I have a friend who, as an old player in the cryptocurrency circle, has unknowingly traded in the cryptocurrency market for 10 years. It is truly not easy to survive in the market! He has been beaten by market manipulators, experienced many liquidations, been confused, and countless times hid alone in dark corners smoking yan. This is the price of growth!

From entering the cryptocurrency market with 5 U to earning 10 million, then to being in debt of 8 million, then to earning 20 million, and now achieving financial freedom!

I mainly mastered contract skills; playing contracts in the cryptocurrency circle is like playing with one's heartbeat—it is thrilling, even more so than riding a roller coaster.

Today, I will share a free summary of his years of trading experience, hoping it can help everyone!

1000x contracts may seem risky at first glance, but they are actually my most profitable and highest win-rate investment variety. Initially, I was quite confused about this, but later I gradually understood.

This is mainly due to my unintentional adherence to a set of clear trading rules:

1. Total position setting: The funds I use for contract trading are always fixed. For example, the funds for one account are always 300 U. This means my maximum loss is 300 U, while if the market trend is favorable, I have the opportunity to gain several thousands of U in returns. This setting allows me to maintain controllable risks while seizing profit opportunities from major trends.

2. Initial amount: My starting trading amount is always very low, based on the principle of stock trading master Livermore. He believed that if you start correctly, it's best to start making money right away. Therefore, my initial trial amount is always very small; even if the total position is 300 U, the initial amount often is just in the single or tens of U, ensuring I am in a profitable state at the beginning of the trade.

3. Adding positions strategy: I only add positions when profits appear and the trend is clear. This strategy allows me to further amplify profits when the market trend is favorable while avoiding increasing risks in an unfavorable market environment.

4. Stop loss setting: I will adjust the stop loss position according to market conditions in a timely manner to ensure that I do not lose the principal. This is an important principle I adhere to in trading, helping me remain calm during market fluctuations and avoid emotional trading decisions.

These four rules have unintentionally enforced strict trading discipline on me, and the logic behind them applies equally to ordinary low-multipler contracts, as the reasoning is consistent. Of course, before starting, I still want to remind new players:

Contract trading is not child's play, especially for those who believe in some contract technique or guru who can predict prices. Do not blindly believe that just by listening to them you can make big money; this kind of thinking should be avoided. I do not have any secret that will make you rich just by hearing it.

Moreover, contract trading tests human nature very much. Unless you can persist in using a very small amount of money, such as 100 U or 300 U, this fits the strategy of 'using small to fight for big', rather than 'using big to fight for small'. What I share is a method, hoping to provide some reference for contract players, and that is all.

Playing in the cryptocurrency market is essentially a competition between retail investors and manipulators. If you do not have super strong professional skills, you can only be cut! Those who want to layout together and harvest the manipulators can come (Public account: Trend Prediction) to discuss with like-minded cryptocurrency people~

What are the types of contracts:

Perpetual contracts: Perpetual contracts have no expiration date, and users can hold them indefinitely and perform their own closing operations.

Delivery contracts: Delivery contracts have specific delivery dates, including weekly, next week, quarterly, and next quarter delivery contracts. When the specific delivery date arrives, the system will automatically deliver regardless of profit or loss.

USDT margin contracts: This means you need to use the stablecoin USDT as collateral. As long as there is USDT in the account, you can trade multiple cryptocurrencies in contracts, with profits and losses settled in USDT.

Coin-margined contracts: These are contracts that use the underlying cryptocurrency as collateral. You need to hold the corresponding cryptocurrency before trading, and profits and losses are also settled in that cryptocurrency.

Techniques for making money with perpetual contracts:

1. Avoid full positions.

How should funds be allocated? Fund allocation should be understood from two levels:

First, understand risk from the perspective of fund allocation. First, clarify how much loss your account can or is prepared to endure. This is the foundation for our fund allocation thinking. Once this total is determined, consider how many times we can afford to lose in the market before willingly admitting defeat.

