In this world of temptation and risk in the cryptocurrency market, I have been through it all for a full decade. In 2015, I entered this mysterious and unknown field with a capital of 300,000. At that time, I was like many newcomers, filled with hope for the future, but also a bit nervous.
Fortunately, I soon迎来我的高光时刻。In the market's waves, my assets soared like a rocket, peaking at over 3 million. At that moment, the joy of success clouded my judgment, and I believed I had mastered the essence of trading, becoming a trading god capable of commanding the cryptocurrency market. Driven by this blind confidence, I decisively quit my stable job, fully immersing myself in cryptocurrency trading, even borrowing money to expand my trading scale.
However, reality struck like a fierce beast, waking me from my dream. A series of problems plunged me into an abyss of despair. The market took a sharp downturn, and all previous profits burst like bubbles. Not only that, but I also fell into substantial debt. To repay my debts, I had to sell my house, and my family fell into crisis, with my wife and children nearly leaving me. The year 2017 became the darkest moment of my life; in just a few months, I plummeted from the peak to the bottom, and the enormous gap and despair nearly drove me to collapse.
But I knew I couldn't let myself be defeated like this. After countless painful nights, I began to reflect deeply on my trading behavior. I was fortunate to have an in-depth conversation with a big shot in the cryptocurrency world, sharing tea and discussing the market's ups and downs. Every word he said struck me like a heavy hammer, giving me a new understanding of trading.
Since then, I embarked on a difficult path of self-redemption. I started summarizing methods frantically, constantly reviewing each trade, and carefully analyzing my erroneous trading methods and approaches. I understood that to survive in this brutal market, I had to change my mindset and cognitive level. Thus, I embarked on a fervent journey of learning, acquiring various trading knowledge, technical analysis methods, and market psychology. With guidance from experts, I gradually enlightened and found my own trading path.
Now, although I cannot yet claim great wealth, I have at least achieved stable profits and can steadily outperform over 80% of the market. Looking back on my journey in the cryptocurrency world, it has been full of ups and downs, with a legendary touch. From initially entering with 300,000 to making millions during the bull market, and then seeing my assets plummet, I have now regained my footing and am moving towards higher goals. I have deeply experienced the cruelty and allure of this market.
Now, I am eagerly awaiting the next bull market, with the goal of increasing my assets to three small targets. Next, I would like to summarize and share the valuable experiences I have accumulated over the years, hoping to help a wide range of investors, especially those who are lost and confused in the cryptocurrency space.
In cryptocurrency trading, there is one of the simplest yet most effective methods: adhere to trading common sense. As long as you possess enough self-discipline, every cryptocurrency trader can achieve this. Whether you are an aggressive investor skilled in short-term trading, a conservative player fond of low-cost entry, or a technical expert focused on trend breakthroughs, if you are in the cryptocurrency space, you must respect the following eight principles and consistently adhere to them. You will be pleasantly surprised to find that your account will gradually escape the dilemma of losses and begin to walk towards the avenue of profits.
First, the more you lose in cryptocurrency trading, the more cautious you should be when averaging down. There is a common trap in the cryptocurrency market: many traders, when trapped in losses, often fall into extreme anxiety. They not only fail to consider exiting to cut losses but instead obsessively average down to lower their cost, hoping to recoup all losses in the next market surge. However, this approach actually contradicts basic trading principles. The process of decline cannot be reversed overnight; averaging down is often just a self-comforting tactic. The more anxious you are, the more likely you will make erroneous operational decisions, ultimately falling deeper into regret. Therefore, before averaging down, it is essential to calm down and ask yourself why you should average down at this position and whether there is sufficient basis and confidence.
Second, strict adherence to operational discipline is a must. Before trading, many cryptocurrency traders carefully develop detailed trading plans, such as what price level to buy in when the market drops, or at what price point a specific token can be purchased. However, when it comes time to trade, they often find themselves easily distracted and tempted, failing to execute their plans properly. If you cannot strictly adhere to your pre-established plan, then such trading is no longer rational investment behavior but rather a chaotic gamble. It’s important to understand that in times of high market volatility, most impulsive actions lead to errors and ultimately result in trading failures.
Third, avoid excessive trading in a bear market. Among the many severely loss-affected cryptocurrency traders I have observed, a large portion are enthusiastic about ultra-short-term trading. They attempt to make small profits through frequent buying and selling but often find the opposite occurs, resulting in significant losses instead. Conversely, those who treat trading as a form of entertainment and do not possess advanced trading skills often remain calm and patient, avoiding blind and frequent trading, even when market fluctuations are substantial, thus incurring minimal losses. This clearly illustrates that in cryptocurrency trading, patience and restraint are often more important than superior skills.
