1. When the market is in a state of shock, the long and short positions are in full swing. At this time, you should actively avoid risks. Risks come from exchanges pulling the plug and huge instantaneous fluctuations.
Or you can participate with a small amount of light position. Keep the risk small.
2. Shanzhai Wuliang Pin. At the end of a wave of rising market, near the peak area of BTC, Shanzhai bulls are prone to concentrated selling*, triggering Wuliang Pin. This situation also needs to be avoided.
The principle I set for myself is to only trade BTC or mainstream products with large trading volumes. Products with insufficient trading volumes are extremely risky in this situation.
3. Maximum drawdown under the closed loop of trading logic. I set it to 50% for myself. Always avoid liquidation. In summary, when the risk is high, do a small amount, and when the risk is low, do a large amount. But to be honest, it is difficult to grasp this degree.
4. Asset allocation*. Always use less than 10% of your liquidity to play. Withdraw when the profit reaches x times. In the early stage, you can't figure out whether it is earned by luck or strength. At this time, locking in profits is the best strategy for you, and then rolling with small funds, repeating the cycle. The top few of Contract Emperor started with hundreds or thousands of dollars. If you don't have a mine at home, it's best not to compare the principal with others.
Finally, I spent half a year exploring the contract myself. The top few on the list all experienced many liquidations in the early days. For newbies with insufficient trading experience, not playing is also the best way to prevent liquidations. It is important to do what you can.
So how do we open contract transactions correctly?
After more than 10 years of cryptocurrency trading and the pain of five contract liquidations in the past few years, I finally realized the only secret to playing contracts!
1. Liquidation in the cryptocurrency contract market is common
In the last month, we have witnessed a liquidation of up to $20 billion in the cryptocurrency contract market. This data makes us ponder: Is the cryptocurrency market really short of funds?
In the cryptocurrency world, it is not difficult to find that funds are never a problem. What is truly scarce is the upward force that can gather all forces. This force is what every market participant desires and is the key to driving the market forward.
So why did such a large-scale liquidation occur? Is it just small funds that are desperate and trying to make a fortune with a small investment? This is not the case. Whether it is small funds or large funds, the pursuit of overnight wealth is a common goal. When we see the figures of those liquidations, we should not simply blame them on the impulse of small funds.
Suppose that if 1 million retail investors all enter the contract market, then the 20 billion liquidation funds will average out to 20,000 per person. But this is just an extreme assumption, which is based on the assumption that all retail investors participate in the contract and all contracts are liquidated. But the reality is not the case. Recently, the proportion of liquidation of long positions has reached more than 90%, which has caused us to think about the real situation of the market.
From this perspective, it is not just retail investors who are liquidated. The liquidation of tens of billions of dollars is more like a warning: whether using 5x, 20x or 100x leverage, there are huge risks. This risk can come at any time regardless of the size of the funds.
2. Establish a robust contract practice system to cope with market fluctuations
Why are so many people still hesitant and hesitant to buy recently? After in-depth analysis, I found that different friends have their own unique insights, but more voices reveal the following mentality:
One is that they have run out of ammunition and lack of funds makes it impossible for them to re-enter the market.
The second is the concern that "the decline will never end", and the fear that the market will continue to fall after buying.
The third is the mentality of "fear of gain and loss", which is to be afraid of losses but also to pursue victory, thus falling into a vicious circle of chasing rising and selling falling.
The fourth is to "wait and see" and miss the opportunity in hesitation.
The fifth is "lack of courage and determination", feeling fear of the unknown in the market and being unable to act decisively.
These mentalities are common in the cryptocurrency world. They are like an invisible barrier that fills the entire market with panic. After an in-depth analysis, I found that the first four reasons mostly stem from the cognitive level of contract investment. Only when you have a deep understanding and sufficient knowledge of the market can you overcome these obstacles and have enough courage and determination to deal with market fluctuations.
There are two main reasons for the market downturn after the cryptocurrency market crash: one is the natural fear instinct of human beings, and the other is the lack of understanding of contract speculation. In addition to these psychological factors, I think the more critical thing is to establish a set of your own contract practice system.
