The market sentiment has been dull these past few days, so I'm writing an article that everyone can refer to.
The two mainstream trading styles in the cryptocurrency world: intraday contracts for ultra-short term and low-leverage swings, or long-term spot trading. I will share some views around three models; please correct me if I'm wrong.
1. Intraday contracts:
1. Focus on one coin, like BTC: This accounts for 90% of short-term trading strategies, or the area of focus for prominent traders. Before 2021, I was also in this category.
Advantage: Focus your attention on a single coin. This will provide a better market sense. Capital is also relatively concentrated, and BTC is more stable than altcoins. This is definitely the best target.
Disadvantages: If BTC gets caught in significant volatility, various losses will occur. Like the big fluctuations from April to around September. Or minor consolidations or spikes. This will lead to short-term losses, and the capital curve becomes very unstable. This is something I have experienced before. Often, after many consecutive winning trades, as my capital rises rapidly, one trading mistake or a black swan event can lead to liquidation.
Difficulty: Of course, I have also thought about controlling drawdowns. Generally, it goes like this: for example, starting with 10,000 and then increasing leverage to quickly accumulate capital, and once there is profit, reducing leverage and allocating positions to control drawdowns. But by this time, the mentality has already changed. When you have 100,000, you start thinking about 1 million or 10 million. It's very difficult to achieve. When the market is good, I often manage to multiply my capital by 10 in a very short time. But then I accelerate my losses, which is the painful part for me. Of course, I also encounter this issue in forex and futures. My market sense is very good. Small capital can grow to 10 times very quickly. This is also the advantage of short-term trading; using small capital to grow large is fastest through ultra-short trading.
Method: Basically, it's about using a 15-minute or 30-minute cycle to catch spikes, mostly on the left side. Very simple. Liquidation, huge volumes, Bollinger Bands, patterns like M tops and W bottoms, divergences, etc., just these. Intraday trading requires high technical skills. If that prominent trader does ultra-short trades every day but analyzes long-term fundamentals, you can unfollow them. They completely don't understand! Or they are not traders; they are analysts, collectively referred to as analysts.
Two difficulties that small capital cannot overcome:
1. After making money intraday, you want to think big and aim for swings. It's fine to hold for a day or two, but if you recklessly increase your position, the originally profitable trade may end up losing. This problem is very normal; everyone has greed. And if you're reading this, you've surely encountered it too. Where's the problem? It's in how you define the trade when you enter. Is it intraday short-term, or a swing trade? Please believe me, I review my short-term trading profits every year, and 80% of my profits come from active closing. Of course, there are many breakeven operations or stop-losses. For ultra-short trades, you must have a very high win rate, over 70%, to proceed. It's compound interest; otherwise, after deducting transaction fees and capital costs, without a 70% win rate, you shouldn’t even think about it. Plus, you need to be extremely focused, with precise entries and exits; sometimes I also share my trades in public.
2. Leverage issue: Many people believe that since intraday trading pursues short-term gains, leverage should be unlimited, the higher the better. I used to think this way too; back then, it seemed like the maximum was only 20 to 50 times leverage. Later it gradually increased. Then I got scammed by a small exchange, using 500x or 1000x leverage. The results are predictable. For BTC, if I do ultra-short trades with leverage over 50 times, I will definitely lose; I mean over a sustained period, not just a single trade. For altcoins, if I start with more than 10 times leverage, I will also definitely lose. Then I will share my best ultra-short leverage with everyone: BTC 10 to 20 times, altcoins 3-5 times.
Leverage issue: It’s like this, higher leverage is not always better. Many small traders are mostly in the public sphere. 10u, 100u, wanting to increase leverage, aiming to become wealthy quickly, commonly referred to as gamblers. Is there anything wrong with that? Not at all. Otherwise, why come to the crypto world? But you must ensure to win on the first try! And then continue winning, like a roulette game. So basically, there are no sesame-sized accounts that can succeed on the first try. That's impossible. So how does a sesame-sized account accumulate the first chunk of capital? This will be mentioned later in the article.
In summary: Growing small capital with short-term trading is very difficult to achieve more than a hundred times. Of course, achieving less than 10 times is very simple. The prerequisite is a strong market sense and the ability to control drawdowns. Therefore, the trading model for short-term trading should be fixed; never change it. If using divergence, then always use divergence to catch left-side peaks. If using pressure, then always wait for pressure. If chasing highs, then always chase highs. The method should never switch; if not fixed, then any place becomes a trading point, leading to frequent trades and faster losses!
This information is not easy to come by and is useful for small-scale intraday traders; please like and follow.
