Author | @resdegen

Compiled | Bai Hua Blockchain

Financial management is not only a combination of technology and luck, but also a comprehensive test of one's psychological quality and discipline. Remembering this point is the key to standing undefeated in the long-term market game.

In the current rapidly changing and highly competitive market, how traders maintain calm, rational and develop a sound strategy has become the key to standing firm in the market and making sustained profits.

The following are 8 psychological frameworks that combine market practice and psychological principles, aiming to help you penetrate market noise, enhance decision-making ability, and become a sharper, more focused and logically clear investor.

01. Conduct the "100% Cash Test"

What is the "100% Cash Test"? The "100% Cash Test" means that you assume your entire portfolio is converted to cash (e.g. 100% USDT), and then ask yourself: if you were to reallocate your funds now, would you still buy the current assets in the same proportions?

If the answer is no, it means your portfolio may need to be adjusted.

So, ask yourself: if your portfolio was 100% USDT today, would you still choose to reallocate your funds to exactly the same positions as you have now?

For most people, the answer is likely to be no. However, many find it difficult to take action. Why? Because they are influenced by the following psychological factors:

· Sunk cost fallacy

· Emotional dependence

· Fear of admitting mistakes

The sunk cost fallacy is a cognitive bias where people continue to invest time, money or effort, even when it is no longer logical to do so (this also applies to interpersonal relationships, projects, etc.). In trading, this means stubbornly holding on to underperforming positions because "too much has already been invested" (whether in capital or emotion), rather than cutting losses and reallocating to better opportunities.

Going back to the initial question, if the answer is no, you need to take action.

It may feel overwhelming at first, but you can start small, for example, choose one position and ask yourself: if it were today, would I still buy this Token in the same quantity? Then, continue to evaluate the second position.

Although selling feels emotionally difficult, as if closing the door on a potential possibility. But holding on to positions out of hope or fear will only lead to stagnation and poor decision-making.

Courageously face the problem, decisively adjust your portfolio, and avoid the mistake of being unable to let go of sunk costs. Remember, sunk costs do not participate in decision-making.

02. Maintain a Structured Portfolio

Achieve more efficient management through clear categorization:

1) Core Positions

Core positions refer to high-conviction investments, meaning you can hold the Token through violent price fluctuations in the long run.

This does not necessarily mean you have to hold it long-term, as the opportunity cost is very high in this market, and frequent rotation is necessary. But if you think you can accurately time each market swing, that's self-deception - you still need to believe in the long-term value of certain things.

2) Trading Positions

These are short-term to medium-term opportunities used to capture specific trends or price movements.

These positions provide more flexibility, allowing for faster rotation and tighter stop-losses. Each person's trading style may differ, and this is not limited to perpetual contract accounts.

For example, I can buy an on-chain opportunity, do a 4x swing trade (from $5 million to $20 million), and then exit. Even if the price continues to rise afterwards, I won't mind, because I had already clearly defined the type of trade I was doing before the trade.

If I believe it could reach $1 billion (e.g. due to the project's uniqueness), it will be classified as a core position. I can accept a 50% drawdown in it, because I understand that this volatility is the cost of achieving outsized returns.

3) Clearly Categorize, Avoid Confusion

Mixing core positions and trading positions often leads to confusion and emotional decision-making. By separating them, you can better understand the purpose of each position, reducing unnecessary regret.

So, portfolio management not only helps you maintain rationality, but also improves the overall efficiency of your portfolio and the confidence in your decisions.

03. Fewer, More Concentrated Positions

This is an underrated skill that only the best traders can truly master. Perhaps this is the secret to moving from one level (e.g. six figures) to the next (e.g. seven figures).

1) Key Points

It has been proven that increasing positions in high-conviction investments and using compounding to achieve growth is more likely to preserve wealth in the long run and make you a true millionaire, compared to randomly trading Memecoins.

Every trade should have a meaningful impact on your portfolio, otherwise it's not worth doing.

2) Reduce Positions, Optimize Management

Reducing the number of positions helps manage the portfolio more efficiently and avoids the biggest enemy in trading - indecision.

When you have to deal with 15 different positions at the same time, the mental burden will make you feel exhausted. However, if you limit your holdings to a few select positions (e.g. no more than 5), you will be more cautious and start to seriously consider: "Is this randomly recommended Token really worth allocating to?"

Of course, there will be some opportunities that are highly asymmetric bets (e.g. taking a 1-2% risk for a potential 20-40% portfolio gain). The key is not to randomly diversify your capital, but to maintain concentration and focus to achieve greater returns.

