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A discussion on portfolio management, execution strategies, and psychology to help you improve your trading abilities.
Here are 8 psychological frameworks to help you clarify your thoughts and become a sharper, more focused, and organized trader.
1. Conduct a '100% cash test'
To optimize your portfolio allocation, ask yourself a key question: If today your portfolio were reset to 100% USDT, would you reallocate funds to the current positions?
Most people would answer 'no,' but find it hard to take action. This is mainly due to the following psychological barriers:
Sunk Cost Fallacy
Emotional Attachment
Fear of Being Wrong
The sunk cost fallacy is a cognitive bias where people continue to invest time, money, or energy because they have already committed, even when it no longer makes sense (this also applies to relationships or projects, etc.).
In trading, this manifests as people holding onto poorly performing positions because they have 'already invested too much'—whether in money or emotion—rather than decisively cutting losses and reallocating funds to more promising opportunities.
Ask yourself this question. If the answer is negative, then decisive action is required.
While it might feel confusing at first, you can start gradually from one position: ask yourself, if it were today, would you still buy the same amount of this token? Then analyze the second position.
Selling often feels difficult to let go of because it means giving up on a potential opportunity. But holding onto a position out of hope or fear will only lead to stagnation and poor judgment.
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2. Maintain a structured portfolio
Clear classification helps manage more efficiently:
Core Positions: High-conviction investments; capable of withstanding significant volatility.
This does not mean you must hold long-term, as the opportunity cost in this market is very high, and rotations are frequent. But if you believe you can accurately predict every fluctuation, you might be deceiving yourself. The key is to trust your judgment.
Trading Positions: Short to medium-term opportunities primarily used to capture specific trends or price fluctuations. These positions are more flexible, allowing for quick rotations while setting stricter stop-loss conditions.
Everyone's trading style may differ—this does not specifically refer to perpetual contract accounts. I can invest in an on-chain project, exit when the price rises from $5 million to $20 million. And I won't care if the price continues to rise afterward because I have set psychological expectations in advance and know what type of trade I am conducting.
If I believe it could reach $1 billion (for example, based on its uniqueness), then it would be classified as a core position. Even if it experiences a 50% pullback, I can accept it calmly because I understand that this volatility is the price of achieving excess returns.
Confusing core and trading positions often leads to confusion and emotional decision-making. By clearly distinguishing, you can better understand the purpose of each position, thereby avoiding unnecessary regret.
3. Less but more focused investments
This is an undervalued skill that only the best traders can master. It may be the key to moving from a large level (e.g., six figures) to a higher level (e.g., seven figures).
The fact is that leveraging belief and compounding those gains has created more true millionaires—those who can maintain wealth over the long term—rather than relying on certain meme coins.
Every trade should have practical significance for your portfolio. If it doesn't, it's not worth doing.
Reducing the number of transactions not only allows you to manage your portfolio more efficiently but also helps avoid the most exhausting state in trading—indecision. If you are managing 15 different positions simultaneously, it is easy to exhaust yourself physically and mentally.
But if you limit yourself to holding only a few positions (like a maximum of 5), you start to think: is this random speculative opportunity really worth investing in?
Of course, sometimes very asymmetric risk-reward opportunities arise (for example, taking only 1-2% risk could bring a 20-40% increase to your portfolio). The key is that you shouldn't diversify randomly.
Some people become wealthy through a small number of carefully selected actions, while others are constantly chasing dozens of meaningless surges. I refer to them as 'fomo-chasers.'
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4. Build your portfolio through clear goals
Portfolios should always be designed around your financial goals.
If your goal is to increase assets from $200,000 to $2 million in a bull market (although $2 million may not be enough for retirement, it still serves as a good interim goal), then every decision you make should serve that goal. Ask yourself:
Does this trade provide practical help toward my goals?
Or am I just chasing to avoid missing out?
Lack of focus can impair your judgment. It might seem tempting to invest $5,000 in every opportunity, but you need to weigh the pros and cons:
Such investments may have minimal impact on your overall assets.
However, it can consume a lot of your time and energy (for example, a 1% position taking up 20% of your attention).
Many people have a 'magic number' in mind when buying an asset: for instance, 'I want to make 10 times my money with this token.' This kind of wishful thinking does not lead to success.
Instead, you need to clarify your goals and constantly check if you are moving toward them. This is very important.
As Elon Musk said: "One of the biggest mistakes people often make (myself included) is wishful thinking. You want something to be true even if it isn't. You ignore reality because you prefer to believe in your fantasies. This is a very difficult trap to avoid."
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5. Focus on your core competency
You have achieved today's results because you have effectively leveraged your core competency—perseverance.
For example, I increased my portfolio size by capturing and compounding multiple on-chain winners. As the assets grow, liquidity may become an issue, but shifting to higher market cap assets is not always the best choice.
As you enter higher tiers of the market, you will compete with participants who have more specialized advantages in larger markets. Don't assume that a larger portfolio will automatically make you an expert in perpetual contract trading.
