Cryptocurrency trading is gambling, and the odds are important
No matter whether you are speculating in coins, stocks or foreign exchange futures, there is a paradoxical thing: if you truly understand that these speculative activities are essentially gambling, you will not become a gambler and have the possibility of making a profit. Once you think of yourself as investing, it is basically the difference between dying early or late.
Cryptocurrency speculation is essentially no different from gambling. The difference is that traditional gambling odds are limited, while for cryptocurrency speculation or other targets, the odds are not fixed and theoretically have unlimited odds.
I see that most of the people discussing cryptocurrency in the community square are technical analysts; in fact, technical analysis is shit; the trend cannot be analyzed at all, and there is no need to analyze it; the price movement is actually very random, and all technical methods and technical indicators, as Chanzhongshuochan said, are just a classification tool to classify what can be done and what cannot be done, and they do not have predictive function in themselves.
People who play with technology have a one-track mindset, that is, if a certain pattern or a certain indicator appears, the price will definitely rise or fall. Maybe they have never really verified the technical methods they believe in. But if you have some time and are willing to find the historical trends of a few coins, pull them back a distance, and then push the K lines to the right one by one, mark the places that meet your "must rise" or "must fall" thinking, and then do a simple statistics, you will find that the probability of it being accurate or inaccurate is basically half and half.
The so-called technology is just a classification method to distinguish between what can be done and what cannot be done. It refers to which coins can be involved at the moment under the technical indicators you are familiar with. Please note that this is not analysis. The so-called analysis means that you predict the trend based on this technical signal, and the trend is unpredictable. For example, my habit is that a basic requirement for going long on most trading pairs is that the slope of the MA99 line must be obviously up or down. If it is up, go long, and if it is down, go short. This does not require analysis at all. Even if you have 800-degree myopia, it is clear at a glance whether the line is down or up.
Just like people who use the double moving average system, if the short-term moving average crosses the long-term moving average, they go long, and if the long-term moving average crosses the short-term moving average, they go short; whether there is a crossing or not is something that can be seen at a glance, and there is no need to analyze it at all. Of course, if the MA99 line is up, it does not mean that it will definitely rise, and if it is down, it does not necessarily mean that it will fall; similarly, if the short-term moving average crosses the long-term moving average, it does not necessarily mean that it will rise; if we have a gambling mentality, we will look at each intervention from the perspective of probability.
For example, if the MA99 line is up, the price is online and breaks through the previous high, which meets the intervention criteria. Please pay attention, don’t refute me and say that this is still technical analysis; let me say it again, the so-called analysis means that you make predictions based on technical indicators, and I don’t have any predictions here, only classification.
That is to say, for me, whether to go long or short, the classification standard is that the MA99 line is up or has already gone up, and the price is running on the line and breaking through the previous high point. This meets the standard of going long; however, it is only possible at the moment, that is, for now, it seems to be possible, but it is very likely that the price will fall below the MA99 line again and fall back below the previous high point; it becomes impossible to do it, which is possible, and the possibility is not small.
If we have a gambling mindset, we know that the probability of the next bet being big or small is the same, so every intervention must establish a firewall, which is the so-called stop loss point. Of course, everyone knows that there must be a stop loss point, but if you rely solely on setting a stop loss, it is also difficult to make a profit, especially for trend tracking type of trading style; the characteristic of trend tracking type of trading is that the number of losses exceeds the number of profits, and the key to profit is to offset most of the losses through one or two big ups or downs, so how to control the proportion of most losses is the management of funds.
To use the terminology of gambling, winning money depends on winning big and losing small; this is the only way to get high odds.
Almost all successful traders use a split-position plan, or a batch plan; this is the only way to control risks within an acceptable range.
Because every time you intervene, especially trend-following type transactions, the probability of failure is higher than the probability of success. After all, the probability of a sharp rise or a sharp fall is far less than the probability of sideways trading.
If the amount of money invested in the first position is too large, a few failures will cause a large retracement of your principal. When the trend comes later, you will not have much money left. Assuming that your principal is 100,000 U, and you go all in every time you intervene, even if you set the stop loss to 5 points, 10 consecutive losses (this situation is not uncommon) will have lost half of your principal. Even if a big trend appears later and you get 100% profit, you will just return to the starting point.
If you only invest 30% of your capital in your first position, and your stop loss is 5 points (mine is 7 points), then the 5 points of your first position of 30,000 U is a 1.5% loss relative to your total capital of 100,000 U. Ten consecutive losses are only 15%, or even nothing. If you adopt the method of anti-equivalent martingale, that is, 30% is a fixed ratio, 30% of 100,000 U is 30,000 U. After a loss of 1.5%, the remaining capital is 98,500 U. The next first position you invest will be 30% of 98,500, or 29,550 U, and so on.
If the trend meets your expectations, for example, you go long, the price rises after you intervene, and breaks through the previous high again and stabilizes, then add 30% to your position and set a stop loss in the same way. Generally speaking, when adding positions, because you have already made a profit, the stop loss point can be relaxed to obtain a buffer for callbacks, such as a position slightly below the previous low (because sometimes the entry price after breaking through the high is more than 5% away from the previous low). Of course, you can also set a stop loss according to the profit situation. For example, when adding positions, the first position has already made a 10% profit, that is, 3,000U, and the second increase is 30,000U. The total investment is already 60,000U. You can still set a stop loss ratio of 5%. If it is triggered, you will lose 3,000U and break even (ignore the handling fees and the like).
That is to say, the risk you face in each transaction is a 1.5% loss; as long as the trend after the first position is established meets expectations and meets the standard for adding positions, you will not lose money. If you encounter a good trend, you can add positions twice more. Of course, the proportion of each subsequent increase should not exceed the previous position. At the same time, move up the stop loss. In a large upward trend, you can almost add to the full position.
In other words, all your risks are in the period from the establishment of the first position to the meeting of the criteria for increasing positions. The biggest risk is 1.5%. As a certain book says, the profit is given to you by the market, you have to wait, you cannot force it, but how much money you lose is something you can decide for yourself. Using small losses to wait for big profits is the key to defeating the market in the long run.
This is the way to win and lose in gambling, and this is how to get high odds. The harm of technical analysis and prediction is that you cannot control losses. Even if you set a 5% or 10% stop loss, it is useless because you think it will rise or fall after analysis. When the stop loss price is triggered, you basically will not move because you think it will go back to the direction you want it to go. What's more terrible is that you were right the first few times, and the result is that small losses turn into deep traps or even a big crash. The money you made 100 times accurately, more than half or even 90% will be lost because of this crash. In the words of gambling, it takes ten years to cut wood and burn it in one day.
Any technical means has its own suitable market environment. MACD will fail in non-trending market and generate a lot of false signals, and indicators like RSI are useless in trending market. So don't be superstitious about technical analysis. No one means can be applied to all market conditions. All technical methods are like the so-called techniques of gambling. There are wins and losses, and there are losses and wins. The more you win in the front, the more you lose in the back. And you never know when you will win and when you will lose. Yin and Yang cycle, black and white alternate, there is no absolute rule, this is probability. Therefore, if you want to win money, you can only lose less when you lose and win more when you win.
