Most people think that a bull market is the best time to make money, but it is precisely in a bull market that many newcomers eventually lose money. Of course, the term "newcomer" here is relative. For example, if you have always been paying attention to the crypto market and rarely pay attention to the A-share market, but heard that the A-share market has skyrocketed, you withdrew your funds from the crypto market and went all-in on the A-share market. In this case, you are a newcomer in the A-share market.
A-shares have been booming since the end of last month (September), and many friends have directly withdrawn their funds from the crypto market and went all-in on A-shares. Even some crypto KOLs who used to sneer at A-shares have claimed that they will take their families to buy the bottom of A-shares. I am really confused. If the script continues to develop along this path, I guess these KOLs will soon start teaching their families how to make money by trading stocks!
In addition, we do not encourage extreme gamblers such as those who put all their assets at once to buy a certain currency (it is true that CZ sold his house in Shanghai to go all in for Bitcoin, but why do you think he only has that one house in Shanghai? How can you guarantee that you can follow CZ's example and sell his house to go all in and become the next CZ?) or a certain stock!
Stud is an art. Before you have fully mastered this art, it is best not to easily regard yourself as an artist. In a bear market, because the overall market environment is in a downward trend, many people will become more cautious in their operations, and will not easily go all-in even if they buy.
But it is different in a bull market. Many newcomers rush into the market when they hear that the bull market is coming (or choose to re-enter the market after leaving it for a period of time). At the beginning, they may invest some small funds with a try-it mentality. At this time, if they lose money, it is actually a good thing for them, because they will curse, "It's all a scam", and then continue to choose to leave the market and deliver takeout or start to concentrate on learning some basic knowledge to improve themselves and seriously study the trading mechanism of the market.
If you make money right after entering, things will become uncontrollable. For example, these newcomers will look at the increasing income in the background and sigh, "This money comes too easily", and think that they are the chosen one in the dark, and they have already mastered the essence of market transactions and grasped the code of wealth. As the market heats up, some people will become more and more courageous. They will gradually increase their positions, and some people will even start to play contracts with leverage... And the final outcome actually doesn't need me to say much. At least 90% of people will end up with losses (or deep traps).
In addition to the above psychological and operational reasons, there are many other reasons why people lose money in a bull market, such as:
- Trusting others to make you rich
For example, because of the fear of missing out on the opportunity to get rich, you easily choose to trust others, thinking that others can lead you to the road to wealth. As a result, under the guidance of some so-called "KOLs who never lose money", "teachers who lead and post orders", and "enthusiastic netizens", you are cheated of some or all of your capital.
- Phishing attack
For example, when one does not understand the use of wallets, on-chain interactions, etc., one operates based on personal feelings, and dares to click and authorize various links that are randomly searched on the Internet or sent by others without confirmation, and finally all the assets are phished away.
- Trapped in a pig-killing scam
For example, being tricked into trading on a fake exchange, buying problematic tokens (such as MemeCoin, which you can only buy but not sell, fake contract tokens with the same name, etc.), having your mnemonic phrases and crypto assets stolen by someone pretending to be an official or Uncle JC, etc.
In short, the more bullish the market is, the more all kinds of "monsters and demons" will appear as people from all walks of life (a steady stream of retail investors) rush into the market with the dream of making a fortune. What you see is the opportunity to make a fortune, while others only care about your capital.
We have mentioned many times in previous articles that newcomers should remember two basic principles when investing in the crypto market (including stocks and other monetary markets): one is to protect the principal, and the other is not to touch if you don’t understand. Before you hope to use the market to make money, it is best to establish some basic investment concepts for yourself.
1. Master the knowledge that is most useful to you
I remember that one time, a friend left a long message in the background, wanting to have a technical discussion with me on some of the code principles of Bitcoin, and also raised some questions about the WA mining problem of Bitcoin. Of course, I didn't have any discussion with him at the time. First of all, I didn't understand any code, and secondly, I didn't seem to have any obligation to spend time and energy on something that had no practical significance to me. Moreover, I also looked at the background records of that friend at the time. Although I have been following Hualihuawai for a few days, there is no record of interaction with articles such as likes/reposts/appreciations. I basically won't respond to such requests to have a long discussion with others at the beginning. Everyone's time and energy are limited. You can't unconditionally ask others to do something for you completely according to your own wishes.
In the blockchain field (including the crypto market), there is indeed a huge amount of knowledge that needs to be learned, but this also depends on your goal of entering this field. If you just want to do spot investment transactions, then some advanced knowledge is actually not necessary to study and research in depth. For example, you don’t have to learn Solidity and learn how to write smart contracts just to buy a few ETH, right?
For example, if you are optimistic about BTC and want to buy some, then you just need to read the white paper of BTC itself (it doesn’t matter if you don’t understand some of the technical parts in it), and based on the white paper, you need to understand the basic knowledge about the operation principle of Bitcoin, Bitcoin address, use of wallet, etc. You don’t need to become a cryptography expert or a cryptanalysis expert.
