Like other speculative markets, fools who do not understand market operation rules, lack position management, risk control, and trading discipline are the main source of profits. There will be idiots who believe the story when smart money is selling the news, buying at the highest point, for instance, believing that a certain person will treat Dogecoin as a Martian currency, or thinking that wealthy people will all buy a punk AYC NFT and hold it without selling. Only those with trading experience in other markets will stop-loss when losing, say -10% or whatever, but these fools, having listened to the story, might hold on to an -80% or -90% loss, not understanding market operation rules like liquidity mentioned above.
Then, the principal is foolishly provided to another market's major profit contributor, which is leveraged gambling. Traditional finance's leverage is usually only open to qualified investors. Due to the well-known lack of regulation in this market, 100x or even 1000x leverage is easily provided to fools. Leverage amplifies greed and fear along with fees; they have no experience and understand nothing, making it very easy to lose everything. The above factors combined with off-market borrowed leverage create a meat grinder for fools. Understanding gambling psychology shows that just missing out on profits, potentially earning but not actually earning, or earning and then losing, are all recognized by the brain as significant.
Earning provides the same dopamine. Then you end up like the social trash gambling with red eyes in other places.
How to view leverage?
Price changes should be viewed through Wyckoff; those who cannot achieve long-term stable profits with spot trading do not deserve to touch any leveraged derivatives. Find a cycle that suits you and respect every bit of principal. Even if you only have 100u, treat it as if it were 100w; only then can you learn something. If you treat 100u like a lottery and gamble it away, thinking it's just 100u, you won't learn anything. When profits and losses come from the same source, how can you overcome the issue of not holding onto positions?
Position affects changes in mindset; if you're down half your position, cut it again if necessary. The positions you can manage are built up little by little, so it's a matter of position. Find a position you can manage that doesn't exceed 20% of your principal x10 and 10; it's good to preserve your principal. Small positions in trial and error are actually a positive cycle. With profits, your mindset improves, and you won't fear stop-loss drawdowns.
The more you can hold on during a market move, the more afraid you become of losing again, making it easier to miss out on the market.
The direction of positions accounts for only 30%, while 70% is about mindset, position management, and risk-reward ratio management.
You need to find the position that suits you through trial and error; clarify your market positioning. The market has moved past the stage where everyone is inflating bubbles together (PVE) and has become PVP. In 2021, everyone was inflating bubbles.
In this phase, everyone making money in a bull market is borrowing from the principal of those who didn't escape the bear market. In this cycle, there's a high margin for error; during a bear market, while repaying debts from the bull market, every penny you earn is taken from someone else's pocket. The important thing is to clearly understand what level you are at and how that matches with the market. If you're silver, you can only play against bronze and silver; if you enter a diamond match, you're just giving away free points. Be patient until you reach your matching level; don't wait until your level comes up only to have lost all your bullets in the diamond match. Think carefully about where every penny you earn comes from; this is very important. If you don’t understand this and go into matches beyond your level, your money will mysteriously be taken by others. You must navigate this challenging matching market.
You must learn to calculate risk-reward ratios and odds; this market is no longer one where you can make money just by playing house.