3) Less is More

A few people have achieved wealth growth through a streamlined portfolio, while another group is obsessed with "collecting" meaningless short-term gains, which I call "gain collectors".

In short: either choose highly asymmetric bets, or decisively increase positions in high-conviction investments and use compounding to grow. Strategies that fall between these two are unlikely to achieve true success.

04. Build Your Portfolio Based on Your Goals

Your portfolio should always be centered around your financial goals.

If your goal is to grow your assets from $200,000 to $2 million in this bull market (although $2 million may not be enough to retire, it is still a worthwhile goal for most people), then every decision should bring you closer to that goal. Ask yourself:

· Is this trade substantially helping me achieve my goal?

· Or am I just blindly chasing the market out of fear of missing out?

1) Stay Focused, Avoid Misjudgment

Lack of focus will impair your judgment. Investing $5,000 in every opportunity may seem tempting, but consider the following costs:

· This level of investment may have a negligible impact on your overall portfolio.

· It will consume a disproportionate amount of your time and energy (e.g. using 20% of your attention to manage an investment that only accounts for 1% of your portfolio).

2) Abandon Unrealistic Fantasies

Most people buy a Token just hoping it will reach the "magic number" in their mind: "I need this Token to go up 10x." This kind of wishful thinking only hinders your judgment and does not help you achieve your goals.

Instead, you need to clearly define your goals and assess whether you are making progress towards them. This is crucial and worth emphasizing repeatedly.

In summary, before investing, first clarify your goals, and ensure that every decision serves your goals, rather than being led by market emotions.

Translation: One of the biggest mistakes people often make, which I have also experienced myself, is the mindset of wishful thinking. You know, that kind of mentality where you hope something is true, even if it's not actually the case. You choose to ignore the facts, simply because you'd rather believe it fits your expectations. This is a trap that is very difficult to avoid. - Elon Musk

05. Focus on Your Strengths

The reason you've come this far is that you've been leveraging your strengths - perseverance.

For example, through a few successful on-chain configurations and the help of compound growth, my configuration has been significantly improved. As the portfolio size expands, liquidity may become a challenge, but shifting to higher market cap assets is not necessarily the best solution.

1) Maintain Your Core Strengths

As you continue to progress in the market, you'll find yourself facing competitors with sharper and more professional advantages in larger markets. Don't assume that having a larger configuration will automatically make you a master of perpetual contract trading.

If your success comes from on-chain configuration, then continue to dig deeper in this field. Unless your configuration scale reaches a very high level (e.g., $5-10 million or more), liquidity is usually not a problem, with 7-8 digit liquidity pools and 7-8 digit 24-hour trading volumes, which can fully support your operations.

Similarly, if you have performed well in the Solana and Base chain Memecoins or AI themes, there's no need to shift to liquidity staking on the Sui chain. Focus on your strengths to achieve more stable growth.

2) Avoid Deviating from Familiar Domains

Assuming the market trend continues without a clear turning point, rashly entering unfamiliar domains often leads to the following issues:

Low Conviction: Due to a lack of sufficient understanding of the new domain, you tend to be risk-averse, allocating less capital, thereby reducing potential returns.

High Costs: Exploring new domains requires learning their rules and operations, which consumes a lot of time and energy, distracting your attention.

These issues not only impair your efficiency but may also reduce your overall rate of return.

The key going forward is to focus more on your areas of strength and leverage your existing successful experiences to further enhance your competitiveness and achieve more stable asset growth.

06. Don't Try to Trade Against the Trend

The appeal of counter-trend trading lies in the fact that those who can successfully capture market turning points often gain tremendous reputation, such as accurately predicting the peak of LUNA, the market cycle top, or the bottom of SOL. However, counter-trend trading can only bring profits at key turning points.

In a bull market, when market momentum is strong, what you need to do is to increase your position in line with the trend, supporting the market, rather than trying to "extinguish the fire".

Unless you are George Soros or GCR - but clearly, you are not them, and you know it.

1) Why is Counter-Trend Trading Difficult to Succeed?

Trying to capture every market turning point not only exhausts you physically and mentally, but it also often fails to achieve the desired results. Statistically, the probability of success in such attempts is extremely low. Be realistic - otherwise, you wouldn't be reading this article.

Instead of obsessing over predicting every turning point, it's better to focus on market trends, steadily and gradually, and amplify your results through compound growth.

