The fluctuating candlestick chart is bait, while poverty is the trap.
"I opened a position again out of impulse!" At three in the morning, staring at the contract interface on my phone that has exploded again, I viciously stub out the cigarette in my hand. This is the seventh time this month that I've opened a position unexpectedly, and my capital has shrunk by 40%.
Retail investors in the cryptocurrency market frequently open positions. On the surface, it seems like greed, but in reality, it is a time anxiety born out of poverty. When you only have 30,000 to 50,000 in capital, a 30% annual compound interest sounds like a joke—doubling it takes three years, but urgent matters in life cannot wait, and the ticket for the next bull market is even more urgent.
The 100,000 now and the 100,000 five years later are not the same concept in the crypto world. After all, who can guarantee that the coins in hand will still be there in five years, and that the exchange won't run away?
01 The dilemma of retail investors, poverty is the root cause rather than a flaw
Finance speaks of the time value of money, which is amplified to the extreme in the crypto world. For small capital players, frequent trading is not a choice but a survival strategy.
Imagine you have a capital of 50,000, facing two choices: one is to patiently wait for an annualized 30% compound interest, doubling in three years; the other is to seize a contract opportunity to leverage 3 times, potentially earning a year’s profit in one night. Which would you choose?
Most retail investors would choose the latter because capital determines mindset, not the other way around.
Data shows that low-frequency traders have an annualized return of 18.5%, which is higher than the 11.4% return of high-frequency traders. But this is useless for small retail investors—the 18% annualized return does not solve their pressing financial needs.
Small capital players want not stable profits, but quick turnarounds. After all, with little capital, if they don't take a gamble, how can they gather enough chips for the next round of the bull market?
02 Market reality, institutionalization has squeezed retail space
This bull market is entirely different from previous ones. Institutional funds are entering in large numbers, and the Bitcoin ETF has reached an asset management level of hundreds of billions of dollars, with listed companies holding 4.8% of the circulating BTC. The market has shifted from being 'retail-friendly' to 'institution-led'.
The results are shocking: 90% of retail investors have not made money in this bull market.
Why? Previous bull markets were broad-based rises; even holding altcoins could yield profits. This bull market, however, is a localized one, with mainstream coins rising strongly while most altcoins perform mediocrely.
Johnny, a full-time trader I know, frankly stated: "Since Trump issued cryptocurrency, I haven't made any money. In the past, I could make money without even knowing what candlesticks were; now, the strategy has to change completely."
Retail investors face a double blow: on one hand, institutional funds are compressing profit space; on the other hand, investment logic has changed, yet many remain immersed in the strategies of the previous cycle.
03 Psychological traps, the real human nature behind frequent trading
The root of frequent trading lies in the lack of clear trading rules. When there is a lack of a system, every fluctuation seems like an opportunity, yet also like a trap.
When the market rises, FOMO (fear of missing out) emotions become overwhelming; when the market falls, there is panic selling. Emotions are led by the market, naturally leading to impulsive trading.
Behavioral finance points out five major psychological barriers for retail investors: frequent trading, full-position betting, blindly chasing trends, greed in profits, and holding onto losses. These irrational behaviors can lead to significant returns being given back and are more likely to cause permanent losses of capital.
Even scarier is the 'disposition effect': investors often sell winning positions too early while holding onto losing positions for too long. This means retail investors tend to 'cut profits short and let losses run', which is completely contrary to investment principles.
04 The way to break through is to establish a system to escape the dilemma
To change the habit of frequent trading, the key is to establish a complete trading system.
This system should include seven major modules: risk control, position management, opening logic, entry points, stop-loss settings, take-profit strategies, and position adjustment mechanisms. The system is like a car's navigation + brakes + airbags, providing certainty in a chaotic market.
Position management is key to avoiding liquidation. A trader shared that after several liquidation lessons, they found that 'strict position management' is the most effective way to escape the troubles of liquidation.
It is recommended to divide funds into five parts, using only one part for building positions each time. Never go fully invested; use at most 50% of your position, leaving 50% to wait for good opportunities. At the same time, strictly control the number of trades, no more than three times a day, to avoid emotional trading.
Stop-loss is a lifeline; once the preset stop-loss line is breached, regardless of how likely a rebound seems, one must unconditionally close positions. Holding onto losing trades never ends well.
Chenghua pointed out from the perspective of a quantitative trader that for retail investors, dollar-cost averaging into Bitcoin may be a relatively easy strategy to implement. 'As long as the time is extended, there is a high probability of good returns.'
Opportunities in the market are never lacking, but there aren't many that belong to you. Frequent trading is not as good as precise trading; use waiting to gain certainty and use a system to restrain impulses.
The truly smart players have begun to adjust—the majority of their funds are allocated to mainstream coins, while a small portion is used to chase new coin opportunities. They understand that in this institution-led era, surviving is more important than making quick money.
After all, only those who hold onto their chips can wait for the opportunities that truly belong to them. Follow Xiang Ge to learn more firsthand information and precise points in the crypto world, becoming your navigation in the crypto sphere; learning is your greatest wealth!
