When trading cryptocurrencies, it is essential to learn how to cut losses and take profits, especially in swing trading. Cutting losses and taking profits are even more important in swing operations. If you do not learn to cut losses and take profits, it will lead to a complete loss of control, turning swing trading into an empty phrase, causing previous gains to become losses, and previous losses to worsen, ultimately resulting in being trapped in a position for a lifetime. So, what are cutting losses and taking profits?
We conducted a thorough analysis of the investment targets, obtained predictions for price fluctuations, made corresponding operational decisions, and then established our own expected values. When the expected value is reached, we decisively take profits, which is known as profit taking.
Literally, taking profit means stopping profit. This process may involve selling too early; after selling, the coin price may still rise, but it is still necessary to stop profit. This is not foolishness but rationality. Many investors fail to take profit due to excessive greed, ultimately turning gains into losses.
As for stop-loss, it is when our expectations deviate from reality. We expect the coin to rise, so we buy; but when the coin drops after buying, what we need to consider is no longer whether the expected value can be realized, because once the 'pre' goes wrong, there is no longer an 'expectation.'
Next, one must learn to stop-loss, learn to admit defeat, learn to bow down; otherwise, one will continue to make mistakes, leading to irreversible consequences. Being able to stop-loss is a compromise with the market, and this is a wise move. Preserving one's life allows for the opportunity for new investments.
Therefore, taking profit and stopping loss are equally important matters. How exactly should one take profit and stop loss?
First, let's talk about taking profit. Taking profit is based on one's expected value. Once the expected value is reached, decisively take profit, even if the coin price may still rise. We cannot earn all the money in the cryptocurrency market; often, trying to make one more bite leads to choking. Taking profit once accumulates experience from successful investments, which will give us more motivation and capability to embark on the next successful investment journey.
Speaking of stop-loss, I believe there are two principles for stop-loss in swing trading for everyone's reference: first, set a loss ratio. After analyzing the buying point, set the stop-loss ratio according to your risk tolerance, and it is recommended to keep it within 10%.
For example, set the stop-loss limit at 3%. If you are bullish on a certain coin and buy it at 10 yuan per coin, immediately sell when the price drops to 3%. Alternatively, establish a stop-loss position based on key points. For example, if you buy at an important point such as a support level or a significant moving average, and the price drops and breaks below the support point after buying, then sell immediately.
What operational methods should be adopted to achieve swing profits? The logic of swing trading is to buy at relatively low points and sell at relatively high points; in short, it is to achieve buying low and selling high. To achieve this goal, what specific methods should be adopted? I believe that to achieve swing profits, three operational methods should mainly be employed.
The first operational method is the accumulation and liquidation method, which is to find the corresponding bottom area before the coin price has started, gradually buy in, establish your position, and then wait for the coin price to rise.
This method of operation requires investors to have patience and a certain level of restraint. During the accumulation period, the coin price will fluctuate repeatedly, and one must not be anxious. Once the coin starts to rise, observe and analyze to find the peak area of the coin price, then gradually sell to secure your victory.
The second operational method is the breakout trading method, which does not rush to intervene when the coin price is consolidating, but rather intervenes when the coin price is about to break out of the consolidation. The advantage of this method is that it can avoid wasting money and effort by entering too early.
Buy in when there is a breakout, as the coin price continues to rise, set your take profit point and decisively sell to achieve expected returns. Using this operational method requires investors to be decisive; when opportunities arise, they must be captured swiftly, and when goals are achieved, one must be able to decisively withdraw.
The third operational method is the over-speculation trading method, which is not to follow the crowd blindly.
The views of retail investors are prone to error, especially when the majority of investors are surprisingly unanimous in going long or short; this is often when a turning point arrives. The over-speculation trading method utilizes the emotional irrational factors of investors to conduct contrarian operations, buying when the market shows extreme pessimism and selling when the market shows extreme optimism. This method requires investors to have strong psychological resilience.
Specifically, when to accumulate positions, what truly counts as a breakout, and how to use market overbought and oversold conditions for trading will be discussed in detail in the following articles. Here, the main focus is to establish a model for swing trading, clarify the principles, logic, methods, and principles. Mastering these is like mastering the strategic planning of military operations, which is key to whether a campaign can succeed; then comes the details of execution. Combining strategy and tactics can achieve true swing victory.
Discipline in execution is key to the success of swing trading. Execution power is very important, and more and more companies are beginning to study execution power and conduct training in execution power. If there are only wishes and plans, even if detailed operational procedures are formulated and every link is refined, the final effect may still be poor; this is a problem of execution power.
Running a business requires execution power, as does being a person, and trading cryptocurrencies also requires execution power. Without execution power, all analysis and methods are meaningless. How can one improve execution power in cryptocurrency investments?
First, be clear about your goals. We just mentioned the need for a clear 'expectation' supported by specific data or theories and methods for analysis, having reasonable expected values, and not being overly optimistic or pessimistic about the projected trend of the coin price. One must clarify one's 'expectations' to form the guiding ideology for the entire swing trading operation.
After establishing expectations, it is necessary to formulate a clear investment plan, set the approximate cycle for swing trading, for example, one month or two months, find the target sector for investment, and identify suitable individual coins within that sector.
At what price to buy, at what price to sell, where is the take profit point, where is the stop-loss point, when to add positions, when to increase positions—these all need to form a real and clear plan in advance to guide every step of your operation.
As long as the analysis is rational and supported by past successful experiences—of course, having a good market sense is better—then one should invest decisively. Do not be afraid of wolves in front and tigers behind, and do not be overly concerned about gains and losses. Once an investment decision is made, one must have confidence in oneself and not be disturbed by temporary, short-lived, or unexpected changes that cause indecision.
At the same time, make good use of the dynamically changing external conditions to measure whether your judgment is erroneous, especially pay attention to grasping the big direction and big trend, make adjustments based on your expectations, and sell immediately to achieve predetermined profits. If the judgment is incorrect, then decisively stop-loss.
Discipline must be strictly adhered to, even if sometimes the operations make one feel extremely unwilling, it must be executed. Only by doing this long-term can one truly achieve 'implementation without compromise, execution without conditions.'
Set clear goals, develop plans, and execute strictly. This is the simple three steps to improve execution power. Integrate goals, plans, and methods into a complete operating system, and then do it unconditionally. In practice, dynamic adjustments can be made based on specific situations, but if disciplines are established and not executed, it is like the discipline in the army becoming meaningless, leading to repeated defeats.
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