Every newcomer who enters the cryptocurrency circle must have a passionate vision of wealth, just like me at the beginning, diving into this mysterious and variable field. To this day, I still clearly remember the first operation when I was a novice. The feeling of "getting rich overnight" was like being hit hard by the god of luck, which is still unforgettable. When I woke up, the balance in my account was 50,000 more. At that moment, the ecstasy in my heart was like a surging tide, instantly drowning me. I thought I had found the golden key to open the door to wealth, as if I had become the "chosen one" who dominated the market.
After being intoxicated by this sudden victory, that night, driven by impulse, I opened a 75x leverage position, fantasizing that my funds would double like a rocket the next day, with financial freedom just around the corner. However, reality was like a harsh slap in the face that woke me up. The market plummeted sharply, and not only did I not see the expected huge profits, but my account funds rapidly drained like a floodgate opening. Watching my hard-earned savings slowly being devoured, anxiety, regret, and self-blame gnawed at my heart like a venomous snake.
At night, which should be a quiet time for rest, I tossed and turned in bed, unable to fall asleep. At one or two o'clock, my eyes were glued to the screen, missing any slight market fluctuations; when I finally managed to doze off, I was abruptly awakened at four or five o'clock, frantically grabbing my phone to check, my heart always in my throat, caught in the painful struggle between "painfully cutting losses and closing positions immediately" and "wait a minute, maybe it will rebound soon," every minute and second was torment.
In just a few days, my account margin of 300,000 nearly hit zero. Even with subsequent additional funding, I could hardly escape the misfortune of liquidation. The financial losses were severe, sleep was seriously lacking, and my mindset completely collapsed. It was a dark time. However, I had an inherent stubbornness, and I gritted my teeth to persist, determined to explore a path forward in this chaotic market. After three years of struggle, with the remaining capital of 120,000, I miraculously earned over 27.5 million! Looking back at this arduous journey, the flavors of it can only be deeply felt by myself.
Today's sharing is not to flaunt personal achievements but to sincerely hope to light a lamp for newcomers to the cryptocurrency world, helping you find direction amid confusion and avoid the detours I once took.
1. Risks and Protection Strategies in the Cryptocurrency World
1. Risk Avoidance Guide for Major Market Shocks: The cryptocurrency market is like raging waves, with major shocks occurring frequently. At this time, both long and short sides engage in fierce battles, with black swan events such as exchanges "pulling the plug" and instant massive fluctuations frequently happening, leading to an exponential increase in risk. The wise move is to actively avoid involvement, temporarily observe from the sidelines, and preserve strength. If you simply can't resist the urge to participate, be sure to take small positions to keep risks at a minimum, and never let greed blind your eyes to recklessly go in heavily.
2. Warning of Risks in Altcoins: In the late stage of a bullish market, especially near the peak area of BTC, altcoin bulls are prone to concentrated selling, triggering a flash crash phenomenon. These coins have low trading volumes and poor liquidity; once the market sentiment shifts, there is simply no support, leading to a catastrophic price collapse. I set a strict rule for myself: focus only on BTC or mainstream coins with high trading volumes, staying away from these high-risk niche altcoins and never playing with the principal.
3. Red Line for Drawdown Control: In the closed-loop of trading logic, the maximum drawdown is a matter of life and death. I set a drawdown limit of 50% for myself, which is a line that cannot be crossed. No matter how crazy the market gets, one must always stay vigilant to avoid the curse of liquidation. In summary, be cautious and take small steps when risks are high, and be steady and take larger steps when risks are low; however, mastering this timing indeed requires repeated refinement in real combat.
4. Essentials of Asset Allocation: Capital management is key to survival in the cryptocurrency world. Always use only less than 10% of liquid funds for contracts; this is your lifeline. When profits reach a certain multiple, don't hesitate; decisively withdraw profits. In the beginning, it can be hard to distinguish whether profit comes from luck or skill, locking in profits is the wisest strategy, then using small amounts to cycle through operations steadily. It should be noted that many of the top-ranked contract traders started with just a few hundred or thousand; the size of the principal is not the key to success or failure; the reasonable use of funds is the true way.
