1. Avoid going all-in
How should funds be allocated? Fund allocation should be understood from two perspectives: first, from a risk standpoint, clarify how much loss our current account can or is prepared to bear. This is the foundational thought for our fund allocation. Once this total is determined, consider how to allocate it in a way that, if we continuously suffer losses in the market, we can afford to take a few losses before willingly admitting defeat. Personally, I believe the riskiest strategy should also be split into three parts. In other words, you should give yourself at least three chances. For example, if the total account capital is 200,000, and the client allows for a maximum loss of 20%, which is 40,000, then I suggest the most aggressive loss plan is: first 10,000, second 10,000, third 20,000. I believe this loss plan has a certain rationality because if you get it right once out of three tries, you can profit or continue to survive in the market. Not being kicked out by the market itself is a success and provides a chance to win.
2. Grasp the overall market trend
Trends are much harder to trade than consolidations because trends require chasing highs and cutting losses, demanding a certain level of determination in holding positions, while the strategy of buying low and selling high appeals to human nature.
The more trading aligns with human nature, the less money is made; it is precisely because it is challenging that it is profitable.
In an upward trend, any violent pullback should be an opportunity to go long. Do you remember what I said about probabilities? So, if you haven't boarded the train, or if you got off, be patient. Wait for a drop of 10-20% and then be bold.
3. Set designated take profits and stop losses
Setting target take profits and stop losses can be said to be the key to determining whether one can profit. In a series of trades, we should aim for total profits to exceed total losses. Achieving this is not difficult; just follow these points: ① Each stop loss ≤ 5% of total funds; ② Each profit > 5% of total funds; ③ Total win rate > 50%. Meeting the above requirements (with a win-loss ratio greater than 1 and a win rate greater than 50%) allows for profitability. Of course, one can also have a high win-loss ratio with a low win rate, or a low win-loss ratio with a high win rate. Anyway, as long as the total profit is positive, that’s enough. Total profit = initial capital × (average profit × win rate - average loss × loss rate).
4. Remember not to trade too frequently
Since BTC perpetual contracts are traded continuously 24 hours a day, many newcomers trade almost every day during the 22 trading days in a month. As the saying goes: If you walk by the river often, how can you avoid getting your shoes wet? The more you operate, the more likely you are to make mistakes. Once you make a mistake, your mindset can change for the worse. When your mindset changes, you might act impulsively and choose 'revenge' trading: possibly going against the trend or over-leveraging. This can lead to a series of mistakes, easily resulting in huge losses that may take years to recover.