Fourth, in trading, avoid continuously increasing your position in a bear market. In the tempting and illusory world of cryptocurrency, there is a stark reality: many people throw money around in trading without hesitation, yet live frugally in real life, nitpicking to save a few bucks. This is an extremely dangerous trading mentality. Before you have developed a stable ability to make money, never keep adding funds to your trading account, especially when such investments have already affected your normal living standards. The appearance of losses indicates that there is a flaw in your trading system; at this moment, you should not try to fill the gap by adding more funds, but rather calm down and seriously reflect on your trading strategy. Only after calmly exploring an effective method can you consider increasing your trading intensity.
Fifth, missing out won't cause losses, but chasing highs often leads to losses. In the cryptocurrency world, there is a common phenomenon: many investors find that the tokens they are interested in often perform well when they are not trading. When they cannot resist buying at a high price, the price usually falls immediately after their purchase, leaving them with no choice but to sell at a loss. The reason for this is simple: the fundamentals of the asset have not changed significantly, and the price increase is often just a result of short-term market speculation. Therefore, in trading, we should try to choose a median price as a reference, and enter the market when prices are low to avoid blindly chasing highs at elevated prices, which can lead to awkward situations.
Sixth, trading cryptocurrencies should follow market trends. In the cryptocurrency market, trends can be categorized into three types: upward trends, downward trends, and sideways consolidation trends. Undoubtedly, during a downward trend, we should hold light positions or even stay out of the market to avoid risks; while when an upward trend is forming, actively participating in trading can significantly increase our success rate. Only by following market trends can we take the initiative in trading and gain more profits.
Seventh, avoid touching assets that are falling without a bottom in sight. In cryptocurrency trading, blindly trying to catch a falling knife is akin to catching a flying knife bare-handed; it is an extremely dangerous act that places you at great risk. We must patiently wait for a significant bullish candlestick to appear, as this signals the market's bottoming out. Only at this time should we slowly buy in; this method of trading is known as right-side buying. If you blindly try to catch a bottom during a decline, it will only deepen your losses and ultimately trap you in an inescapable dilemma.
Eighth, never trade based on research reports or rumors. In the cryptocurrency space, many retail investors are particularly fond of listening to various rumors to make trading decisions, which is a grave mistake. A basic understanding reveals that if a piece of information is genuinely valuable enough to guarantee easy profits, why would those who know the information not keep it to themselves to make a fortune instead of sharing it with you? In fact, when information reaches ordinary retail investors, it is often done so intentionally by major players to attract them to take the bait. In such cases, many blindly following the crowd end up getting trapped.
In addition to the trading knowledge mentioned above, trading volume is also a very important analysis indicator in the cryptocurrency market. Skilled traders usually possess strong pattern recognition skills and can keenly identify repeatable trading volume patterns. A deep understanding of these common trading volume patterns can provide us with useful insights into market sentiment and predict future price movements.
For example, a high trading volume pattern typically appears after long-term price fluctuations, with a significant spike in volume leading to a trend reversal. It usually occurs at the end of a long-term bullish or bearish trend, often signaling market weakness and a change in trend. A fluctuating volume pattern is characterized by a significant decrease in volume, which can trigger early entrants to exit trades before a price reversal, trapping some weaker traders who are forced out due to market pressure. A pullback volume pattern refers to a decline in volume during a counter-trend pullback within a larger trend, indicating that the market is consolidating and adjusting before continuing its trend. A volume breakout pattern occurs when there is a sudden surge in volume as the price reaches a new high or low. This pattern confirms the market's strong belief in the breakout and indicates that the market is ready to accelerate further when breaking key resistance or support levels. Additionally, a decrease in volume during a trend is also a signal worth noting. If trading volume gradually declines during an upward trend, it may indicate that market participants' interest in that particular asset is waning, and a potential trend reversal might be imminent; conversely, a decrease in volume during a downward trend may signal that the market is in the process of bottoming out, and the trend may reverse upwards.
Understanding trading volume and its impact on price movements is just the first step; what is more important is how to effectively apply it to your personal trading strategy. Here are some suggestions for incorporating volume indicators into your trading plan:
First, compare the number of options on up days and down days. When prices rise, if the trading volume is significantly higher than when prices fall, it indicates that the bullish forces are dominant, and market sentiment is optimistic, serving as a bullish signal that suggests the current upward trend may continue.
