1. Avoid full margin trading
How should funds be allocated? Fund allocation should be understood from two levels:
Firstly, from the risk perspective, understand that fund allocation must first clarify how much loss our account can or is prepared to endure. This is the thinking basis for our fund allocation. Once this total amount is determined, consider how to minimize losses to the market if we continuously make mistakes, and how many times we should be willing to accept our bad luck and acknowledge our failures.
I personally believe: the riskiest method should also be split into three times. In other words, you should at least give yourself three chances. For example, if the total account funds are 200,000, and the client allows you to lose a maximum of 20%, i.e., 40,000, then I suggest your riskiest loss plan is: 10,000 for the first time, 10,000 for the second time, and 20,000 for the third time. I believe this loss plan has a certain rationality. Because if you get it right once out of three times, you can profit or continue to survive in the market. Not being kicked out by the market is itself a success and gives you a chance to win.
2. Grasp the overall market trend
Trends are much harder to trade than fluctuations, because trends involve chasing highs and cutting losses, requiring determination to hold positions, while buying low and selling high aligns more with human nature.
Trading is about the less it aligns with human nature, the more money you can make; it is precisely because it is difficult that it is profitable.
In an upward trend, any violent pullback should be an opportunity to go long. Do you remember what I said about probabilities? So, if you’re not on the bus, or have gotten off, wait patiently. When a drop of 10-20% occurs, be bold in going long.
3. Set stop-loss and take-profit targets
Stop-loss and take-profit can be said to be the key to determining whether one can profit. In several trades, we must ensure that total profits exceed total losses. Achieving this is actually not difficult; just do the following points:
① Each stop loss ≤ 5% of total capital;
② Each profit > 5% of total capital;
③ Overall win rate > 50%
If the above requirements are met (profit-loss ratio greater than 1 and win rate greater than 50%), profits can be realized. Of course, it is also possible to have a high profit-loss ratio with a low win rate, or a low profit-loss ratio with a high win rate. Anyway, as long as the total profit is positive, it’s fine. Total profit = initial capital × (average profit × win rate - average loss × loss rate).
4. Remember not to trade too frequently
Since BTC perpetual contracts are traded 24/7, many beginners operate daily, and with about 22 trading days a month, they almost trade every day. As the saying goes: those who often walk by the river will inevitably get their shoes wet. The more you operate, the more likely you are to make mistakes, and after making a mistake, your mindset can deteriorate. Once your mindset deteriorates, you may act impulsively, choosing 'revenge' trading: possibly going against the trend or over-leveraging. This can lead to one misstep after another, easily resulting in significant losses that may take years to recover from.