How to stop loss? 6 ways to survive in the cryptocurrency world

Author: Duo Nine Source: yourcrypto Translation: Shan Ouba, Golden Finance

Making a profit in the cryptocurrency space is a great thing, and everyone loves to talk about it. It's engaging and can increase engagement. However, people rarely talk about losses.

One ​​way or another, everyone goes through such moments in the cryptocurrency space. How you overcome it determines whether you end up being a winner. Next, I will share with you my best tips:

1. How to Protect Profits

2. Buy when the market is panicking, sell when it’s euphoric

3. Don’t trust altcoins

4. Don’t do crypto full-time

5. Avoid quick profits, or they will lead to ruin

6. Accept failure and losses

1. How to Protect Profits

It’s not enough to take profits and sell. You also have to protect those profits! If you don’t have a clear system in place, the crypto market can quickly take them away from you in an instant.

A recent example is this guy who lost $400,000 in one trade. He didn't start out with $400,000. He started out with $500. He lost all of his profits in one trade.

Anyone who relies on luck to make a profit will sooner or later run into bad luck and end up losing everything, except for impulsive trading caused by greed.

To avoid this, follow these steps:

If you get lucky like the example above and turn $500 into $400,000, then your first priority is to protect those profits. This means not trading with your profits, but moving them out. You can convert them to fiat (more on that later), or use them to buy gold or Bitcoin. That's it!

After you've secured your profits, you can then continue trading with your principal. In this example, the guy above could go back to trading with $500, or slightly more, because he can afford it now. In any case, those profits should not be put back into the market.

The benefit of doing this is that even if the market goes against you and you lose your principal ($500), you still have $400,000 in profits as a safeguard. This will make you a better trader/investor over time, and will allow you to refocus faster after a loss.

Only if you stick with your strategy over the long term and get good results, should you increase your principal, trading bankroll, or portfolio. Only then should you even consider putting a small portion of your profits back into increasing your trading bankroll or investments. That's it.

2. Buy when the market is panicking, sell when it’s excited

You should only invest your profits in a bear market (market downturn), ideally when people start tweeting that Bitcoin is dead. This is the best time to start buying and taking risk. Always try to maximize your risk/reward ratio, which means looking for asymmetric trades!

Continuing with the example above, in the current weak market conditions for Bitcoin, I would put the $400,000 in USDC (a stablecoin pegged to the US dollar) and earn passive income, just like the guide in Alpha Post #29.

With a current annual yield of 29%, this $400,000 would allow that person to earn about $10,000 per month without doing anything. This is the actual income from trading fees and closing positions. If the market falls further, he will gain more.

I would not buy Bitcoin or any other token right now. I would wait for a discount as the market continues to fall. Remember, you can't lose money if you don't buy, and you still keep your $400,000 profit! Protect them at all costs.

Once the market gives a bottom signal, such as signs that the bear market is about to end, you can gradually buy Bitcoin using dollar cost averaging (DCA) and invest your profits. This way, even if the price of Bitcoin falls or goes sideways, you can reduce your risk and have a chance that the price will eventually recover and set new highs. If you are patient, a well timed entry can easily double your $400k or whatever you put in.

Look at the current cycle. If you bought Bitcoin during the previous bear market (when Bitcoin was below $20,000), you beat most people in the market. The larger your portfolio, the more Bitcoin you should hold. See my guide for more on this.

For example, in the last bear market, I used my profits to buy Bitcoin when it was below $20,000. I didn't time the $15,500 bottom perfectly, but in retrospect, any buy below $20,000 was a good time. If you need help timing the market better, join our Sponsor Group. You can also read more about Sponsor Groups here.

You can certainly play with some altcoins (cryptocurrencies other than Bitcoin), but if you have a larger portfolio, they should only be a small portion of your total portfolio. Anything more than that is irresponsible and will ultimately cost you money. See below to learn why. Regardless, when you see market sentiment getting excited, start selling and don’t buy back in. Protect your profits!

3. Don’t trust altcoins

Altcoins are not a reliable store of value! At best, they are just some nice technology. Most altcoins don’t even need a token and they have very poor utility as a store of value in the long run. You wouldn’t buy tomatoes with $10,000 to store wealth, would you? Altcoins, like tomatoes, will quickly lose value.

