Below, we gather the rules scattered throughout Chaoxin—in "Five-Element Defense / Cycle Clock / Six-Character Formula / Ten Prohibitions / Six Gates of Daily Decision-Making"—into a linear filter that runs from "I want to place a trade" to "my finger clicks Confirm." Each layer has only three possible outcomes: "Pass / Reject / Hold." No ambiguity is allowed.
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I. Guiding Principle: First Look for Reasons Not to Trade, Then Look for Reasons to Trade
The core of Chaoxin isn't finding entry points; it's a filter. Ordinary traders ask, "Can I buy?" Chaoxin traders first ask, "What's a reason I shouldn't buy?" After filtering out 9,999 excuses, the one that remains is what we call an opportunity.
The six-character chain is the framework: Follow → Wait → Stay Calm → Stop → Review → Trust.
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II. Seven Filters (follow the order; don’t skip layers)
🔴 Layer 0: Five-Element Red-Flag Check (30-second self-check; pass this first)
As soon as you get the urge to place a trade, fill out this checklist first. If any item raises a red flag → reject the trade and don’t look at this asset again today.
Five Elements Red-Flag Area Self-Check
Water · Liquidity Chasing pumps, catching falling knives, illiquid micro-cap coins Did it just surge/crash, and do I want to jump in?
Wood · Structure Drawing lines by feel, treating false breakouts as real, timeframe mismatch Was this signal triggered by my system, or is it just what I “feel”?
Fire · Emotion FOMO, revenge trading, impulsive trading Did I lose on the last trade and want to win it back immediately?
Earth · Judgment Trusting KOLs, mistaking a story for value Do I want to buy just because “someone recommended it”?
Metal · Discipline No stop-loss, holding losing positions, excessive leverage Can I not define my stop-loss clearly / am I trying to use excessive leverage?
⚠️ If you don’t pass this layer, nothing else matters.
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🌊 Layer 1: Identify the Market Tide Phase (Check the conditions first)
First, determine which “tide” the market is currently in:
• Flat tide (middle to late bear market) → Don’t bet on a rebound; only dollar-cost average or refine your system
• Listening tide (bottoming area) → Wait for all five bottom signals to align before opening your first position
• Rising tide (main uptrend) → Hold; don’t overtrade; add in the direction of the trend
• Full tide (topping area) → Reduce positions in stages; don’t open new longs
• Ebb tide (top confirmed) → Close positions and log them; only review trades
Exit rules:
• Trades against the tide phase → reject (e.g., opening new longs at full tide or buying the dip during ebb tide)
• Tide phase unclear → stand aside and wait for confirmation
Don’t predict the tide; just decide whether you should get in the water in this phase.
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🧭 Layer 2: Follow the Trend — Trade Only with the Trend (Four Steps to Determine Direction)
1. Determine the trend direction on the higher timeframe (daily chart)
2. Only take opportunities in the direction of the higher-timeframe trend; discard countertrend trades
3. Keep timeframes consistent: once you choose a timeframe to follow, use signals from that timeframe only
4. Stick to one direction and one setup; don’t keep switching back and forth
Disqualifiers: going against the trend, conflicting signals across timeframes, or trying to “call tops and bottoms.”
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🎯 Layer 3: Wait — Verify Signal Integrity
Chaoxin’s rule: “Don’t open a position unless all five signals are present.” Break your entry conditions into a checklist:
• Is the structural level in place (breakout / retest / key level)?
• Is volume confirming the move (breakout on increased volume or stabilization on declining volume—not a fakeout)?
• Is the trend confirmed (don’t trade in a tight, choppy range)?
• Are the timeframes aligned (higher timeframe + trigger timeframe pointing in the same direction)?
• Do external conditions fit (not late in a full-tide phase, and not during a major negative-news window)?
Additional checks (optional): If your system uses unusual OI, extreme funding rates, or Liu Yao line-position labels, use them only as auxiliary filters, not as Chaoxin’s primary signals.
If any signal is missing → stand aside; don’t anticipate the move.
