David G, a KOL overseas who is also an advisor to the meme trading platform Moonshot, shared on X today a guide to making money in bull markets, compiled from his years of experience, in the hope that readers can avoid repeating past mistakes.
- Original Title: "David's short guide to making money in bull markets"
- Author: David G
- Translator: Zombit
The following is the original translation:
Please note that this article is mainly about "execution", that is, how to withdraw with a large amount of money. I will not delve into research, analysis or asset selection (that part is relatively simple).
In bull market trading, you need to focus on the following three core elements:
- Portfolio structure
- Use of leverage (how and when to use it)
- On-chain operations
Table of Contents
TogglePortfolio structure
This largely depends on the size of your capital. The advice would be different if you have $100,000, $1 million or $10 million, but the core concepts below generally apply.
You should use high-quality collateral to value your portfolio, which for me is BTC and SOL. In corrections or bear markets, I will sell and hold stablecoins; but in bull markets, I will use profits to increase my holdings in my favorite mainstream assets. BTC and SOL are good choices because I can use them as collateral to trade perpetual contracts, which makes my capital more efficient.
Currently, my portfolio is close to 100% BTC and SOL, but as the market cycle progresses, I will convert a larger proportion of my funds into stablecoins.
Use of leverage
(The following suggestions are suitable for beginners who have just started with perpetual contracts. More experienced traders can improvise as they wish.)
Forget all the advice about leverage trading on crypto Twitter (CT). Leverage is just a tool to improve capital efficiency and to be utilized when the risk/reward ratio is highly asymmetric.
First, you need to treat the trading of mainstream assets (like SOL) and small-cap coins as completely different types of trading. Although this sounds obvious, most people are not aware of it.
A basic rule is: on small-cap coins, never let your total leverage position exceed the amount of your investment portfolio. This will help you avoid a lot of pain while still maintaining a large upside potential.
For example: Assuming you have $100,000 in capital, valued in SOL, and use this as margin for perpetual contracts. In this case, your small-cap leverage position should not exceed $100,000. Exposing yourself to extremely volatile assets carries too much risk and will likely lead to heavy losses. If you are not a top-tier trader, you are basically doomed to lose. But in this example, you can still achieve 2x leverage ($100,000 in SOL + $100,000 in small-cap position), which is already sufficient exposure. Don't be too greedy.
For mainstream coins, at certain times you can achieve higher leverage ratios, but usually not more than 3-5x.
The key to using leverage is: "The higher the leverage, the earlier you should take profits."
I won't go into more details on perpetual contract trading here.
Also, for your and everyone's safety, "never let any trade have the potential to blow up your account".
On-chain operations
Alright, now for the interesting part. If your portfolio structure is correct, on-chain trading can become extremely profitable, but "the prerequisite is that you have the right structure".
Why? Because most people are using on-chain trading the wrong way. The goal of on-chain trading is to achieve outsized returns, and that's it. In a bull market, slowly accumulating profits is fine, but the only thing you should care about is catching the big winners. These winners will completely transform your asset allocation and your life.
Your goal is to find a few positions that grow far beyond your other assets. This goes against the traditional diversification investment principle, but as Buffett said: "Diversification is protection against ignorance. It makes little sense if you know what you are doing."
The crypto market is a "reflexive market", where the big winners will win extremely, extremely big. You only need one or two big wins to change your life, and this should be your obsession.
How to handle large profits
Once you've caught a big winner, never liquidate the entire position at once, but gradually reduce it over time. For example:
- When the position was worth $5 million, sell 10% when it reaches $50 million.
- Sell another 10% when it reaches $100 million, then 10% at $250 million, and so on.
Again, I emphasize that big winners will win extremely, extremely big, so you must leave room for upside. If your remaining 30% position grows to a $3 billion market value, that 30% profit will exceed all the gains you previously took.
The hardest part about holding large positions is that you need to withstand massive volatility. No matter how good the coin is, it will experience 50%-70% retracements, even multiple times, during the uptrend. You need to be psychologically prepared and not panic when this happens.
Mindset management
Remember, in the crypto market, your returns come from your ability to withstand volatility. Most people cannot tolerate this volatility, which is why they cannot achieve outsized returns. Volatility is your friend and the reason this asset class is so profitable.
With more experience, you will become increasingly accustomed to these fluctuations. Eventually, you may become numb, not only in trading but in other aspects of life as well, but at least you will become wealthy.
Summary
The core of trading lies in psychology, and your biggest opponent is yourself. But if you can learn to execute at a high level, you can succeed and even win big.
Pray, meditate, take a walk, do anything that keeps you clear-headed, and make it a daily habit.
Remain humble and always be prepared to lose everything. If you do fail, believe that you will be fine.
Good luck, and see you in the bull market!
