Source: Talk Outside
Benjamin Graham wrote in "The Intelligent Investor":
The bull market is the main reason ordinary investors lose money.
How much risk can you bear? First ask yourself: Are you married? What is your partner's income? Do you have children? Do you have an inheritance? Do you have elderly people to support? Is your job secure? Do you need this investment to provide a stable cash flow? Finally, how much loss can you bear?
Is it feasible to be greedy when others are fearful and fearful when others are greedy? The problem with this strategy is: the bear market has no bottom, and the bull market has no ceiling.
Managing an investment portfolio is like cooking small fish, once determined, do not move it lightly.
The public cannot make money by accurately predicting the direction of the stock market.
Everything will pass. Equally eternal and correct investment commandments are: maintain a margin of safety.
...
A few days ago, a partner in the group also shared a sentence: Stick to your trading philosophy, your trading principles, money is not endless, but can be lost completely. I feel this sentence is also quite representative, many people like the bull market, because in the bull market, people always think they can definitely make money, but for many people (especially newcomers who entered the market during the bull market), the bull market is actually a beautiful trap.
If everyone can make money in the bull market, then you should consider a question: where does your profit come from?
If you haven't figured this out, then you may be the one providing profits to others in the bull market. And if you don't want to be that person, you should start forming and perfecting your own trading strategy as soon as possible. In this issue, we will continue to sort out several basic principles that need to be considered when formulating a trading strategy from the perspective of methodology:
1. Keep it simple, but not single
In the Talk Outside toolbox, we provide dozens of commonly used on-chain tools, and these websites also cover a lot of data. In addition, in some of our previous articles, we have also shared a lot of practical on-chain data indicators and their usage. But there are still many people who often leave messages asking us for more tools, these people always want to be able to collect a lot of data or indicators, hoping to increase their trading win rate.
But to be honest, even if you collect more than 200 different indicators, will you really carefully look at so many indicators? Will so many indicators really help your trading?
As we mentioned in a previous article in Talk Outside: If you like to learn and do data research, you can certainly understand various indicators and the logic behind them from different dimensions. But if you are mainly doing some basic trading, the blind combination of too many indicators, in addition to consuming a lot of your time and energy, we believe it will not be of much help to you, because those complex strategies with many parameters are easy to appear so-called overfitting.
For most ordinary traders, the best strategy is often simple, you just need to focus on a few key indicators (parameters) and thoroughly understand the logic behind them. That is to say, trading needs to be kept as simple as possible (focusing on a few key indicators), but not single (thoroughly understanding the logic behind them), quality is sometimes more important than quantity.
Here's a simple example, let's take the K-line that everyone will look at:
Currently, there are a lot of K-line related indicators, in addition to the basic MA, EMA, BOLL, RSI, etc., there are also many extended indicators or patterns, as shown in the figure below.
But for most ordinary traders, maybe trend line + channel + Fibonacci + MACD combined is enough. As shown in the figure below.
Then, the rest is to be more human, such as who can be more patient and resist temptation, who can strictly manage their position and risk, and who can spend more time and effort learning and improving...
2. Don't touch what you don't understand, preserve your capital
These are two basic trading prerequisites that we often mention in our past articles in Talk Outside, especially applicable to newcomers. For example, during the recent MemeCoin craze, some people saw others getting rich overnight by rushing into Dogecoin, so they couldn't help but want to join the battle, becoming 10U warriors. The result?
We don't need to talk about the zeroing out, after all, 10U zeroing out doesn't matter much to many people. But many newcomers overlooked the Gas issue and directly learned from others to rush into the Ethereum chain to rush Dogecoin, and then left messages asking questions like: Why did the money in my wallet decrease? Why did the coins I bought decrease? Why...?
The reason is simple, because these people only consider how they can turn 10U into 10,000U in one day, or how they can get rich overnight, and often ignore the cost issue. When you do small-scale Dogecoin rush on Ethereum, you not only need to consider the Gas issue, but may also involve the problem of high slippage.
That is to say, the cost issue is an easy-to-ignore problem, and this problem can sometimes be more important than you think.
The so-called "don't touch what you don't understand" involves many aspects. In addition to the necessary research and understanding of the trading target, you also need to do necessary cost backtracking tests for your trading process, such as at least the following aspects you need to consider:
- Commissions
The transaction commissions charged by different DEXs and CEXs may be different, especially for DEXs (including some TG Bots), you need to understand the relevant fees before trading. As shown in the figure below. Of course, the commissions of a few thousandths in many CEXs can be ignored by many people.
- Slippage
Especially when trading on-chain meme coins on some DEXs, due to liquidity and violent price fluctuations, you often need to set a relatively high slippage to be able to trade successfully.
In addition, you may also need to consider factors such as market impact, bid-ask spread, and other factors that affect the cost.
In short, the implementation of any strategy requires adhering to the two basic prerequisites of "don't touch what you don't understand" and "preserve your capital". "Don't touch what you don't understand" is to help you avoid falling into some traps and temptations, and "preserve your capital" is to allow you to "live" longer in this field.
3. Respect the market, revere the market
Many people always like to seek a definite answer in the market, such as always hoping to ask: Can Bitcoin reach $100,000 this year? Will Ethereum rise to $5,000 this year?...
The market is unpredictable, because the market is constantly changing, and this change also has uncertainty.
Although many KOLs, bloggers, or so-called signal teachers seem to be able to accurately "predict" the future trend or price, I prefer to call their such predictions "guesses". Because through backtesting historical data, combined with some factors affecting the market trend, and combined with personal experience, many times it is indeed possible to make relatively reasonable guesses about the future market, but guesses are guesses, after all, this is still a probabilistic issue.
And the issue of probability also needs to be considered in combination with factors such as cycles, for example:
Someone tells you that Bitcoin will 99% rise to $500,000 in the next 10 years, will you consider holding Bitcoin now? Or will you consider the other 1% possibility?
Or, someone tells you that Bitcoin will most likely exceed $100,000 in the first quarter of next year (2025). How do you understand this "high probability" he is talking about? How much principal would you be willing to invest for this high probability?
Alternatively, someone tells you that Bitcoin may experience a correction in the coming weeks, perhaps dropping to the range of $89,000 - $91,000. How do you understand the "may" and "perhaps" he is using? How much capital would you be willing to prepare to continue buying for this "perhaps"?
Of course, it is also possible that someone will open two positions at the same time, one long and one short, and whichever makes money, they will show you the profitable one, making you believe they are a guaranteed profit master, and you only need to "pay a tuition fee" for them to lead you to the path of wealth.
In the end, everyone's personal situation is different. Some may choose to bet their net worth on a 20% probability, while others may only be willing to try a small position even with an 80% probability. In this field, we not only need to learn to respect the market, but also to revere it. When you decide to follow someone's guidance or conclusions to make what appears to be a profitable choice, you should also consider the possibility of losing money in advance. If you want to consistently generate reliable returns in this field, you should DYOR and form and improve your own trading strategy as soon as possible.
Note: The above content is a personal perspective and analysis, and is only for learning and exchange, and does not constitute any investment advice. Any projects or websites mentioned in the article are not directly related to the author (the author does not accept any advertising from project parties). Please evaluate the security of the corresponding projects or websites yourself. Investment always carries risks, don't get into what you don't understand, and don't play what you can't afford to lose.