I personally believe: The most adventurous method should also be divided into three times. In other words, you should give yourself at least three chances. For example, if the total account capital is 200,000, the client allows you to lose a maximum of 20%, which is 40,000. The most adventurous loss scheme I suggest is: the first time 10,000, the second time 10,000, and the third time 20,000. I believe this loss scheme has a certain rationality. Because if you get one right out of three, you can be profitable or continue to survive in the market. Not being kicked out of the market is itself a success; there is a chance to win.

2. Grasp the overall market trend.

Trends are much harder to deal with than fluctuations because trends involve chasing highs and cutting lows, requiring a steady position, while high selling and low buying align with human nature.

Trading is about aligning with human nature; the more it aligns, the less money you make. It is precisely because it is hard to do that it makes money.

In an upward trend, any violent pullback should choose to go long. Do you remember what I said about probability? So if you weren't on the bus, or you got off, patiently wait for a drop of 10-20%, and be bold in going long.

3. Set specified profit and stop loss targets.

Setting profit and stop loss can be said to be crucial for whether one can profit. In several trades, we must ensure that total profits exceed total losses. Achieving this is not difficult; just do the following:

① Each stop loss ≤ 5% of total funds;

② Each profit > 5% of total funds;

③ Total trading win rate > 50%

Meet the above requirements (profit and loss ratio greater than 1 and win rate greater than 50%), and you can achieve profitability. Of course, you can also have a high profit and loss ratio with a low win rate, or a low profit and loss ratio with a high win rate. Anyway, as long as you ensure that total profit is positive, total profit = initial capital × (average profit × win rate - average loss × loss rate).

4. Remember to avoid excessive trading.

Since BTC perpetual contracts are traded 24/7, many newcomers operate every day, attempting to trade nearly every day during the 22 trading days of a month. As the saying goes: those who often walk by the river will inevitably get their shoes wet. With more operations, mistakes are bound to happen, and after making mistakes, the mindset can deteriorate. Once the mindset deteriorates, one might make 'revenge' trades: possibly against the trend or heavily leveraged. This can lead to a series of mistakes, resulting in significant losses that might take years to recover.

The most stable strategy for cryptocurrency contracts:

Choose good currencies and be a good person. As a leveraged trader, volatility can be magnified by leverage, and during trading, the primary consideration should be certainty rather than volatility.

In a rising market, go long on strong currencies; conversely, in a falling market, go short on the weakest currencies.

For example, at the beginning of a new quarter, the strongest uptrends are EOS and ETH. When retracing, the first choice is to go long on these two currencies. In a downturn, the first choice to short is Bitcoin. Even if the final result shows that mainstream currencies have a larger decline than Bitcoin, only shorting or following Bitcoin can greatly avoid the risk of violent rebounds.

Most people in the cryptocurrency circle are short-term traders, and when trading, it is hard to stick to ideal exit points, and they are not very skilled in position control. They cannot rely on fluctuations to average out their prices. Given this situation, for most traders, a good entry price is more important than anything else.

Once there is a profit, take some profits first, secure the gains, and set a stop loss at the cost price for the remaining portion. This is what I have always emphasized in my own community.

As for the main techniques:

First, transfer USDT to the contract account of the exchange, but the total amount should not exceed 300 U. This amount is set based on the proportion of my personal spot trading funds. Generally, one can also determine the trading amount based on 1% of total funds, but each trade should not exceed 300 U (this limit only applies to 1000x contracts).

In addition, I actually do not recommend trading methods like 100x contracts because of the high risk and low cost-effectiveness. Either choose low multiplier contracts below 5x with large positions, or choose high multiplier contracts of 500-1000x with very small positions. It is best to only choose the latter, because contract trading inevitably leads to liquidations, and even low multiplier contracts are no exception. A thousand times contract will either result in a 300 U liquidation or huge profits, overall the profit and loss ratio is extremely large.

Therefore, if you master the correct method, 1000x contracts are likely to be profitable. However, if you trade on exchanges without an ADL liquidation mechanism, you are likely to be wiped out. Previously, my group friends and I wiped out the 1000x contract on Exchange A until it was directly taken offline...

I want to emphasize: The essence of contract trading is to use a small amount to fight for a large return, rather than using a large amount to fight for a small return.