Also ask yourself these three questions (you must be able to answer them before entering):
1. Why am I entering? — A condition, not a prediction (“retest holds + volume increases” ✅, “I feel like it’s going up” ❌)
2. Where will I admit I’m wrong? — Set the stop-loss price precisely and write it down before entering
3. What would prove me wrong? — Clearly define the invalidation condition (don’t exit only after taking a loss; exit when the thesis is invalidated)
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💰 Layer 4: Do the Math — Risk/Reward and Risk Limits
Once the signal passes, calculate the risk first, then consider taking the trade:
• Risk/reward ≥ 1:2 (risk $1 to make $2); if it falls short → reject the trade
• Risk per trade ≤ 1% of total capital (calculate position size from the stop distance, not from “how much I feel like putting in”)
• Position-size limits: test positions no larger than 10% of total capital; total exposure to altcoins ≤ 20%
• After 2 consecutive losing trades → reduce position size; after 3 → stop trading for the day
Formula: Position size = Total capital × 1% ÷ Stop distance (ATR or structural level)
If the calculated position size is too small to matter, your stop is too wide or the signal is unclear. Pass.
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❄️ Layer 5: Stay Calm — Freeze During the Trade (stop emotions from taking over)
Put a mandatory checkpoint between the impulse and the order:
• Write “asset / direction / entry zone / stop-loss price / target / invalidation condition” on one line and stick it next to your screen
• Don’t touch the confirm button before your trigger; after it triggers, only “verify”—don’t reanalyze
• If you feel FOMO → physically step away from the screen for 3 minutes
Principle: Be fast by preparing before the session, not by skipping steps during it.
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🚀 Layer 6: Execution and Position Management (Scale In + Trail)
Only get here after passing the first 5 layers:
• Scale in: start with a small test position (within the 10% limit) → add only after confirmation → keep some capital in reserve
• Place stop-loss orders in advance only: don’t widen them, cancel them, or say “I’ll wait a little longer” during the trade
• Watch only two things while in a position: the stop-loss line and the trailing take-profit line (move it up using MA5/MA10 or structural levels)
• Exit as soon as the thesis is invalidated; don’t wait for the stop to be hit before reconsidering
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III. Condense the Seven Layers into a “60-Second Pre-Trade Checklist”
□ No red flags in the Five Elements (Wood, Fire, Earth, Metal, and Water)
□ The tide phase allows this direction
□ Following the higher-timeframe trend; not trading against it
□ All five signals are present: structure + volume + trend + timeframe + environment
□ Can answer the three questions: entry / where I’m wrong / invalidation
□ Risk/reward ≥ 2:1; risk per trade ≤ 1%
□ Position size is within the limit and scaling in is practical
□ Stop-loss order is placed; invalidation condition is written down
□ Emotions are steady; no impulsiveness, FOMO, or revenge trading
All 9 boxes checked → you can take the trade
Any box unchecked → don’t take this trade today
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IV. Post-Trade Logging (Make the Filters More Accurate Over Time)
Record these 6 items for every trade: time, asset, direction, stop-loss level, actual profit/loss, and emotional state at the time.
Review the causes once a week:
• Was the loss due to “random market action” or “breaking a rule”?
• If the same type of mistake occurs 3 times → make that rule more explicit
• After 100 trades, review your win rate + risk/reward ratio. Build confidence in probabilities from data, not feelings
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V. Common Pitfalls That Make Filters Fail
💡 Even the best filters can fail in three situations:
1. Immediately trying to win back losses — Fire/Thunder; Layer 0 should have stopped you
2. Seeing someone else post their trade and rushing in — Earth red flag; treating “who recommended it” as a reason to buy
3. Trading when only 3 of the 5 signals are present — treating “close enough” as “complete”
Chaoxin’s exact words: “If the signals aren’t complete, don’t trade; if all five aren’t present, don’t open a position.” Better to miss a trade than to make a bad one.
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VI. Practical Steps to Put This into Action
If you want to put these filters to real use, don’t start by chasing “perfect parameters.” Start with these three steps:
1. Set the checklist above as your phone lock screen or save it in your notes; go through it before every trade
2. During your 8 p.m. review, look back: How many trades you considered today were blocked by the filters? Did those blocked trades avoid losses?
3. First, track 100 paper trades or small-size trades: win rate, risk/reward, and which layer you break most often—the data will show you how to adjust the filters
Chaoxin’s guiding principle is “slow is fast”: survive first, then think about growing your capital. The filters aren’t there to help you make more money; they’re there to cut out losses you shouldn’t be taking.
⚠️ Cryptocurrencies are highly volatile, and high-leverage contracts may result in the loss of all your principal. The above is a framework for trading knowledge and execution; it is not a signal service, does not recommend coins, and does not promise returns. You are responsible for all gains and losses from your decisions.