If your success comes from on-chain investment operations, then continue to focus on that area. Unless your portfolio significantly expands (to over $5 million to $10 million), liquidity is usually not an issue—the liquidity pools and 24-hour trading volume at this level can fully support your operations.
Similarly, if you perform well with meme coins or AI projects on Solana and Base, there is no need to try new projects on Sui.
If there have been no significant changes in your area of expertise, venturing into unfamiliar territory often leads to:
Lack of firm confidence: Due to unfamiliarity with a new field, you may reduce your capital allocation out of risk aversion.
Excessive energy consumption: Learning the rules of a new field requires a lot of time and mental energy.
This also leads to my next point.
6. Do not engage in counter-trend trading
Unless you are a legendary figure like George Soros or GCR. Hint: you are not.
Counter-trend trading seems very attractive because those who successfully predict key turning points often receive widespread attention, and reputation is something many people aspire to (e.g., the top of LUNA, the peak of market cycles, the bottom of SOL).
But counter-trend trading only yields returns at critical turning points in the market. In a bull market, as market momentum strengthens, you need to go with the flow rather than trying to act against it.
Trying to predict every turning point is not only extremely stressful but also has a very low probability of success. Be realistic, my friend, or you wouldn't be reading this article.
Instead of trying to outperform the market at every turning point, focus on participating in the market and compounding your gains.
In a bull market, the trend is your ally—do not go against it. Go with the flow, profit when the market ends, and leave the stories of counter-trend heroes to history books. Your goal is not to be a prophet of the market, but to achieve portfolio growth.
In other words: it is better to experience a slight pullback and confirm the trend than to completely miss the opportunity.
"Counter-trend trading is actually very simple. The challenge lies in how to make money through counter-trend trading."
7. Establish investment logic and stop-loss strategies and remain rational
Tokens are merely tools for achieving financial growth; they are neither loyal nor will they care about you. When evaluating investment opportunities, record your investment logic and strategy.
a) Investment logic
Why buy this token?
Is this a trade based on some catalytic event?
Are you betting on information asymmetry, or do you believe the market is fundamentally mispricing it?
Or is it simply FOMO based on seeing a favorite KOL recommend it?
b) Stop-loss strategy
Set clear criteria that force you to close your positions—be it a specific price, time, or changes in market conditions.
Stay rational and do not act emotionally. Remember, this is a trade, not an emotional endeavor.
Imagine a scenario:
Assuming you bought token XYZ for $50,000, it rose to $200,000, and now it has returned to $50,000—assuming your investment logic has proven to be wrong. Your portfolio has dropped from $500,000 to $350,000 after the local peak in December.
You have two choices:
1) Continue to hold onto tokens that are underwater, waiting for a rise without clear basis just to make up for unrealized losses;
2) Rebalance the portfolio, cut losses, and reallocate funds to better opportunities.
The ultimate goal is to increase the value of your portfolio, regardless of which token brings these returns. If you discover a better opportunity, shift your position. If a new investment doubles, your regret over the previous token will dissipate. The key is the outcome, not loyalty to a particular token.
Forget about commitments, hopes, dreams, and wishful thinking. Selling a token does not mean it is the end—you can always buy it back.
It sounds simple, but the cryptocurrency market is a place where people can easily become extremely attached to their investments—if you know how to leverage this, it is actually a characteristic of the market.
But you must focus on your goal: to increase the value of your portfolio. It doesn't matter which token the returns come from.
Pursuing profit takes precedence over community belonging.
8. Distinguish between results and process, and avoid excessive self-blame
The outcome of a trade does not fully define its quality. A good trade is based on the most comprehensive information and reasonable logic at the time, not just a profitable outcome.
If you are not gambling by luck but are trading as follows:
Clear investment logic
Clear stop-loss strategy
Reasonable risk management, clearly distinguishing between core and trading positions
Choosing a favorable market environment, such as a reasonable risk-reward ratio or high potential returns
Then, regardless of the final outcome, this is a rational decision.
Do not excessively blame yourself for the results.
After a loss, people can easily fall into a self-blame mindset, but this attitude often overlooks the quality of the trading process.
Losses are an unavoidable part of trading. Even well-planned trades can sometimes fail, while accidental mistakes can unexpectedly yield profits.
I have also fallen into the trap of excessive self-blame, but later realized that those trades were actually based on logic and aligned with my strategy.
Excessive self-blame can bring immense psychological pressure, leading to poor judgment, indecision, and emotional trading. Over time, this vicious cycle can make you feel worthless or always inferior to others.
Summary
This article turned out longer than I expected, but I hope it can be helpful to everyone. I know there is still much to add, but to be honest, I have trading to do.
In any case, after multiple reflections, writing these down has been quite helpful for me personally.
The past is gone, and the only thing worth focusing on is the future. Past decisions are meant to help you do better next time, not to become your burden.
If you have performed well so far, that's great. If not, that's okay—there is no learning without failure in this market, and every success comes at a cost.
Remember: it's not about how many times you caught a big surge, nor who made the most money. It's about how well you played each hand, whether you achieved your goals, and most importantly, whether you preserved your capital during market crashes.
See you in the market, dear adventurer.
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