A common way to lose money in the cryptocurrency market is to buy the latest altcoin released and hold it for the long term. Please don’t do this. It’s like buying tulips and expecting to get rich overnight.

This is not a viable strategy.

Altcoins are good for short- to medium-term speculation. That's it. Hold them for more than a year and you'll likely lose money. There are some exceptions, but in general, altcoins are not your magic weapon for long-term success.

They can make you rich overnight, but that wealth won't last if you don't follow the first point of this article. During a bear market, most altcoins plummet 90% to 99% as buyers disappear. The reason altcoins rise and fall so quickly is that they lack liquidity.

This means that insiders can easily drive up the price. Once they take profits, there's no one to stop the price from plummeting. Bitcoin, as the most liquid cryptocurrency, doesn't have this problem.

Only Bitcoin is fundamentally a reliable store of value and in some ways similar to gold. Even though Ethereum likes to call itself "ultrasonic money," it doesn't qualify as such. In fact, Ethereum is more like oil. Its price will fluctuate up and down depending on the usage of its network.

4. Don't quit your job to trade crypto

95% of traders will eventually lose money. Only 5% are winners. Cryptocurrency trading is harder than your day job and is 24/7. This may not be a cost-effective exchange. Instead, you should continue your job, or find one you like and invest in cryptocurrencies (mainly Bitcoin).

A good way to avoid large losses is not to trade cryptocurrencies. Instead, you can invest in this emerging field. When you invest, buy the casino, not play the game like trading. This means that you should invest in the infrastructure of cryptocurrency with a long-term perspective.

In this sense, Ethereum and its derivative decentralized finance (DeFi) are a good example. The rise of DeFi has made Ethereum what it is today (the oil of DeFi). Likewise, Bitcoin is and will always be a reliable store of value.

If you want to protect your wealth, buying Bitcoin at a discount is never a bad bet. When you buy it, you don't intend to sell it the next day. No, you buy it to hold it for the long term and enjoy your retirement.

How to do it?

You can take out a loan against your Bitcoins, or earn income on your Bitcoins like I did before. When Bitcoin reaches $1 million in the next 10 years, you can retire.

As for altcoins, try to invest in the infrastructure of cryptocurrency, not its meme coins. The real opportunities are there. Don't invest too much in altcoins, but a good investment can bring 10x to 100x returns.

I can't tell you which coin will be the next Ethereum, but you can take some risks based on your age. As you get older and accumulate wealth, reduce your exposure to altcoins and focus on Bitcoin for inner peace. It's worth it.

5. Stay away from fast money, they lead to disaster

A quick 10x return on memecoins can get you into a state of excitement and greed and quickly lead to bad trades. Don't invest your entire capital in such speculations. Never go all in on a single altcoin. Try speculating in small amounts, but keep it to a small portion of your total portfolio.

Earning your year's salary on a single trade could change your life, but so could losing your entire bankroll. Memecoins are attractive because of their potential to make you rich (or poor) quickly. They are highly risky and only worth a try if you have a small portfolio.

In this case, it makes sense to take a bigger risk. If you already own a sizable portfolio of crypto assets (most of which should be Bitcoin), then only use a few percent of your total portfolio to speculate in memecoins or similar high-risk coins. That's all.

If you hit it big, sell it, never look back, and follow the first point of this article. Never sell Bitcoin to buy altcoins. If you find yourself doing this, there is only one reason: greed. And greed never ends well.

6. Accept failure and losses

In the cryptocurrency world, failure and losses are inevitable. But you can definitely mitigate their impact and reduce the size of the losses. This is exactly what you need to do. The market will do what it wants to do. Your role is to manage risk.

Making money should not be your ultimate goal. Instead, you should strive to maximize your time and freedom. Bitcoin is part of the answer. Most people need to lose a ton of money playing altcoins before they realize this.

By accepting your losses, you will focus on what's important faster and improve your risk management. The top 5% of traders who win in this game do so because they manage their risk correctly. That means they lose often, but in smaller amounts, while they win big a few times a year.

That's what you really need. Accept that losses are part of the process, but make them small enough that they don't throw you off balance. It takes time and discipline.

Be patient with yourself and find your comfort zone. It might not even have to do with crypto!