must stop.
What does this mean? If your stop-loss is set 6% below the current price, then your position size should be: 4000 yuan ÷ 6% ≈ 66,000 yuan. It’s not about how much you want to invest.
First, determine how much you can afford to lose, then work backwards to figure out how much to invest—this is the biggest difference between professional traders and retail investors.
Respect volatility, refuse to stubbornly hold on
The volatility of the cryptocurrency market is 2-3 times that of the stock market, which means your position should be much more conservative than when trading stocks. Using stock trading mentality to trade cryptocurrencies is like going naked into a storm.
The most fatal mistake I've seen is 'adding to a losing position to average down.' It’s like falling into a pit and instead of finding a way to climb out, you keep digging deeper.
For altcoins, I have a hard rule: do not increase your position when in loss. After buying, if it drops, either stop-loss or watch, but never add to the position to average down.
Adjust positions according to the bull and bear, be flexible and responsive
Position strategies in bull and bear markets should be completely different.
In a bear market, I usually keep my position within 30%, mainly concentrated in Bitcoin and Ethereum. Keeping a large amount of cash is not only for hedging but also to have chips to play when the real bottom arrives.
In a bull market, I will moderately increase my position to 50%-70%, but I will definitely take profits in batches. I won't fantasize about selling at the highest point, but set target levels and gradually sell when reached.
The key is that different cryptocurrencies should be treated differently. Major cryptocurrencies can take heavier positions, while altcoins should not exceed 5% per coin, and leverage positions must be strictly controlled.
03 Five tips to get started, so beginners can live longer
Three-stage position building method
I never exhaust my bullets at once. For the cryptocurrencies I am optimistic about, I will take three steps:
First, use 10% of the funds to test the waters, and once the trend is clear, increase to 20%, leaving 20% as emergency funds. This way, even if the judgment is wrong, the loss from the test position remains within a controllable range.
Weight according to risk level
My position structure has a clear ratio: mainstream coins (BTC/ETH) account for 60%-80%, and altcoins do not exceed 20%.
Moreover, I set limits for each cryptocurrency: mainstream coins should not exceed 25% per coin, altcoins should not exceed 5% per coin, and leverage positions should not exceed 10% of total capital.
Reverse the position size based on stop-loss
This is the core technique of professional traders: first determine the stop-loss range, then work backwards from the loss amount you can tolerate to find the position size.
For example, if you can accept a loss of 4,000 yuan on this trade, and set the stop-loss at 8% below the current price, then your position should be 4,000 ÷ 8% = 50,000 yuan. This way, even if the stop-loss is triggered, it won’t hurt your principal.
Adjust positions according to the cycle
The market is in different stages, and my position strategy varies accordingly:
In a bear market, control the test position to 5%-8%, strictly control losses; in the early stages of a bull market, gradually increase to 50%-70%; in the late stages of a bull market, gradually reduce to a 30% position and hold cash to observe. Don’t try to fight against market cycles, going with the flow is the wise choice.
Abandon emotional trading
I have a hard rule: write the trading plan in advance, determine the entry point, stop-loss point, and position size, and never change it casually after opening a position.
If I incur three consecutive losses, I force myself to take a day off to review what went wrong. The most common mistake after losing money is revenge trading, which only leads to greater losses.
A friend who suffered serious losses once told me that his biggest lesson was: 'I have 10,000 capital, betting all in each time, won 9 out of 10 times, but the 10th failure wiped everything out.'
Another senior who climbed up from a million loss shared: 'The real enlightenment in trading cryptocurrencies comes when your thinking is reshaped, and the rhythm is corrected, making the market transparent in your eyes.'
The market never lacks opportunities; what is lacking is that when opportunities arise, you still have capital. Surviving is not a choice, but a capability. Follow Ake to learn more first-hand information and cryptocurrency knowledge, becoming your navigation in the crypto world. Learning is your greatest wealth!#巨鲸动向 #加密市场观察 $ETH