Additionally, due to the extremely high multiples of 1000x contracts, transaction fees and funding fees have become relatively minor, and the key is whether you can open the right positions. Moreover, the transaction fees for 1000x contracts are much cheaper compared to other contracts at the same ratio. From another perspective, contract trading is essentially about borrowing money to open positions, and the borrowed money only requires interest repayment. If liquidation occurs, the money does not need to be repaid, making it a very good investment target.

Of course, if you do not trade according to my rules, the speed of losses will be very fast.

The most important thing is still position management:

Position management includes fund management and risk control. The two words 'position' should not be understood literally; rather, it expresses when to add positions, how much to add, where to reduce positions, and how much to reduce. It is essentially a roadmap of 'entering, adding, reducing, and exiting'.

So the complete trading process should be:

1. Market analysis; you can use any technical analysis.

2. Position management. After entering a position, we need to consider what might happen next: what to do with profits, whether to add to positions, take full profits and exit, or continue holding. If profits expand again, what to do? If losses occur, should we stop loss, hold the position, or partially exit? How much loss will lead to a full exit? Position management will simultaneously consider risk and return factors.

3. Strictly execute trades. When your plan is clear, you must implement it and not let market fluctuations disrupt your thoughts.

4. Summarize trading. After completing a trade, it is necessary to review the previous trades over a period of time, covering all three market conditions: rising, falling, and sideways. Based on this, improve and optimize market analysis, position management, and the trading execution process.

We first need to find the entry point based on our trading skills, which must be a support line. When the market is above the support line, the trend is upward, and when the market breaks below the support line, the trend is downward. More importantly, the support line is also the basis for defining potential risks. When the stop loss is placed below this support line, the potential risk range is determined. If it touches the initial stop loss area below the support line, we should exit first or close most of the positions and then gradually reduce positions as it continues to fall until all positions are closed.

Thus, the potential profit range is above the support line, and the upward trend in the market has not ended, so theoretically, the potential profit is unlimited. After entering, if the price rises, we can hold the original position for further gains, or gradually add to our position based on the original position, and we will adjust the stop loss based on market developments. When the market behaves as we expected, we should move the stop loss close to the cost price or below a support line with a certain margin, moving the stop loss continuously reduces the risk range in the market, which is equivalent to locking in floating profits.

When the price rises again to a new support or resistance level, then starts to retreat, the area below this support or resistance level becomes the zone for reducing positions. At this time, we should gradually close all positions. To summarize: First, we need to find a support-resistance line at the cost price. When the price rises far from the cost line, we gradually add to our position, and the additions must be decreasing. When the price falls further away from the cost line, we gradually reduce the position, and the reductions must also be decreasing. Your position management skills must balance risks and returns.

The six basic principles of position management:

First: Do not operate with full positions; always maintain a certain proportion of backup funds:

Second: Buy and sell in batches to reduce risk, average costs, and amplify returns. The advantage of buying down in batches and selling up in batches is that your average price is lower than others, yielding higher returns.

Third: When the market is weak, hold light positions; in a bear market, it is best not to exceed half a position. In strong conditions, you can moderately hold heavier positions; in a bull market, it is advised to limit positions to 80%, with the remaining 20% reserved for short-term or backup funds for unexpected occurrences.

Fourth: Adjust positions appropriately with market changes, adding or reducing positions as necessary.

Fifth: When the market is sluggish, you can go short temporarily and wait for opportunities.

Sixth: Change positions: retain strong currencies while selling off weak currencies.

The above six principles apply to both spot and contract trading. If you still do not understand, please read a few times, review and learn anew; you can be a master!

Next, let's discuss position management methods, which involve batch operations.

Batch operations refer to dividing the invested funds for actions such as building, adding, or reducing positions. Batch operations can be completed within a day or over a period.

Why do these actions? Because the cryptocurrency market is volatile, both rises and falls are highly probable events, and no one can accurately predict short-term price fluctuations, so it is necessary to leave enough funds to cope with unpredictable fluctuations.

If there is insufficient assurance to operate with full positions, a sudden market change can lead to significant losses. Therefore, using batch methods can reduce the risk of full position investment and average costs, which is the basis for lowering costs and amplifying returns.

Next, let's discuss how to batch: divided into equal batch and unequal batch methods.

