1. Capital management. Divide your capital into 10 parts, using no more than one-tenth of your capital in a single trade. For example, if you have 10,000 to trade, your stop-loss cannot exceed 1,000. Determine your position based on losses; at the entry point you find suitable, calculate the stop-loss as 1,000 and then enter. If you are a beginner with lower risk tolerance, you can also divide your capital into 20 or 50 parts, which will correspondingly reduce your losses.
2. Always set a stop-loss when opening a position. Protect your capital by planning your stop-loss point before opening a position, rather than impulsively opening a position and then thinking about when to set the stop-loss. At that moment, you are unprepared and most likely do not know where to set the stop-loss, which is very dangerous.
3. Do not overtrade. Excessive trading violates the first principle of capital management; if you divide your capital into 10 parts, losing 1/10 each time. In the case of frequent trading, if you make ten wrong trades in one day, you will lose all your capital. Do not overtrade; maintain patience and wait.
4. Do not let profitable positions ultimately stop out. Don’t let floating profits turn into floating losses; once you have a certain level of floating profit, set a protective stop-loss near the entry price. If a previously profitable position ends in a loss, it significantly impacts your mindset, making it harder than just stopping out initially. Old hands in the market can relate to this; as for how much floating profit to set a stop-loss, it depends on personal tolerance, generally around 3 points or more.
5. Do not go against the trend. If you are uncertain about the trend's direction, 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 catch the top or bottom against the trend.
6. Exit and observe when confused. Referring to point 5, if you cannot distinguish the trend, stop trading and wait for the trend to become clear before entering.
7. Buy actively traded assets with sufficient liquidity. Stay away from illiquid assets. For example, newly listed coins on exchanges may have very poor liquidity. Even if they are airdrop tokens, you know there will be a significant dump, but you cannot grasp it. Under conditions of insufficient liquidity, your short position can easily stop-loss or even get liquidated; illiquid assets generally do not meet technical analysis criteria.
8. Diversify risks. Trade multiple assets instead of putting all your eggs in one basket. Even in a clear trending market, a single asset's fundamental issues can lead to a counter-trend movement. My advice is to diversify your investments from mainstream cryptocurrencies and those with higher trading volumes.
9. Try to use market orders more often. Do not only use limit orders; be flexible and effective in responding to market orders. Sometimes the market moves very quickly, and limit orders often miss opportunities. For instance, when stopping losses, if the market moves rapidly, limit stop-loss orders may easily miss the opportunity to stop losses, resulting in significant losses.
10. Do not arbitrarily terminate trading without reason. Strictly follow your plan and do not change it without sufficient justification. Many people, after opening a position and gaining some profit, become anxious and want to secure their gains. When the price moves in an ideal direction, patience is necessary. If you are worried about significant profit withdrawal, you can refer to point 4 and set protective take-profits or trailing stops near the cost price.
11. Withdraw in a timely manner. If your trades are going well, you can transfer some of the profits to a backup account or withdraw them for emergencies. Money that hasn't left the casino never belongs to you; when trading, do not reinvest all your earnings into a snowball effect, but instead take out a portion and keep it in another account for emergencies.
12. Do not buy for a one-time dividend. In cryptocurrency, do not buy coins because of airdrops or staking profits, as this often leads to significant losses.
13. Do not attempt to increase your position to lower costs. Try not to continuously increase your position to lower costs, as this is one of the biggest mistakes traders can make. Buying more as prices drop may occasionally lead to a rebound to your ideal profit position, but if prices keep falling without rebounding, a single trending market can wipe out all your capital. Gann saw countless big players on Wall Street become bankrupt because they tried to catch the bottom.
14. Do not exit due to losing patience. Do not enter a trade out of impatience after waiting too long. Be patient and wait for trading opportunities. Do not place an order just for the sake of trading; remain patient while waiting for the results of take-profits and stop-losses.
15. Avoid small profits and big losses. Do not take a small profit before reaching your take-profit point, and do not hold a position at your planned stop-loss point, letting a small stop-loss turn into a big loss. Small losses with big profits ultimately result in losses.
16. Do not cancel your set stop-loss points during trading. Refer to point 15; once a stop-loss is set, never cancel it casually, as small losses can escalate into significant ones.
17. Avoid frequent trading. Frequent trading incurs transaction fees that can unknowingly erode your capital, and it increases the probability of losing your principal. Maintain patience and wait.
18. Don’t only go long and ignore shorting. Speculation is not investing. In a bull market, the market trend is clearly rising, and you may be eager to go long. However, in a bear market, when there is a clear downward trend, do not force yourself to go long. Instead, short at high points to align your trades with the trend, which is the way to make money.
19. Do not buy because the stock price is low, nor sell because the stock price is high. Some coins that were originally $100 may drop to only $1 in a bear market; at this point, do not buy just because the price is low, as it could still drop by another 90%, like Luna. Conversely, if a coin is only $1 and rises to $100 in a bull market, do not short it just because the price is high, as it could potentially rise to $1,000.
20. Pyramid position increase method. The pyramid method means that when you open a position, you start with a relatively large position, and then as the market moves in your desired direction, you make small additional purchases. For example, in an upward trend, after a rise, entering a consolidation zone, wait for the consolidation zone to break upward before adding to your position. If it does not break, do not add.
21. Go long on small-cap stocks and go short on large-cap stocks. In the cryptocurrency market, during a bull market, going long on small coins can lead to very easy doubling. In illiquid assets, stop-loss orders often experience significant slippage, while shorting liquid mainstream coins like Bitcoin is relatively safer.
22. Do not engage in hedging trades. When the direction is wrong, closing the position to admit the mistake and waiting for an opportunity is essential. Many people do not stop-loss when their long positions hit the stop-loss level but open a short position to hedge, which is meaningless. If you believe the price will continue to fall, you can close the long position and open a short position. Leaving the original long position while opening a short will waste margin.
23. Plan your trades and trade your plan. Without sufficient justification, absolutely do not arbitrarily change your trading plan. Each trade must have ample justification and be executed according to the established plan, without exiting easily before a trend reversal.
24. Don’t increase your position after making a profit for a while. Don’t increase your position after making a few trades; if you always trade one Bitcoin at a time, after experiencing many profitable trades, you will become overly confident. When the next opportunity arises, you might increase your position to trade 10 Bitcoins, and if you incur a loss at that time, all your previous 10 profitable trades will be wiped out. As the saying goes, every time you want to make a big move, it often leads to a big setback.
If you are still underwater, unable to see the trend,
Going long leads to drops, going short leads to rises. Feel free to click on the avatar to follow me.
Daily spot potential layout and bull market strategy layout Comment 111 No long share