BTC Bull Market Strategy! Trader teaches you money-making rules: fund allocation, stop-loss strategy, all in one glance

Full of dry goods! Legendary trader teaches you the money-making strategy in the Bull Market.

Since early November, Bitcoin has continued to experience big pumps, even approaching the milestone of $100,000. The fact that Cryptocurrency exchange APP has climbed the rankings also proves that BTC has reattracted the attention of retail investors, with many newbies joining the crypto world.

Cryptocurrency legend trader Eugene recently wrote a "2024 Encryption Starter Guide" for crypto worldNewbie, synthesizing his past lessons and selflessly sharing "full of dry goods".

Whether you're a big investor or a small retail investor with only 4-5 digit dollars in your account, you can refer to his advice.

For the convenience of readers to better understand, the complete compilation of Eugene's article 'encryption city' can be read by clicking here.

3 Golden Trading Rules

Before entering the crypto world, Eugene provides 3 golden rules for reference:

If you can successfully protect your funds, profits will come eventually

You can succeed without leverage

Decide in advance the amount of funds you want to invest in Cryptocurrency and never add funds in the late stage of the market cycle.

drop risk is the key to success

In the encryption currency market, there are a lot of fantastic stories of hundredfold profits, which easily trigger investors' extreme fear of missing out (FOMO) mentality.

You will see a lot of profit screenshots, all achieved by leveraging 10-100 times. However, due to the survivorship bias theory, you only see the winners and not the losers.

When analyzing trading opportunities, I often ask myself, 'How much loss am I willing to bear at most for this trade?' I will reverse calculate the appropriate position size. In most cases, my decision-making process is related to how much loss I can bear.

Here is my reference standard (the proportion of capital that can be lost):

Extremely low probability - Maximum loss = 1%

Margin Level - Maximum Loss = 2%

High confidence level - Maximum loss = 5%

Extremely high certainty - maximum loss = 10%

Image source: FinboldCryptocurrency trading diagram

2 Leveraged

Leverage is definitely the number one killer for crypto world investors, and also an extension of the first point of the golden rule.

There is absolutely no need to engage in high leverage (greater than 5 times) operations, as we should focus on the drop in volatility, leverage will only amplify bidirectional volatility.

The desire to use leverage often stems from greed, as we hope to earn more with existing funds, but this is a misconception.

We should prioritize trading with better 'risk-return ratios' and control downside risk.

For example, on a 4-hour chart, it may be a reasonable trade to go long when an asset retraces or goes long at a historical support level, because the stop-loss level is clear and close to the get on board price. Even if the judgment is wrong, the capital loss is very limited.

3 Money Out, not Money In

The only time you should deposit money to buy Crypto Assets is the day you decide to become a real investor or speculator and fully commit to this field.

There are some exceptions to this rule, but overall, following the rule of only selling without buying can help you avoid the second misconception of losing money: adding leverage when the price rises.

In a bull run, it is common for Newbies to have no profit experience at the beginning and have not experienced the most greedy and excited period of the bull run, so they usually reduce their positions.

At this stage, Newbie usually bets a smaller amount of funds, perhaps only allocating 1%-5% of the total assets, but after several profitable trades, confidence increases, with a successful track record, you believe you can be more aggressive in adding leverage.

No one realizes that everyone is a genius in the Bull Market.

After adding to the position in the late stage of the bull market, you, who originally only allocated 3% of the funds, increased it to 30%, and eventually collapsed when the bubble burst.

By implementing a strict rule of never adding funds, you can prevent yourself from making this mistake.

If you find that your fund pool has shrunk to the extent that it needs to be replenished, then perhaps you should not have engaged in speculative behavior in the first place.

Image Source: Study Finds Financial Strategy Concept Illustration

Any suggestions for investing in cryptocurrency now?

If you have just discovered Crypto Assets or are preparing to understand this investment game seriously, here are the market operation methods I recommend.

Understand the basic framework of the encryption currency market.

Cryptocurrency trading has two main areas: Centralized Exchange (CEX) trading, on-chain trading.

The methods for success in these two areas are quite different, so you don't need to be proficient in both, but at least in one of them.

Central exchange trading strategy

Centralized exchange trading involves fast profit percentage trading, and you need to achieve minimal loss through strict stop loss. A simple risk-reward ratio (R/R) trading strategy may be as follows:

Admission Price: 1 US dollar

Target Price: 1.25 US dollars

stop loss price: 0.95 US dollars

Risk-return ratio = 0.25 / 0.05 = 5

How to identify these trading opportunities or determine these variables is up to you, but the basic concept is that you should set strict stop-loss orders to prevent downside risks.

You don't have to pursue 'home runs'. If you are willing to continue with successful trades like compound interest, I guarantee that you may achieve a return of 3-10 times without using leverage.

on-chain trading strategy

On-chain transactions involve very early bets aimed at achieving multiple returns, and you need to achieve minimal losses through undervalued projects.

A good on-chain risk-reward trading strategy may be as follows:

get on board: $2 million FDV (Fully Diluted Valuation)

Target: $20 million FDV

stop loss: drop to zero

Risk-reward ratio = 10.0

As you can see, there is no stop-loss point for early bets on on-chain transactions, but you can protect yourself with an increased risk curve. Simply put, the individual bet amount doesn't have to be too large, but it still provides enough upside potential to achieve the benefits you think are worthwhile.

If you hold a larger amount of funds, I suggest that the amount of Token on-chain betting each time is 1% of the total supply.

Assuming the FDV of a project on a certain chain is 2 million US dollars, then you will need to invest 20,000 US dollars.

Therefore, if you manage a medium-sized fund (six-digit dollars), you can make reasonable bets without taking too much risk.

If you happen to gamble on an AltCoin that can be listed on a first-line exchange, you can get enough exposure.

The most common way I've seen to make a seven-figure profit in a single bet is to buy 1% of the token supply when the FDV reaches $5 million and hold it until the FDV reaches $500 million, then sell it to make a profit of $5 million.

Further reading: Introduction to Crypto Assets! 5 major methods, characteristics, and risks of Crypto Assets at a glance

Conclusion

The path you choose is related to your investment style. I suggest that you first try on-chain trading with a small capital account (the risk of investing in on-chain currency is extremely high, please consider it carefully), and then gradually participate in centralized exchange trading after the rise of funds.

When the funds exceed a certain scale, on-chain transactions will only be a small part of the overall strategy, but first the total amount of funds must reach seven-figure dollars.

Remember, the risk mindset of the two domains is quite different, being proficient in one does not mean being proficient in the other.

Although you are not the first person to enter the crypto world, I believe that now may be the easiest period to generate profits and losses since the beginning of 2021.

You will face opponents who have survived in the past 3 years of PvP competition and have more trading experience and skills. But you have a key advantage, a freedom of thought that is not bound by the past.

Make good use of this advantage, you may surpass the performance of the older generation during this new Bull Market cycle!

【Disclaimer】The market is risky and investment should be cautious. Eugene's views and trading strategies are for reference only. Users should refer to more diversified indicators to judge whether to invest, and consider whether any opinions, views, or conclusions in this article are applicable to their specific circumstances. Invest at your own risk.

'Bitcoin Bull Market Strategy! Trader teaches you how to make money: capital allocation, stop loss method all at once' This article was first published in 'encryption City'