2. The Maze of Contract Trading and Strategies to Break Through
1. Analyzing the Chaos of Liquidation: The cryptocurrency contract market can be likened to a wealth meat grinder. In the past month, as much as $20 billion was liquidated, a shocking figure. This is not merely a funding issue, but a lack of market synergy. Whether small retail investors or large fund players, all harbor dreams of getting rich overnight, and under the temptation of high leverage, they rush in. The reality is harsh; recently, the proportion of long positions leading to liquidation exceeded 90%, warning us that leverage is a double-edged sword. Regardless of the size of funds, the risk of liquidation follows closely.
2. Building a Practical System: Why do so many investors hesitate in the face of market fluctuations? A deep dive reveals that the mindset issue is the main reason. Some are out of funds, their 'ammunition' exhausted; some fear a bottomless pit of decline, buying only to be trapped; some are caught in the whirlpool of chasing highs and cutting losses; some hesitate and miss golden opportunities; and others are paralyzed by fear, lacking the courage to act. In fact, the first four mindsets stem from insufficient understanding of contract investment. Only by deeply understanding the market and filling in the gaps in knowledge can one dispel fear and establish their own contract trading system, moving steadily through the storms.
3. From Self-Awareness to Strategic Elevation: Investment master Van Tharp once said, "You are not trading the market itself, but your understanding and belief about the market." This profoundly highlights the core of an investment operating system - a unique market interpretation and action guide. But building such a system is easier said than done. One must first deeply analyze oneself, clarifying interests, goals, knowledge reserves, and skill boundaries.
On this basis, accurately grasp the timing of entry and exit, select investment targets, and allocate positions reasonably. At the same time, allow for a buffer for mistakes; when market trends deviate from expectations, respond calmly, draw nutrients from failures, and continuously optimize the system. This is a long marathon; it takes 6 to 10 years in the stock market, while the cryptocurrency market, despite having bull and bear cycles of about 4 years, also requires at least 8 years of refinement. Unfortunately, many retail investors blindly follow trends throughout their lives and have never built their own strategic fortress.
4. Breaking the Curse of Liquidation: Looking back, I faced numerous setbacks in the contract trading journey. A few years ago, I experienced five liquidations, each one a deeply painful memory. Initially, I flailed about like a headless chicken, making all sorts of excuses and complaining about the unpredictable market. Until one day, I had an epiphany: a complex operating system is not the antidote; supreme position management is the true essence. Strict position control may seem simple, but it contains profound investment wisdom that allows us to remain calm amidst market turmoil, avoiding the fatal traps of unmanageable leverage and overexposure.
5. The Ultimate Path of Position Management: The root cause of contract liquidation lies in excessive leverage and fully invested operations. Leverage and position are interdependent; if you choose high leverage, you must lower your position, and vice versa. The market is ever-changing, something we cannot control; we must strictly adhere to the safety bottom line of our positions. Imagine investment as defending a city, positioning yourself in a sturdy fortress while occasionally peeking at the market pulse, but never venturing out into danger. For example, if EOS is currently priced at 3U, if the liquidation price can be controlled at 1.5U, regardless of how the market ravages, we can remain steady. "As long as the green mountains remain, we need not worry about firewood," adhering to a half-position philosophy or even a dynamic half-position strategy in the cryptocurrency world allows for flexibility in both spot and contract trading.
After weathering the storm, I deeply understand that the ultimate secret to playing contracts is: position management. I hope my experiences and insights can serve as a navigation chart for everyone in the cryptocurrency world, helping you avoid hidden reefs and sail towards the shores of wealth. Remember, in the cryptocurrency world, mindset and strategy are equally important; stability is the key to longevity.