3. From self-awareness to strategy improvement, achieving long-term stability
The famous investment philosopher Van Tharp once said: "You are not trading the market alone, but your understanding and belief in the market." What this means is your investment operating system - a unique set of market interpretation and action guidelines. But how easy is it to build such a practical system?
Before building the latest strategy system, you need to clarify your investment philosophy and have a deep understanding of yourself. This includes your interests, goals, knowledge accumulation, skills mastery, and the boundaries of your abilities. Only by truly understanding yourself can you find a path that suits you. In addition, you need to be clear about when to enter the market, when to leave the market, which targets to choose, and how to configure positions. Not only that, you also need to be prepared to deal with mistakes. When the market trend does not meet your expectations, how should you deal with it? This is not to let you choose extreme methods, but to let you learn lessons from failure and constantly improve your system.
You may find this road difficult. But playing with coins is not an easy task that can be accomplished overnight. It requires continuous learning, practice, reflection and adjustment. To establish and verify a perfect investment operating system, you often need to go through two bull and bear cycles. In the stock market, this may take 6 to 10 years; in the cryptocurrency circle, although it is generally recognized that the bull and bear cycle is shorter, about 4 years, it also means that you need at least 8 years to continuously improve and verify your system.
This may sound daunting, but you have to know that this is a marathon, not a sprint. However, I must admit that not everyone realizes the importance of establishing an investment operating system. Some retail investors may blindly follow the trend and chase the rise and fall throughout their lives, and never really establish their own strategy system.
4. How to avoid liquidation in contract operations?
In fact, I have tried to build multiple operating systems. I have carefully designed the valuation model of currencies, the criteria for buying and selling, the strategy for selecting currencies, and the planning of holding time. Whether it is the stock market or the foreign exchange market, I have invested my efforts in operation. Now I bring these experiences to the cryptocurrency circle, hoping to find my own path to success here.
In the past few years, I have encountered five liquidations in contract operations. This is undoubtedly a heavy blow to me, and also a miraculous experience in my career in the cryptocurrency circle. After each liquidation, I tried to find various reasons and reasons to explain it, and even complained about the volatility of the market like many leeks.
But one day, it suddenly dawned on me. I began to realize that an overly complex operating system might not be what I really needed. I began to think about whether there was a way to get rid of the trouble of liquidation and make me more relaxed on the road of the cryptocurrency circle.
So, I found my answer - strict position management. Although this trick is simple, it contains profound investment wisdom. It allows me to stay calm in the face of market fluctuations and avoid getting into trouble due to excessive leverage or heavy positions. I believe that as long as I can strictly implement this strategy, I will be able to go further and more steadily on the road of investment.
5. Extreme position management: the ultimate line of defense against cryptocurrency contract liquidation!
The root cause of contract liquidation is often due to two factors: excessive leverage and full position operation. These two are like a double-edged sword in position management, and we need to carefully weigh them. Leverage and position complement each other. When you choose high leverage, you must adjust your position to a very low level accordingly, and vice versa.
We don't need to comment on the extreme volatility of the market, and we don't need to be too emotional about the ups and downs of the market. How the outside world changes has nothing to do with our inner decisions. All we have to do is to protect the safety of our positions. The market will always stir up waves at some point, but the safest strategy is to put yourself in a solid fortress. You can occasionally stick your head out and feel the pulse of the market, but you must never expose yourself to the forefront of risks.
Therefore, extremely demanding position management has become the core of contract trading. It is not only a strategy, but also an attitude, a kind of awe and respect for investment. For example, the current price of EOS is 3U. If we can control our contract liquidation price at 1.5U, then no matter how the market fluctuates, we will be safe. This is the charm of position management, which makes us more calm and at ease in investment.
There is an old saying: "If you keep the green mountains, you will never run out of firewood." This is the essence of position management. Only by ensuring the safety of your own funds can you be invincible in the future market. In the currency circle, I always adhere to half-positionism, or even dynamic half-positionism. Whether it is spot trading or contract trading, I can handle it with ease. After experiencing the baptism of the contract market many times, I deeply realized that the only secret to playing contracts is position management.
Even the stock god Buffett maintains a large amount of cash reserves. Why can't we learn strict position management from them?
If you still don’t know how to operate it, please comment 333 directly, no long belt!!!!
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