In the field of digital currency trading, especially when conducting short-term operations, following a rigorous and reasonable set of trading principles is crucial as it directly affects the profits and losses of investments. Here are several core principles explained in detail:
1. Profit Locking and Drawdown Management Principle
After purchasing a certain cryptocurrency, we need to closely monitor the profit situation. Once the profit reaches 10% or more, we should activate the capital protection mechanism. This means that if the price subsequently retraces to the purchase price, you must immediately sell unconditionally to ensure that the principal is not lost. This practice serves as a solid defense for our initial investment, locking in earlier profits.
If profits further expand to around 20%, a minimum profit selling line should be set, meaning that this trade must at least earn 10% to consider exiting. Unless you can accurately identify the peak based on professional technical analysis, as long as profits have not fallen back to 10%, hold firmly and let the profits run to maximize returns.
Similarly, when profits soar to 30%, our stop-loss baseline should be adjusted to a profit of 15%. Once the price declines and touches this line, sell without hesitation to avoid excessive drawdowns eating into profits. By dynamically adjusting stop-losses based on profit stages, even in the absence of precise peak prediction capabilities, we can leverage the regularity of profit retracements to achieve steady rolling growth of profits.
2. Capital Protection and Stop-Loss Principle
Capital safety is always the primary consideration of investment. After buying a cryptocurrency, if the market trend is contrary to expectations and the price gradually declines, once the drop reaches 15% (the specific ratio can be adjusted slightly according to personal risk tolerance, but 15% has been verified by practice to be more suitable), you must decisively cut losses and exit. This may seem like a painful decision, but it is actually timely loss-cutting to prevent further losses from expanding. Do not harbor any delusions that the price might rebound later, because once losses get out of control, it will greatly impact your investment mindset and may even lead to a vicious cycle of blindly chasing highs and selling lows. Every wrong entry is a lesson, and paying a suitable price for losses can help us remember this and be more cautious in subsequent trades, strictly adhering to the iron rule of setting stop-losses as soon as a position is opened, which applies to both futures and digital currency trading.
3. Principle of the Original Price Buyback Strategy
The principle of buying back at the original price aims to respond to the repeated fluctuations in the market and avoid missing good opportunities and the risks of being left out. The specific operation is as follows:
When you sell a cryptocurrency based on certain judgments and the market falls as expected, but you still have confidence in the long-term or medium-term trend of that cryptocurrency, you should seize the opportunity to buy back the same amount of coins at the original price. It is important to ensure that the quantity is consistent, so even though you have gone through the process of selling first and buying back, the quantity of coins you hold has not changed. Additionally, selling at a high price has accumulated extra funds, effectively reducing the cost of holding.
In another scenario, if you sell a cryptocurrency and do not promptly buy back at a low price, and then the price rebounds strongly back to your selling price, you should decisively buy back unconditionally, even if it incurs some extra fees. In the long run, compared to the cost of re-entering the market at a high price after missing out, these fees are negligible. This is because once you miss out, the subsequent re-entry might require a higher cost, disrupting the entire investment rhythm.
However, if you repeatedly operate on the same cryptocurrency based on the principle of buying back at the original price and the principle of capital protection but find that the price frequently breaks through your preset support and resistance points, this indicates that the trading points you have chosen are not accurate and the market volatility exceeds expectations. At this time, it is advisable to reassess and choose a suitable entry point to avoid falling into the trap of ineffective trading.
In summary, in the battlefield of short-term trading in digital currencies, quick in and out does not equate to frequent trading without rules. Pursuing hot sectors should be based on rational analysis rather than blind following. Taking profits is a reflection of the wisdom of mature investors rather than cowardice. Holding cash and observing is about waiting for the right opportunity, not completely staying away from the market. At the same time, do not overly demand buying at the lowest price and selling at the highest price. Adhere strictly to principles and grasp the rhythm to move steadily through the turbulent waters of the cryptocurrency market.
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