In the cryptocurrency world, there are some little-known but important tips. Let me share a few today:
1. Cost dilution is not as simple as you think
For example, if you invest 10,000 U in a coin when the price is 10U, and then add another 10,000 U when the price drops to 5U, your average cost is actually 6.67U, not 7.5U as many people think. This situation is very common in market fluctuations, and understanding this cost calculation method is helpful for position management.
2. The compound interest effect is amazing
Suppose you have 100,000 U and you exit when you earn 1% every day. If you can maintain 250 trading days a year, your assets will grow to 1.3232 million U in one year. Continue for two years, and your assets can even reach tens of millions. Of course, this result is based on a stable rate of return, but the challenge behind it is how to continue to maintain this compound interest.
3. The relationship between probability and stop-profit and stop-loss
If your investment success rate is 60%, and you set a 10% stop-profit and stop-loss each time, after 100 transactions, your total rate of return can reach 300%. But this premise is that you strictly follow your trading plan and are not affected by market fluctuations, especially in a high-volatility market.
4. Greed is the biggest enemy
If you start with 10,000 U and earn 10% each time, your assets will reach 1 million U on the 49th day, and you can break through 10 million U on the 73rd day, and you will have a chance to exceed 100 million on the 97th day. However, in reality, almost no one can achieve it, because most people cannot control their greed in the process, resulting in a rollover. This is why many traders find it difficult to maintain their profits for a long time even if they make profits.
Contract trading and position management
In contract trading, position management and capital management are the key to success or failure. Many people use 20%-30% of the principal as the basic position, but I personally prefer to use only 2%-5% and use 20 times leverage. This can effectively control risks and avoid emotional decisions caused by excessive fluctuations.