Second, closely monitor volume changes when prices retest support and resistance levels. If there is a significant increase in volume during the retest of these key levels, it often indicates that these price levels will behave more stably, and the market may form a temporary bottom or top at these levels.
Furthermore, be adept at identifying volume divergence phenomena. Typically, trading volume and price should move in the same direction; if prices rise but volume decreases, or prices fall but volume increases, it may signal an impending change in the market price trend that requires our heightened vigilance.
Additionally, selecting appropriate volume indicators based on your trading time frame is also crucial. If you are a swing trader holding positions for several days or weeks, daily volume data may be more helpful for your trading decisions; conversely, if you are a day trader, hourly or even minute-by-minute volume data may better meet your trading needs.
At the same time, we must also be wary of one-time spikes in volume. If trading volume suddenly surges without reason, this could mislead our judgment. Therefore, in such cases, we need to look for further confirmation signals from other technical indicators or subsequent trading periods to ensure our trading decisions are more accurate and reliable.
Finally, we can use increased trading volume to detect signs of institutional activities. In the cryptocurrency market, large investors or "whales" can significantly influence the market. If we notice a sudden surge in volume on higher time frame charts, it may indicate that institutional traders are buying or selling a particular token on a large scale, which is of great reference value for assessing market trends and capital flows.
It is important to remind everyone that any single indicator, including trading volume, is not a universal "magic bullet" and cannot guarantee our success in trading on its own. Volume analysis is just one of many trading strategies, and we should use it in conjunction with other technical standards, indicators, and analytical tools to create a comprehensive trading system. As the old saying goes, "Volume precedes price." By reasonably applying volume analysis to our trading plans, we can gain a deeper understanding of market dynamics, helping us make more informed and accurate trading decisions, and gain an advantage in the fierce market competition.
Of course, the volume analysis strategy is not flawless; it also has its drawbacks and limitations. When using this strategy, we may encounter several challenges:
First, there is the issue of market manipulation. In some cases, market participants with substantial capital may deliberately manipulate volume levels to create false trading signals, misleading ordinary traders to achieve their own profit goals. Such market manipulation can severely disrupt our correct judgment of volume signals, leading us into erroneous trading decisions.
Second, there is the issue of lagging signals. Sometimes, changes in volume may lag behind price changes, meaning that when we notice a significant increase or decrease in volume, the price may have already experienced substantial fluctuations. Making trading decisions based on volume signals at that time may mean we've missed the best opportunity, leading to trading failures.
Furthermore, there is the problem of false spikes. Volume analysis can occasionally produce false spikes, where volume suddenly surges but prices do not show significant fluctuations. These false volume signals can create incorrect market expectations, leading to erroneous trading actions and causing losses.
Finally, there is the issue of price distortion in low volatility. In the trading of assets with lower liquidity or "floating prices," changes in volume can be severely distorted, making it difficult for us to accurately interpret the true market conditions behind the data. In such cases, the accuracy and reliability of volume analysis are greatly compromised.
To effectively mitigate these challenges and risks, we should adopt a cautious approach, combining volume analysis with other technical indicators and analytical tools. By synthesizing multiple signals for comprehensive judgment and mutual verification, we can significantly enhance the reliability and accuracy of our trading strategies, reducing the likelihood of falling into misleading signal traps, thus better protecting our trading capital and improving our success rate.
In summary, trading volume provides traders with an effective way to understand market activity intensity and trader psychology dynamics. After gaining a deep understanding of what volume is and how it affects price movements, we can skillfully apply it to our trading strategies, enabling us to grasp market sentiment and trend changes more precisely. By reasonably utilizing volume indicators such as OBV, VWAP, VROC, and Chaikin Money Flow and studying common volume patterns in depth, we can significantly enhance our trading sensitivity and decision-making ability. If we can organically integrate these tools into our trading plans, we will be able to gain more detailed insights into market dynamics and predict price changes more accurately, thus achieving our trading goals in this challenging and opportunity-filled cryptocurrency market.
If you suffered losses in trading previously because you had not encountered my insights, it may be deemed a twist of fate; however, now that you have read my words and understood the valuable trading experiences I have accumulated over the years, if you still do not cherish and learn from them, it may indeed be your own problem. I hope every friend striving in the cryptocurrency space can draw lessons from my experiences, find a trading path that suits them, and realize their wealth dreams.
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