First: Equal distribution, also known as rectangular trading method, means dividing funds into several equal parts for buying or selling in sequence, with the same proportion of funds for each transaction. Usually, it is divided into 3 or 4 equal parts. For example, buy 30% first, if you start to profit, buy another 30%. If there is no profit, do not intervene with new funds for the time being. When the price of that currency reaches a certain high point or the market changes, gradually reduce positions and sell.

Second: Unequal allocation refers to allocating funds in different proportions for buying or selling, with ratios like 1:3:5, 1:2:3:4, 3:2:3, etc. The shapes created by ratios include: diamond, rectangle, hourglass, etc., with the pyramid trading method being the most common.

For example:

If a certain currency drops to 10 U, buy 20% of the position. When the price drops to 8 U, then enter 30%. At this point, the average cost is 8.6 U.

If the market continues to drop to 5 U, then enter 40%, with an average of 6.5 U.

If the price rebounds to 6.5 U, it is at break-even. If it rebounds to 10 U, it is equivalent to earning 3.5 U. But if you buy at full positions when at 10 U, when the price returns to ten U, you have just broken even.

During the price rise, the lower the price, the larger the position should be bought. As the price gradually rises, the position should gradually decrease. This method of buying belongs to right-side building. This approach is relatively safe; even if the market declines, as long as it does not drop below the holding cost, there is no need to panic.

This method has a heavier initial position, so the requirements for the first entry are relatively high, needing to grasp market fluctuations, suitable for technical players.

Inverted pyramid selling method, in contrast to the upright pyramid, has a broader top and narrows downwards, resembling a funnel. When the price of a cryptocurrency rises, gradually reduce the quantity held, meaning that the number of sold currencies increases as the price rises. This is a method for reducing positions or clearing out.

The core of position management is the above points. Once understood, I believe that in the future, whether it is spot building or contract building, you will have an idea.

Contract position management.

ETH position allocation, calculated by the number of units!

A principal position of 1,000 U should not exceed 5 positions.

A principal position of 3,000 U should not exceed 10 positions.

A principal position of 5,000 U should not exceed 20 positions.

A principal position of 10,000 U should not exceed 30 positions.

A principal position of 30,000 U should not exceed 50 positions.

A principal position of 50,000 U should not exceed 100 positions.

BTC position allocation is calculated based on the number of units!

A principal position of 1,000 U should not exceed 0.5 positions.

A principal position of 3,000 U should not exceed 1 position.

A principal position of 5,000 U should not exceed 2 positions.

A principal position of 10,000 U should not exceed 3 positions.

A principal position of 30,000 U should not exceed 5 positions.

A principal position of 50,000 U should not exceed 10 positions.

Contracts are essentially the same as spot trading, with the same initial capital for each order and the same number of units for each transaction. Take profits when necessary, and take losses when needed; treat yourself as a trading machine! In the end, K will conquer you with strength!

About risks.

1: Liquidation risk.

There is no method that can guarantee profit, especially large and fast profits. Contract trading can amplify profits, and many successful individuals have made a comeback from being underdogs. Although many have faced liquidation, it is essentially a market of games; your liquidation does not mean others cannot succeed. You should focus on improving your skills. Contracts can earn quick money, but also bear the enormous risk of liquidation, which is the biggest risk.

2: Exchange pinning.

The so-called 'pin' refers to technical K-lines, which show a thin line going up or down. This minute line will not affect the spot market, but it is different for contract trading, as leverage amplifies the magnitude. At 100x leverage, even a 1% change can lead to liquidation.

3: Amplified human nature.

Those who have experienced contracts may understand what this means. Even when you see the correct direction, have a trading plan, discipline, stop losses, take profits, and control positions, all of this can be forgotten when trading. The stop loss is not executed, and the decision to hold the position is made, leading to liquidation. Contracts can also easily amplify desires and leverage, and many find it hard to control their human nature, failing to follow trading discipline, resulting in a vicious cycle of liquidation. In fact, the greatest enemy we face in trading is our own human nature.

In the current volatile market changes, blindly going solo will never bring opportunities. Follow the trends, consider timing, strategies, and what Wu Chang publishes.


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