Safety should always be the first priority. On this basis, you can continue to do some advanced learning based on your personal needs. For example, if you like to do short-term trading, you can learn and study more K-line knowledge or on-chain indicators. And so on.
As for how to start learning after entering the crypto field, we have already sorted out some basic learning paths in the "Toolbox" of Hualihuawai. Interested friends can go directly to the toolbox to have a look (just reply to the toolbox in the backend of the official account). In addition, we have also opened a new account "Hualihuawai DAO" to publish some basic knowledge content about blockchain.
In addition, I also recommend that you read the Blockchain Dark Forest Self-help Manual and Blockchain Security Introduction Notes compiled by SlowMist, as shown in the figure below.
2. Think clearly whether you are gambling or investing
I can actually fully understand the gambling mentality, because many people enter this field with limited funds, but they also have the dream of getting rich quickly (even overnight) and changing their life class. When the amount of funds and the dream are seriously mismatched, these people develop a gambling nature.
The current crypto market seems to be naturally able to carry this kind of gambling nature. Where there are gamblers, there will naturally be dealers to create various so-called opportunities. Therefore, we can also see that various stories of getting rich overnight by relying on MemeCoin continue to be popular.
But to be honest, with limited funds, if you want to rely on all-in betting on random MemeCoins and dream of getting a 1000+ times return in a short period of time, this idea will most likely only make you bankrupt in the end. There may be only one Hamlet among 100,000 people. If you firmly believe that you are Hamlet and can do magic, then you can try it.
Otherwise, we still say that you should maintain the necessary patience, make your own investment plan, focus on the 1-3 sub-sectors that you are most interested in and optimistic about, and grasp the laws of the big cycle to find and seize possible potential opportunities to achieve effective growth of funds. This is the best execution path for ordinary people in investing.
And don't be too anxious about getting rich, especially when you reach middle age, you may face some new choices, but you have lived for decades and haven't become rich yet, what's the next few years? For those who have already participated in the crypto market, they are actually ahead of many others. The crypto market is still in a relatively early stage, so whether you want to gamble or invest, you must make wise choices and participate.
Of course, everything is dialectical. For example, playing cards can be used as a leisure and entertainment tool, or as a gambling tool. It depends on how you understand and use it. In other words, it doesn’t mean that MemeCoin cannot be played. If you have 80% of your positions invested in BTC, then it is okay to take out a small position to gamble on MemeCoin, as long as you don’t get too involved.
3. Set profit and loss limits for investment
In the previous article of Hualihuawai (October 8), when talking about trading discipline, we gave several examples, among which we mentioned: Don’t buy more as the price falls, and stop loss according to the target.
Then, some friends left a message saying that they didn't understand this sentence, and asked why they shouldn't buy more when the price drops. As shown in the figure below, when I wrote this sentence, I felt that everyone could relate to it, but after seeing the message, I thought that the text description might not be comprehensive enough, which might cause misunderstandings among some friends. Therefore, I added another sentence at the end: Don't buy more when the price drops, and stop loss according to the target, unless you are optimistic about the long-term and plan to hold it for a long time.
Moreover, I found that many people who are trapped will start to hesitate whether to sell once they are trapped. If they sell, they think their loss is too great and they are unwilling to bear such loss, and they will also hold the mentality of "what if the price goes up again later"; if they don't sell, they will feel depressed and depressed when they see the price getting lower and lower, so they will think about buying more when the price drops, hoping to lower the average price and get their money back soon.
If you want to avoid this, a strict stop loss plan is definitely necessary. If you are not optimistic about the long-term and intend to hold it for a long time (if you really do this, you will naturally not feel depressed and depressed by the price drop), then you should avoid letting your remaining positions (funds) continue to be invested in such assets that perform poorly. Even if your loss position has reached 50%, then in our opinion, it is much better to redirect the remaining position funds to better opportunities than to buy more on the current unfavorable positions as they fall.
The topic of take profit and stop loss seems to have been mentioned many times in our previous articles. For investment, this is indeed a very important matter. Unless you have unlimited funds to invest, you should consider this issue carefully.
In short, when buying, you should also consider selling, and when selling, you should also consider buying. Don't buy more when the price goes up, and don't buy more when the price goes down. You should strictly follow the profit and loss targets you set. I happened to see a picture shared by Maobidao yesterday, which looks quite interesting. I pasted it here to share. As shown in the figure below.
...This article is to be continued. We will continue to supplement and update the remaining content through Huali Huawai.
This is the end of our sharing of this issue. For more articles, please visit the homepage of Hualihuawai. The above content is only a personal point of view and analysis, which is only used for learning records and communication, and does not constitute any investment advice.