2) Going with the Trend is the Wise Choice in a Bull Market

In a bull market, going with the trend is the wise choice. The trend is your friend, don't try to fight against it. Follow the trend, and exit decisively when the trend ends. The market is not meant to create heroes, but to allow rational investors to achieve steady asset growth. Your goal is not to become a "market prophet" in people's mouths, but to keep increasing your returns.

In other words: Instead of constantly trying to precisely predict every turning point, it's better to go with the trend. Even if you occasionally suffer some drawdowns, you can still confirm the trend and seize opportunities.

The cost of missing out on the huge gains in a bull market is often far higher than the temporary volatility. Let go of the obsession with counter-trend trading, follow the trend, and focus on achieving your goals - this is the optimal strategy.

Translation: Being a contrarian is actually quite easy, but the challenge is being a profitable contrarian.

07. Develop Trading Logic, Set Stop-Loss Standards, and Maintain Emotional Calm

Tokens are just tools to achieve financial growth. They are neither loyal nor "care" about you. When evaluating new opportunities, be sure to record your trading logic and strategy.

1) Trading Logic

Clearly define why you are buying this Token:

· What are the reasons for buying it?

· Is this a trade based on some catalyst?

· Are you betting on information asymmetry, or do you believe the market has fundamentally mispriced it?

· Or is it just because your favorite KOL is promoting it, causing FOMO?

2) Stop-Loss Standards

Clearly set an exit standard, whether it's a price target, a time point, or a change in market conditions.

Key: Detach emotions. Remember, this is not a personal emotional battle, but a business.

Imagine this scenario:

You bought XXX Token for $50,000, and it once reached $200,000, but then fell back to $50,000. At this point, your trading logic has been invalidated. Your portfolio has shrunk from $500,000 to $350,000 (assuming it was at the local top in December).

Now, you face two choices:

· Continue holding the losing position, hoping for an unsubstantiated rebound, just to break even;

· Decisively cut losses and reallocate the capital to more promising opportunities, seeking new growth points.

3) The Goal is to Grow the Portfolio, Not Be Loyal to a Specific Token

If you find a better opportunity, don't hesitate to adjust your positions. Even if you feel regretful about the previous Token, if the new configuration achieves a 2x return, that regret will quickly disappear.

The key is the result, not "loyalty" to a particular Token.

Discard promises, hopes, and unrealistic fantasies. Selling a crypto asset does not mean the end - you can always buy it back at the right time.

4) Calm Trading is the Key to Success

This sounds simple, but the crypto market is a place that can create extreme emotional attachment. If you can leverage this, you can gain an advantage. But at the same time, you must always act around the goal: to keep growing your portfolio.

Regardless of where the profits come from, what matters is the overall increase in your assets. Remember: Profit Maximization > Community Sentiment.

08. Detach Emotions from Trading Results, Avoid Self-Blame

The quality of a trade cannot be judged solely by the result. A good trade is one based on the best information available at the time and a well-considered decision, not just whether it ultimately resulted in a profit.

Assuming your trade is not a gamble, but follows these elements:

· Clear trading logic

· Defined stop-loss standards

· Appropriate risk management, whether it's a core position or a short-term trade

· Executed under favorable conditions, such as a good risk-reward ratio or asymmetric potential

Then, regardless of the final outcome, this was a reasonable trading decision.

Also, remember to avoid excessive self-blame or self-deprecation due to trading results. After experiencing losses, people often fall into a vicious cycle of self-criticism, but this mindset often overlooks the importance of the rationality of the trading process.

Losses are an inevitable part of trading. Even carefully designed trades can sometimes fail, while some impulsive trades may succeed by chance.

I have also been overly critical of myself for failures, but later realized that the trade was actually reasonable and in line with my strategy. However, this excessive self-blame only brings unnecessary pressure, leading to misjudgments, indecision, and even emotional trading. Ultimately, you may find yourself in a vicious cycle, starting to doubt whether you are "always making mistakes" or feeling that others are always doing better than you.

09. Summary

After countless reflections on mistakes, this is also a summary and warning for myself. The past is already gone, and the only thing you can look forward to is the future. Past decisions, whether successful or not, are meant to help you do better next time, not to let them consume you.

If you have performed well so far, that's great. If not, that's okay - in this market, there is no growth without failure. Behind every success story, there is a price that must be paid.

Remember: the meaning of trading is not about "catching up with the market trends," nor is it about who makes the most money. What really matters is how you respond to each trade, whether you have achieved your goals, and whether you can still protect your wealth when the market collapses.