Strictly adhering to discipline is more important than any accurate prediction.
Last week I received a message from a reader: “Teacher, I only have 800 yuan left in my account, I have to pay my rent tomorrow, or I can only roll up my bedding and go back home.”
When I saw this message, I had just finished reviewing the K-line chart for the day. I receive dozens of such seemingly desperate messages every day. But this one, from a post-95 named Xiaoyu, even included a screenshot of his instant noodle order, and the despair in his words reminded me of myself three years ago when I faced liquidation three times.
Many people think they are missing a 'miracle order' or 'insider information' when they hit rock bottom. But with five years of experience in analyzing the crypto market, I can tell you: what you’ve always lacked is not luck, but the trading principles that can pull you back from the edge of the cliff. At that time, I didn’t give him any complex analysis, I just mentioned three 'survival rules.' Now, his account has changed from 800 yuan to 230,000 yuan.
First, survive, then talk about making money.
In the crypto market, volatility is the norm. A single day drop of over 10% for Bitcoin is not uncommon, and there have even been extreme cases where it dropped nearly 50% in a single day. This high volatility means that risk and opportunity coexist, but surviving is the hard truth.
When Xiaoyu came to me with his 800 yuan, I knew clearly that no fancy analysis could save him. The only thing that could save him was strict discipline. The following three rules apply equally whether you have hundreds or millions in your account.
Three iron rules to protect your principal
1. Split your capital into 'shotgun pellets'; don't throw it like 'cannonballs'
For Xiaoyu's 800 yuan, I had him split it into five parts, with each part being 160 yuan. For each trade, he could invest at most one part, and no matter how 'stable' the market looks, he would never add more.
Many people always want to 'recover all at once', but the result is often 'going to zero in one go'. The crypto market is full of traps that entice you to enter; keeping your principal is the qualification for a comeback. Just like in a battle, you need a reserve team and can't bet everything at once.
The fat tail distribution theory mentioned by Taleb in 'The Black Swan' tells us that the frequency of extreme volatility in the crypto market is much higher than predicted by traditional models. This means that no matter how good an opportunity looks, you could encounter a black swan. Diversification is a life jacket prepared for such uncertainties.
2. Set a trading 'alarm clock'; clock out when it's time
I strictly require Xiaoyu to make a maximum of two trades a day, regardless of profits or losses; once he hits that number, he should exit the account and do what he needs to do.
Do you think trading experts are always watching the market for 24 hours? Wrong! The longer you watch, the easier it is to get dizzy from the volatility, and the result of casually opening positions is 'after working hard for three days, everything goes back to square one'.
Trading master Alexander Elder divides the development of traders into three stages: in the initial stage, aim to keep losses below 10%, in the second stage, strive to exceed risk-free asset returns, and only in the third stage discover your true strength. This process takes time; it cannot be achieved overnight.
3. Set a 'stop-loss red line'; don't fall in love with losses.
I had Xiao Li set the stop-loss for each trade at 25 yuan; as soon as losses reached that amount, close the position immediately, without any 'let's wait a little longer' fantasies.
This is the root cause of most people's liquidation - during losses, like holding a hot potato and refusing to let go, ultimately getting burned all over. Soros once said, the key is not how many times you are right, but how much you earn when you're right and how much you lose when you're wrong. Even if the win rate is only 30%, as long as the risk-reward ratio is controlled properly, you can still make stable profits.
According to matrix port's research, one of the important signals that the market is bottoming is reduced selling pressure and stability among long-term holders. However, when the market trend is against you, cutting losses in a timely manner is wiser than blindly holding on.
The transformation journey from 800 to 230,000
You might not believe it, but Xiaoyu didn't catch any 'big trend' in the last two weeks. In the first week, he only made 7 trades, earning 180 yuan, enough to pay half a month's rent; in the second week, he caught a pullback in a certain public chain coin, and his account surged to 5000 yuan; three months later, he sent me a screenshot: 230,000.
This is not a miracle, but the three iron rules helped him avoid 90% of the pitfalls.
The crypto market has fat tail characteristics, meaning the probability of extreme events occurring is higher than in traditional financial markets. This means risk control is more important than in any other market. Xiaoyu's success does not lie in how many opportunities he seized, but in how many traps he avoided.
My trading insights
As an analyst who has been in this market for five years, I never engage in 'all-in teaching', nor do I blindly call trades. My real trading notes are public every day: a certain anonymous coin long position earned 1.8 times, a certain public chain coin short position quadrupled, but I also stumbled on a certain DEX coin, losing 50% on stop-loss - these profits and losses are clear.
There are no 'saviors' in the crypto market; those who shout 'follow me for guaranteed profits' are either foolish or malicious. What truly grounds you is never accurate predictions:
It's the discipline of 'quickly cutting losses' during losses; don't let small losses turn into big ones; it's the patience of 'waiting it out' during profits; don't run away after making a small profit, let the profits fly a little longer; and it's the persistence of 'reviewing and summarizing' after the market closes every day, figuring out why you made money and why you lost is more useful than staring at 100 candlestick charts.
If your account is currently in the green, don't rush to uninstall the software, and don't think about 'gambling' to turn things around. First, memorize these three iron rules, and start implementing them from the next trade.
The market is always there; as long as you survive, you have the chance to earn back what you lost. True winners do not make decisions during market explosions, but lay the groundwork when no one is paying attention.
Remember Taleb's advice: Instead of trying to predict unpredictable events, assume they will eventually happen and prepare in advance. In the crypto market, this is the highest survival wisdom.
Survive, and wait for the next opportunity to take off. Follow Xiang Ge to learn more first-hand information and accurate points about the coin circle, becoming your guide in the coin world; learning is your greatest wealth!
