Author: David G
Translated by: ShenChao TechFlow
David's Bull Market Profit Guide: How to Make Money and Avoid Liquidation
Today is a bit serious; I will share some experiences I have summarized from painful lessons over the years, hoping you can avoid some pitfalls through reading this article.
It should be emphasized that the focus of this article is execution - how to truly pocket profits from a bull market. I will not discuss research, analysis, or asset selection (these are actually the relatively simple parts).
The three key elements for successful trading in a bull market are:
Portfolio Structure
Use of Leverage (when to use it, how to use it)
On-chain Operations
Portfolio Structure
The way you construct your portfolio largely depends on your capital size. Whether your assets are $100,000, $1 million, or $10 million, the following core principles apply.
First, your portfolio should be based on high-quality collateral assets. For me, this means BTC and SOL. In a choppy market or bear market, when I sell assets, I usually choose to convert to stablecoins, but in a bull market, I prefer to use the profits to acquire more mainstream assets that I am optimistic about. The advantage of BTC and SOL is that they are not only quality assets but can also be used as collateral for borrowing, thus enhancing capital efficiency.
Currently, my portfolio is almost entirely composed of BTC and SOL. However, as the market cycle progresses, I will gradually convert more of my assets into stablecoins to lock in profits.
Leverage Usage Strategy
(The following advice is suitable for beginners in leveraged trading. If you are already an experienced trader, you can operate according to your own strategy.)
First, forget the advice about leveraged trading you see on Crypto Twitter (CT). Leverage is just a tool to enhance capital efficiency and seize opportunities when the risk/reward ratio is asymmetric.
It is important to note that leveraged trading of mainstream assets (like BTC, SOL) and altcoins (tokens with smaller market caps) are completely different strategies. For example, going long on SOL and going long on a small coin with a market cap of $500 million may both superficially appear as 'going long', but the risks and operational methods are completely different. This point seems simple, but many people do not realize it.
A basic rule is: Never let your altcoin leverage exposure exceed 1x of your portfolio's market value. This helps avoid excessive risk while also retaining enough profit space.
For example: Suppose you have $100,000 in assets, priced in SOL, and you use it as margin for futures trading. In this case, your long position in altcoins should not exceed $100,000. Because altcoin prices are highly volatile, if you are not a top trader, it is very likely that you will get liquidated. But in this example, you can still achieve a 2x long exposure in your portfolio ($100,000 in SOL + $100,000 in altcoins), which is already a very considerable gain. The key is not to be greedy.
For mainstream assets (like BTC and SOL), at certain specific moments, you can choose a higher leverage exposure, such as 3-5 times. However, it is important to note that this strategy only applies to scenarios where risks are clear and expected returns are extremely high.
Key Points of Leveraged Trading
When using leverage, the most important point is: the higher the leverage, the earlier you should take profits.
While there is still much to discuss about perpetual contract (perp) trading, due to time constraints, I cannot elaborate here. I recommend following a few excellent traders:
@Awawat_Trades
@Tradermayne
@LomahCrypto
Additionally, you can watch @CryptoCred's YouTube trading series to learn more practical trading skills.
Finally, always remember: Never put yourself in a position where a reversal in trading could lead to liquidation. This is the most basic survival rule in trading.
On-chain Trading: Seizing Potential Coins in a Bull Market
Next comes the more interesting part. If your portfolio structure is reasonable, on-chain trading may bring you extremely high returns, but be aware that this is only limited to situations where your structure is correct.
Why do I say this? Because many people are trading on-chain incorrectly. The core goal of on-chain trading is to pursue excess returns, not to accumulate capital through small profits. In a bull market environment, the only thing you need to focus on is seizing opportunities that can bring huge returns. Because these opportunities are key to truly changing the scale of your portfolio and even altering the trajectory of your life.
In on-chain trading, your goal is to find and hold a few 'super potential coins' that can far outperform other assets. This may contradict the 'diversification' concept emphasized in traditional investing, but as Warren Buffet said, 'Diversification is for the ignorant.'
The crypto market is a reflexive market, which means that when an asset starts to perform well, it often attracts more funds, becoming even more excellent. You only need one or two such super potential coins, and it can change your life; this should be your core goal in on-chain trading.
How to Handle Positions in Potential Coins
Once you seize a big potential coin, never fully cash out at once. You should gradually reduce your position as it rises while retaining a certain amount to continue participating in potential upside.
For example, if you buy a token at a market cap of 5 million, when it rises to 50 million, you can sell 10%; when it rises to 100 million, sell another 10%; and when it rises to 250 million, sell another 10%. This way, you gradually lock in profits while retaining sufficient upside exposure.
It is especially important to note that the upside potential of potential coins may far exceed your imagination, so be sure to retain a portion of your position to gain greater profits in future explosions. Continuing with the example above, suppose you have sold 70% of your position when the market cap reaches 500 million but decide to retain the remaining 30% and wait for the market cap to reach 3 billion before selling. Then, if it really rises to 3 billion, the profits from that remaining 30% may exceed the total profits from all your previous gradual sales.
This is exactly the significance of the 'gradual selling' strategy: to reduce risk by gradually locking in profits while retaining a portion of the position to participate in potential larger gains. When facing potential coins, patience and strategy are often more important than short-term gains, because once you seize such opportunities, they can completely change your investment outcomes.
Mental Preparation: How to Deal with Price Fluctuations
The hardest part about holding a large position, especially when it occupies a significant proportion of your portfolio, is how to deal with extreme price fluctuations. No matter how excellent the token is, it will inevitably experience a 50-70% correction during the upward process, and it may happen multiple times. You need to mentally prepare in advance to accept such volatility and remain calm when it occurs, not to panic sell easily.
With the strategies above, you can more effectively take advantage of on-chain trading opportunities, capturing super potential coins in a bull market while avoiding missed potential gains due to emotional decision-making.
Remember, in the crypto market, your gains come from your ability to endure volatility.
Most people cannot endure the significant fluctuations of the market, which is also why they cannot achieve great success. Volatility is your friend; it is the core reason why crypto assets are so attractive and profitable.
As you experience more fluctuations, you will gradually adapt to these extreme ups and downs. Eventually, you may become numb to these fluctuations, and even your emotional responses to other aspects of life may diminish. But that’s okay; at least you will become rich because of it.
Mindset Management: The Real Battlefield of Trading
Trading is ultimately a psychological battle, and your biggest opponent is yourself. If you can learn to execute trading strategies at a high level, then not only will you succeed, but you may also achieve great accomplishments.
Keeping a clear mind is key. Whether through prayer, meditation, or walking, find a method that suits you and make these activities part of your daily routine to help you stay focused and rational in trading.
At the same time, remain humble. Always be prepared to lose everything, but even if you really do lose, believe that you can stand up again.
Summary
In the crypto market, volatility is both a challenge and an opportunity. Those who can endure volatility can seize opportunities and achieve great success. May you always remain clear-headed, humble, and confident on this path.
Good luck, see you in the bull market!
