Never put yourself in a position where a trade going against you could lead to liquidation.
Author: David G
Translation: Deep Tide TechFlow
David's Bull Market Profit Guide: How to Make Money and Avoid Liquidation
Today, let's be a bit serious and share some experiences I've summarized over the years through painful lessons. I hope that by reading this article, you can avoid some pitfalls.
It is important to emphasize that the focus of this article is on execution—how to truly pocket profits during a bull market. I will not discuss research, analysis, or asset selection (these are relatively simple parts).
The three key elements for successful trading in a bull market are:
Portfolio Structure
Use of Leverage (when to use it, how to use it)
On-chain Operations
Portfolio Structure
The way you build your portfolio largely depends on the size of your capital. Whether your assets are $100,000, $1 million, or $10 million, the following core principles apply.
First, your portfolio should be based on high-quality collateral assets. For me, this means BTC and SOL. In a choppy or bear market, when I sell assets, I usually choose to convert to stablecoins, but in a bull market, I prefer to use profits to acquire more mainstream assets that I am optimistic about. The advantage of BTC and SOL is that they are not only quality assets but can also be used as collateral for lending, thereby enhancing capital efficiency.
Currently, my portfolio is almost entirely composed of BTC and SOL. However, as the market cycle progresses, I will gradually convert a larger proportion of my assets into stablecoins to lock in profits.
Leverage Use Strategy
(The following advice is suitable for beginners in leveraged trading. If you are an experienced trader, you can operate according to your own strategy.)
First, forget the advice about leveraged trading you see on Crypto Twitter (CT). Leverage is just a tool to enhance capital efficiency and seize opportunities when the risk/reward ratio (r/r) is asymmetric.
It is important to note that trading mainstream assets (like BTC, SOL) with leverage is a completely different strategy from trading altcoins (tokens with smaller market caps). For example, going long on SOL and going long on a small-cap token with a market cap of $500 million may both superficially be "going long," but the risks and operational methods are completely different. This may seem simple, but many people do not realize it.
A basic rule is: Never let your altcoin leverage exposure exceed 1x the value of your portfolio. This helps avoid excessive risk while retaining enough profit space.
For example: Suppose you have $100,000 in assets, and you use it as margin for futures trading (perps) priced in SOL. In this case, your long position in altcoins should not exceed $100,000. Because altcoin prices are highly volatile, if you are not a top trader, you are likely to get liquidated. However, in this example, you can still achieve a 2x portfolio long exposure ($100,000 in SOL + $100,000 in altcoins), which is already a considerable profit. The key is not to be greedy.
For mainstream assets (like BTC, SOL), at certain specific times, you can choose a higher leverage exposure, such as 3-5x. However, this strategy should only be applied in scenarios where the risks are clear and the expected returns are extremely high.
Key Points of Leveraged Trading
When using leverage, the most important point is: The higher the leverage, the earlier you should take profits.
While there is much more to discuss about perpetual contract (perp) trading, I cannot elaborate here due to time constraints. I recommend following these excellent traders:
Additionally, you can watch @CryptoCred's YouTube trading series to learn more practical trading skills.
Finally, always remember: Never put yourself in a position where a trade going against you could lead to liquidation. This is the most basic survival rule in trading.
On-chain Trading: Seizing Potential Coins in a Bull Market
Next is the more interesting part. If your portfolio structure is reasonable, then on-chain trading can bring you extremely high returns, but please note that this only applies if your structure is correct.
Why do I say this? Because many people are incorrectly engaging in on-chain trading. The core goal of on-chain trading is: to pursue excess returns, not to accumulate capital through small profits. In a bull market environment, the only thing you need to focus on is seizing those opportunities that can bring huge returns. Because these opportunities are the key to truly changing the scale of your portfolio and even altering the trajectory of your life.
In on-chain trading, your goal is to find and hold a few "super potential coins" that can far exceed other assets. This may contradict the traditional investment philosophy of "diversification," but as Warren Buffet said, "Diversification is the behavior of the weak."
The crypto market is a reflexive market, which means that when an asset starts to perform well, it often attracts more capital, becoming even better. You only need one or two such super potential coins to change your life, and this should become the core goal of your on-chain trading.
How to Handle Positions in Potential Coins
Once you have seized a major potential coin, never liquidate your position all at once. You should gradually reduce your position as it rises while retaining a certain amount of exposure to continue participating in potential upside.
For example, if you buy a token at a market cap of $5 million, when it rises to $50 million, you can sell 10%; when it rises to $100 million, sell another 10%; when it rises to $250 million, sell another 10%. This way, you gradually lock in profits while retaining enough upside exposure.
It is particularly important to note that the upside potential of a potential coin may far exceed your imagination, so be sure to keep a portion of your position to capture greater profits in future surges. Continuing with the previous example, suppose you sold 70% of your position when the market cap reached $500 million but decided to keep the remaining 30% for when the market cap reaches $3 billion before selling. If it really rises to $3 billion, the profits from that remaining 30% may exceed the total profits from all your previous incremental sales.
This is the significance of the "incremental selling" strategy: to reduce risk by gradually locking in profits while retaining a portion of your position to participate in potential larger gains. When facing potential coins, patience and strategy are often more important than short-term profits, because once you seize such an opportunity, it may completely change your investment outcome.
Mental Preparation: How to Deal with Price Volatility
The hardest part of holding a large position, especially when it constitutes a significant portion of your portfolio, is how to cope with severe price volatility. No matter how excellent the token is, **it will definitely experience a 50-70% *retracement* during its rise, and it may happen multiple times**. You need to mentally prepare yourself in advance to accept such volatility and remain calm when it occurs, avoiding panic selling.
By following the above strategies, you can more effectively seize on-chain trading opportunities, capturing super potential coins in a bull market while avoiding missing potential profits due to emotional decisions.
Remember, in the crypto market, your profits come from your ability to endure volatility.
Most people cannot withstand significant market fluctuations, which is why they cannot achieve great success. Volatility is your friend; it is the core reason why crypto assets are so attractive and profitable.
As you experience more volatility, you will gradually adapt to these dramatic ups and downs. Eventually, you may become numb to these fluctuations, and even your emotional responses to other aspects of life may diminish. But that's okay; at least you will become wealthy because of it.
Mindset Management: The Real Battlefield of Trading
Trading is ultimately a psychological battle, and your biggest opponent is yourself. If you can learn to execute trading strategies at a high level, not only will you succeed, but you may also achieve great accomplishments.
Keeping a clear mind is key. Whether it's praying, meditating, or taking walks, find what works for you and make these activities a daily habit to help you stay focused and rational in trading.
At the same time, stay humble. Always be prepared to lose everything, but even if you do lose, believe in your ability to rise again.
Summary
In the crypto market, volatility is both a challenge and an opportunity. Those who can endure volatility are the ones who can seize opportunities and achieve great success. May you always remain clear-headed, humble, and full of confidence on this journey.
Good luck, and see you in the bull market!
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