Complex does not equal effective, simple does not equal superficial
Many people ask me, as a female analyst, how I maintain stable profits in the highly volatile crypto market. My answer may disappoint many: my trading system is ridiculously simple.
I still remember when I first entered the industry, I was also infatuated with various complex indicators and models. Bollinger Bands, MACD, RSI, Fibonacci retracement lines... My charts were once filled with colorful lines, looking very professional, but my account balance kept getting thinner. Until I realized: complex systems can easily become a burden.
Why is simplicity effective?
I find that most people lose in the market not because they know too little, but because they think too much. The market trends about 20% of the time, but this 20% of the time creates 80% of the profits. A simple trend-following system can help you seize these opportunities without repeatedly stopping out in a choppy market.
The core of my system is encapsulated in sixteen words: “As the momentum increases, so does the coin; as the momentum decreases, so does the coin; when the momentum moves, the coin moves.” It sounds like a cliché, but very few truly understand and execute it.
For example, when Bitcoin broke the 200-day moving average last year, I decisively built my position. Although I missed the absolute bottom, I also avoided the risk of buying in at a mid-level. When the trend is clear, the price often has already moved away from the bottom, but this safety margin is actually higher.
How do I identify trends?
The tools I use are simple enough to be hard to believe: 200-day simple moving average and price action analysis.
If the price is above the 200-day moving average, I only look to go long; if the price is below the 200-day moving average, I only look to go short. This avoids the fatal mistake of counter-trend trading.
Many people ask: Do such simple rules really work? My experience is that effectiveness is not due to complexity, but because it captures the essence of the market. 'The trend is your friend' continues to resonate today because it expresses the essence of trading.
I also combine multi-timeframe analysis to confirm trends. The weekly chart shows direction, the daily chart finds opportunities, and the hourly chart determines entry. It’s like observing the market with a telescope first, then a magnifying glass, and finally a microscope, layer by layer, avoiding being misled by minor details.
Position management is key to survival.
My position management rules are equally simple:
Each trade should not risk more than 2% of the principal.
Gradually increase positions when profiting, never average down when losing.
Increase position when the trend strengthens, decrease position when the trend weakens.
This simple money management method has allowed me to survive through many black swan events. Remember, being alive gives you a chance.
Market cycles tell you what to do now.
In addition to technical indicators, I also pay attention to the market cycle position. The crypto market cycle is driven by multiple factors, including supply and demand, capital flow, market narratives, and investor psychology.
According to the Merrill Clock theory, different economic cycle stages should allocate different assets. Although the crypto market has its uniqueness, it generally follows this rule. For example, during a liquidity contraction phase, I will reduce my position and hold more stablecoins; while in a liquidity expansion phase, I will participate more actively in trending markets.
Many people only focus on price and overlook the grander cycle narrative. Understanding your position in the cycle is more important than analyzing short-term price fluctuations.
My specific operational secrets.
Only trade in an uptrend: For most investors, try to only trade in uptrend assets. If the uptrend is broken, reduce your position immediately.
Combine large and small cycles: When the direction of the large cycle and the small cycle aligns, the trend is often strongest. I usually wait for this resonance opportunity rather than forcing a trade.
Patience is key: In a choppy market without a clear trend, I maintain patience and quietly wait for opportunities. Acting frequently doesn’t necessarily yield better results; sometimes doing nothing is the best choice.
Final advice.
Trading is merely a game of how to measure odds. What you need to do is calculate the risk-reward ratio of each trade and determine if the trade is worthwhile.
I have seen too many people pursue the perfect trading system, yet overlook the simplest truth. As a female analyst, I admit that the market sometimes makes me feel fearful and uneasy. But it is this sense of awe towards the market that keeps me cautious, allowing me to survive in this market for so long.
Remember, simple systems are the easiest to execute and the easiest to stick to. Long-term adherence is the true secret to profitability.
If you are still tangled in various complex indicators, consider simplifying your system. You might find that simplicity is the true beauty of complexity.
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