1. Avoid going all in
How should funds be allocated? Fund allocation should be understood from two perspectives: firstly, from a risk perspective, clarify how much loss your account can or is prepared to bear. This is the foundational thought for our fund allocation. Once this total is determined, consider how many times you can afford to incur losses in the market if you continuously make mistakes. Personally, I believe that even the riskiest method should be divided into three parts. In other words, you should give yourself at least three opportunities. For example, if the total account funds are 200,000, and the maximum allowable loss is 20%, which is 40,000, then I suggest the riskiest loss plan is: first loss of 10,000, second loss of 10,000, third loss of 20,000. I believe this loss plan has a certain rationality because if you get one right out of three, you can profit or continue to survive in the market. Not being kicked out of the market itself is a success, providing a chance to win.
2. Grasp the overall market trend
Trends are much harder to trade than consolidation because trends involve chasing highs and cutting losses, requiring patience in holding positions, while buying high and selling low aligns more with human nature.
The more trading aligns with human nature, the less money can be made; it is precisely because it is difficult that it is profitable.
In an upward trend, any violent pullback should be met with a buy. Do you remember what I said about probability? So, if you’re not in the trade, or you've exited, be patient and wait for a 10-20% drop to boldly buy.
3. Set target take profits and stop losses
Setting target take profits and stop losses can be said to be the key to whether one can make a profit. In multiple trades, we need to ensure that total profits exceed total losses. Achieving this is not difficult; just follow these points: ① Each stop loss ≤ 5% of total capital; ② Each profit > 5% of total capital; ③ Total trading win rate > 50%. If the above conditions are met (profit-loss ratio greater than 1 and win rate greater than 50%), then profit can be achieved; of course, it is also possible to have a high profit-loss ratio with a low win rate or a low profit-loss ratio with a high win rate. Anyway, as long as you ensure total profit is positive, total profit = initial capital × (average profit × win rate - average loss × loss rate).
4. Remember not to trade too frequently
Because BTC perpetual contracts are traded 24/7, many beginners trade every day, with 22 trading days in a month, it's almost a daily routine. As the saying goes: those who often walk by the river will inevitably get their shoes wet. The more you trade, the more likely you are to make mistakes. After a mistake, your mindset can worsen, and once the mindset changes negatively, it may lead to impulsive decisions, resulting in 'revenge' trading: possibly against the trend or heavily leveraged. This can lead to one wrong step leading to more mistakes, easily causing significant losses that may take years to recover from.