Never bet your entire capital on tomorrow
Watching the glaring liquidation notification on the phone screen, my friend's hands kept shaking.
"Brother Bin, 6000U is gone just like that? It's only been three days!" His knuckles were turning white from gripping the chopsticks, his voice filled with reluctance and confusion. I took a look at his phone and saw he had used 3x leverage to go long on SOL with all his capital, without even setting a stop-loss, and it coincidentally crashed when the coin price plummeted, going to zero.
He stubbornly argued: "How can I make quick money without using all my funds?" But I knew this was not investment; it was gambling with life.
This scene instantly took me back to my 2021 self. At that time, I held 8000U, but greed got the better of me, and I went short on ETH with 7500U at 2x leverage, firmly believing the market would correct. As a result, that night ETH surged 8%, and three years of savings evaporated in half an hour. I sat alone in front of the computer, staring at the liquidation text message until dawn.
After eight years of ups and downs in the crypto world, I have witnessed too many myths of overnight wealth, but the more common tragedy is accounts going to zero. Today, I want to share three iron rules of position that have allowed me to completely bid farewell to liquidation.
One, the root cause of liquidation: high leverage and emotional trading
The average survival period for crypto contract users is only 17 days, and 90% of liquidations stem from a lack of risk control rather than market accidents. High leverage is like a double-edged sword; under 10x leverage, a 2% price reversal can lead to liquidation, while 3x leverage can withstand a 33% fluctuation.
I realized that the essence of liquidation is not the market working against us, but rather our battle with our own human weaknesses. In times of greed, we always want to go all in, and in times of fear, we blindly cut losses. These emotional decisions are the real account killers.
Two, three iron rules of position, allowing me to bid farewell to the nightmare of liquidation
1. Total position not exceeding 40%, leave room for maneuver
I call this rule the 'Survival Rule'. For an account of 15000U, I will use a maximum of 6000U for trading, with the remaining funds stored in USDC as backup.
The crypto world is never short of opportunities; what is lacking is the ability to survive until the opportunity arrives. Reserve 60% cash to have the capital to average down in extreme market conditions, and you won’t lose everything due to a single misjudgment.
2. Single cryptocurrency position not exceeding 15%, diversifying risks
I set the limit for a single type of cryptocurrency holding at 15% of the total position. This means that even if a certain cryptocurrency suddenly crashes, it won’t deal a fatal blow to the overall account.
Diversified investment should not only be spread across different cryptocurrencies but also across different sectors. My allocation ratio is usually: mainstream assets account for 60%-70%, mid-cap projects do not exceed 20%, and emerging tokens are strictly limited to within 10%.
3. Stop-loss capped at 1.5% of total capital, controlling single trade losses
This is the most critical discipline. I set the maximum loss for each trade at 1.5% of the total capital and set the stop-loss within 10 seconds after opening a position.
If I have an account of 20000U, the maximum loss for a single trade is 300U. If I open a long position when the BTC price is 60000U, I will set the stop-loss at 59100U (a decrease of 1.5%), so even if I misjudge, the loss is kept within an acceptable range.
Three, practical case: the transition from monthly liquidation to steady profit
My student Xiao Lin used to be a 'liquidation specialist', entering and exiting with the entire account each time, resulting in monthly zero balances. After strictly implementing these three iron rules, his trading underwent fundamental changes:
He operated with a principal of 4800U, controlling total positions within 2000U, and holding no more than 700U for a single cryptocurrency. In six months, his account steadily grew from 4800U to 6600U. Although there was no excitement of getting rich overnight, he has never faced liquidation again.
The most core change is in cognition: realizing that having the entire account is a shield for defense, not a weapon for attack. Staying alive in the market is far more important than short-term high profits.
Four, mindset adjustment: cultivation in the crypto world is about the heart
After eight years of experience, I deeply understand that behind the candlestick charts lies the trend of human nature. When you can stay calm during a surge, maintain discipline during a drop, and endure loneliness during consolidation, you will find that in the crypto world, you are not making money from price fluctuations, but from upgrading your understanding.
Trading is not a sprint, but a marathon. Don't rush for success; accumulate slowly. As long as you stick to the correct trading concepts and methods, there will come a day when you achieve financial freedom.
If you are also struggling in the crypto world, I hope my experience can give you some inspiration. Remember: preserving your principal is the long-term strategy; never bet all your principal on tomorrow. Follow Brother Bin to learn more firsthand information and accurate points of crypto knowledge, becoming your guide in the crypto world; learning is your greatest wealth!#加密市场反弹 #以太坊L2如何发展？ $ETH
